Turkey's textile sector is generating substandard cotton
In the heart of Turkey, a two-hour drive from Istanbul, a factory hummed with towering steel machines, producing jeans destined for American and European markets. However, this summer, the factory was closed, and the machines fell silent. The company, with 20 years of experience in the textile industry, has been hit hard by the soaring inflation that has gripped Turkey.
The inflation rate in Turkey has skyrocketed to 138% between 2022 and 2024, a figure that the company's speaker, with 20 years of experience, has never seen before. This inflation has been a persistent issue for several years in Turkey, but it has become particularly challenging for the textile manufacturers, including the company in question.
The primary factors leading to significant layoffs and factory closures in the Turkish textile manufacturing industry include severe export tariff disadvantages, tightly linked supply chains susceptible to order shocks, intense competition in alternative markets, ballooning input costs, and a global trade environment unfavourable to Turkish textile exporters.
Turkey faces tariff disadvantages of over 30 percentage points compared to competitors like Bangladesh, Pakistan, and Vietnam when exporting textiles. This tariff disadvantage severely squeezes profit margins and makes them uncompetitive abroad. The Turkish textile industry is cluster-based, with many linked specialist units. A sharp decline in foreign orders due to high tariffs causes a cascading impact across the supply chain, hitting every stage from spinning to packaging, leading to layoffs and factory closures.
With significant volume loss to key markets like the US, Turkish exporters are forced to compete intensely for buyers in Europe and the UK, reducing overall profitability and sustainability. Inflation at 138% has raised raw material and operational costs sharply, reducing the ability of small and medium enterprises (which make up 95% of the sector) to absorb shocks, increasing the likelihood of layoffs and closures.
Even local markets have shifted towards cheaper synthetic fibers (e.g., polyester and viscose) instead of cotton yarns, undermining the traditional textile base. Although the direct Turkish situation is distinct, global tariff increases (e.g., US tariffs on competitors) contribute to a challenging export environment with high costs and trade uncertainties. This competitive disadvantage contributes indirectly to problems in Turkey, as global sourcing shifts towards countries with lower tariffs or better trade terms.
The company has already laid off 20% of its workforce by 2024, and this summer, it reduced its workforce by nearly 40%. The factory in Istanbul was not spared, closing its doors this summer. The company has subcontracted for Western brands, but the current challenges have left them struggling to keep up with demand.
As the Turkish textile industry grapples with these challenges, it remains to be seen how it will recover and adapt to the changing global trade landscape.
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