In his 40-year career, William Lucas has seen nearly every step in the erosion of the American garment industry. As general manager of Eagle Sportswear, a company in Middlesex, N.C., that cuts, sews and assembles apparel, he hopes to keep what’s left of that industry intact.

Mr. Lucas, 59, has invested hundreds of thousands of dollars training his workers to use more efficient techniques that come with financial bonuses to get employees to work faster.

But he fears that his investments may be undermined by a U.S. trade rule.

The rule, known as de minimis, allows foreign companies to ship goods worth less than $800 directly to U.S. customers while avoiding tariffs. Mr. Lucas and other textile makers in the Carolinas, once a textile hub, contend that the provision — nearly a century old, but exploding in use — motivates retailers to rely even more on foreign producers to keep prices low.

Defenders of the rule say it is not to blame for a lack of U.S. competitiveness. But domestic manufacturers say it benefits China in particular at the expense of American manufacturers and workers.

“It’s just hard to compete with that,” Mr. Lucas said. “Someone just has to change the law. Someone just has to change the rules.”

During the pandemic, when e-commerce purchases soared, so did the use of de minimis.

In the 2016 fiscal year, 150 million packages entered the United States tariff-free under the policy, but by 2023, that figure rose to more than one billion, according to Customs and Border Protection. About half are textile and apparel products.

A congressional report in June found that Shein and Temu, ultrafast-fashion retailers founded in China, accounted for nearly 30 percent of the packages coming in under de minimis. (Shein and Temu have said they are open to reworking the exemption.) But while U.S. manufacturers say the rule is one of their biggest challenges, it is not the only one.

Apparel sales are coming off pandemic highs and have declined. That means fewer orders for the remaining operators in the Carolinas. Bryan Ashby, president of Carolina Cotton Works of Gaffney, S.C., said that a few years ago he had bought equipment to handle higher capacity, but that he noticed in late summer that his purchasers were pulling back.

Eight textile plants across the Southern United States closed between August and December, according to the National Council of Textile Organizations, a lobbying group. In November, one yarn facility in North Carolina attributed part of its demise to the growing use of de minimis.

“When you have plants that have been open for so long closing, it’s a canary in the coal mine around how policy and the economy are contributing to the economic harm facing the industry,” said Kim Glas, the president of the council.

Through most of the 20th century, mills in the region were abundant. That started to change in the 1990s after the North American Free Trade Agreement was signed, eliminating U.S. duties on products from neighboring countries, and large multinational companies started to move garment production to Mexico. In 2001, when China joined the World Trade Organization, retailers headed to Asia in search of cheap labor to produce their wares. Since 1994, U.S. apparel manufacturing employment has declined 65 percent, according to the Bureau of Labor Statistics.

The surviving companies are mostly family-run and privately held, consistently steering money back into their businesses to pay for expensive new equipment and automation to remain competitive. Many produce items for the U.S. military, which requires some clothing to be American made, or for companies whose stated mission is just that. In 2022, just 2.9 percent of the apparel sold in the United States was made domestically, according to the American Apparel and Footwear Association.

Halsey Cook, chief executive of Milliken, a 159-year-old manufacturer in Spartanburg, S.C., that makes items like military apparel, car floor coverings and merchandise for Patagonia and Carhartt, said that because of de minimis, the textile industry was “feeling the pain in a new way.”

“That garment industry largely had already gone overseas,” he said. The surviving U.S. textile manufacturers have adjusted to the realities of free trade agreements, Mr. Cook said, but the huge growth in the use of de minimis “has just completely opened up and undermined that system.”

In cotton fields, ginneries, yarn mills, dye facilities and cut-and-sew shops in the Carolinas, conversations get animated when they turn to trade law, which hangs over the work being done.

Parkdale Mills, one of the country’s largest yarn makers, has a plant in Gaffney, S.C., that handles only cotton. Men ferry bales of cotton on forklifts, and automated equipment cleans the cotton and transforms it into spun yarns that can be made into fabric. Many employees at Parkdale have worked there for decades, and Davis Warlick, the executive vice president, greets his workers on the floor with warm familiarity.

“We’re trying to create more jobs,” Mr. Warlick said after a tour of the 400,000-square-foot facility. But he said he and his employees remained fearful. “All of that is threatened daily by one bad, ill-informed decision on Capitol Hill. And all this goes away and they don’t understand it.”

The garment industry is among the most price-sensitive, and retailers will jump on opportunities to save any money that they can.

“When you erode any aspect of the supply chain, it hurts everybody,” Ms. Glas of the National Council of Textile Organizations said. That includes U.S. farmers and those who work with them, she added.

Tatum Eason knows this well. She owns Enfield Cotton Ginnery in eastern North Carolina, which cleans hundreds of bales of cotton for farmers in the surrounding community. She flushes out the debris and other impurities within the cotton without charge, and earns money by selling the cotton seed that comes out during the cleaning. (That cotton seed is later used for cottonseed oil and feeding cattle in the United States and tilapia fish in Saudi Arabia, she said.)

In 2023, she ginned half the cotton she did the year before. And with high interest rates making operating loans for farmers more costly and the price of cotton futures down, she senses that the year ahead might be challenging, too. Her business relies on farmers’ optimism, and the dour environment might lead them to plant less cotton come April.

She had filled her office with a carousel of bags of Miss Vickie’s potato chips and a bubble gum machine — sweet incentives to keep the farmers coming back to her so she can encourage them that it was worth it to plant cotton.

“We’re brainstorming what we can do in our operation to lock in knowing what we’re going to gin each year,” she said, sitting inside her wood-paneled office. “It’s worrying.”

The e-commerce boom brought on by the pandemic wasn’t the only factor in the proliferation of de minimis shipments. In 2016, Congress raised the de minimis ceiling to $800 from $200 in an effort to lower costs for importers, speed delivery times for small and medium-size businesses and reduce paperwork for Customs and Border Protection.

The textile and apparel industry wants to rein in use of the provision, but hasn’t agreed on one proposal to send lawmakers. But there seems to be agreement that manufacturers in China and throughout Asia are getting a free pass to the U.S. consumer market.

There are bills in Congress that seek to bar some countries, like China and Russia, from using the provision, but none call for its elimination.

Supporters of de minimis say eliminating it could lead to increased costs for consumers and businesses that are importing goods. The competitive challenges felt by the textile industry aren’t caused by the provision, according to John Pickel, a senior director of international supply chain policy at the National Foreign Trade Council, a lobbying group that supports de minimis.

“I think it’s a bit of a red herring to hang your hat on de minimis as sort of the boogeyman of why particular domestic industries are not competitive,” Mr. Pickel said.

As details and bills are being hashed out in Washington, U.S. manufacturers continue to fulfill orders.

Inside a nondescript one-story building at Eagle Sportswear, a staff of 75 completes orders of hoodies, shorts and sweatpants for clients like the U.S. military and American Giant, a privately held retailer dedicated to selling domestically made clothes.

Up to five workers stand alongside one another and share in the tasks it takes to complete a garment. It’s a departure from the traditional “batch sewing” approach, in which one person sits and works on an individual task before moving a garment down the production line. By having multiple pairs of hands and eyes on a piece of material, addressing it right away, the company aims to increase quality control and provide greater value for clients.

The pay starts at $11 an hour and can rise to $17, including bonuses for meeting production goals. It used to take an hour to complete a garment, Mr. Lucas said, but that time has been brought down to 43 minutes.

Mr. Lucas says he has had to charge American Giant more in the last year to make some of its apparel, partly because of orders that require smaller batches. Bayard Winthrop, who founded American Giant in 2012 and has pieced together a domestic supply chain that can make his company’s $138 cotton hoodies, says that’s all right.

Many retailers in his position have decided to reach overseas to produce more for less. Keeping production — and those jobs — in the United States is more important to him, he said.

“The people out here should be celebrated as the heroes of this country, and we have lost our way for a very long time,” he said, sitting in Mr. Lucas’s office at Eagle Sportswear. “I just don’t know why. I think it should be celebrated more — celebrated more from a policy perspective.”