As President Donald Trump turns tariffs on and off like tap water, fashion is grappling with the implications of a global trade war.
On Thursday, Trump announced a one-month pause on 25 per cent tariffs for goods and services covered by the United States-Mexico-Canada Agreement (USMCA), offering a temporary reprieve for the fashion industry, coming just two days after the punitive taxes took effect.
However, with a new 10 per cent tariff on China implemented on 4 March, adding to the 10 per cent tariff introduced in February, the pressure on fashion brands and retailers continues to mount. While this extension provides short-term relief until the suspension ends on 2 April, its broader implications for fashion stakeholders are significant and tilt the landscape further towards a full-blown trade war. Trump’s threat to impose a reciprocal tariff on all US trading partners introduces a layer of uncertainty for the fashion industry, leaving no country exempt from potential cost increases. The unpredictability of shifting import duties could force some companies into a holding pattern, delaying critical supply chain decisions until there is greater clarity, says Dr Sheng Lu, director of the department of fashion and apparel studies at the University of Delaware.
The temporary respite from new duties on Canada and Mexico provides crucial financial breathing room, allowing fashion companies to continue importing goods from their North American counterparts without facing the 25 per cent duties. This stabilising effect is vital for an industry already grappling with rising costs and shifting consumer demand. Over the next month, the fashion sector can maintain its existing supply chains and production relationships with partners in Mexico and Canada, avoiding disruptions that could affect timelines and delivery schedules.
At the same time, fashion brands may need to rethink their strategies to navigate the shifting trade landscape — not just within North America, but globally. Trump’s renewed threat of tariffs against the European Union, a key producer of luxury goods, adds another layer of uncertainty that could reshape sourcing and pricing decisions.
Independent designers weigh in on how they’re feeling about Trump’s on-again, off-again promised tariffs on trade partners.
Non-trade barriers
With new tariffs looming, there are lessons to be drawn from past trade restrictions, according to Sonja Chapman, associate professor at New York’s Fashion Institute of Technology (FIT). Historically, companies adjusted their supply chains to comply with stringent import quotas while keeping costs under control. A similar recalibration may now be necessary, particularly when it comes to determining a garment’s country of origin, a designation that can dictate tariff exposure.
Currently, trade rules stipulate that a garment’s country of origin is based on where it is sewn — or, in the case of knitwear, where the panels are knitted. This opens the door for strategic production shifts: fabric cut in China but sewn elsewhere could be classified under the second country’s origin, avoiding certain tariffs. Similarly, knitwear panels produced outside of China but assembled there could still qualify as originating from the initial production site.
Non-tariff barriers (NTBs), however, represent another major challenge for the fashion industry, as they provide a way for countries affected by Trump’s tariffs to respond via restricting imports without imposing direct duties, says Margaret Bishop, an expert in textile supply chain management at Parsons School of Design. NTBs are any rules, regulations or practices beyond duties that complicate trade between countries. These barriers, though less visible than tariffs, can have significant implications and take several forms, affecting everything from production costs to consumer purchasing decisions.
Key NTBs impacting the global fashion sector include quotas, which limit the volume of specific garments or textiles that can be imported, creating artificial scarcity and driving up prices. Import licensing requirements, too, can be a considerable obstacle, with complex and time-consuming procedures causing delays and raising costs for fashion businesses.
Compliance standards present yet another NTB for fashion. Differing safety, labelling and sizing requirements across markets can create a maze of compliance obligations for fashion brands, while sanitary and phytosanitary measures, which target specific chemicals or dyes used in textiles, add yet another layer of complexity. Lengthy customs inspections and cumbersome documentation requirements can delay time-sensitive fashion deliveries, further disrupting supply chains and affecting brands’ abilities to respond to fast-moving consumer trends.
US tariffs on Chinese-made products could unintentionally exacerbate the problem of counterfeits by bumping up the cost of legitimate goods while leaving illicit operations largely unaffected. As tariffs rise on authentic apparel, footwear and accessories, price-sensitive consumers may be more inclined to seek cheaper alternatives, inadvertently fuelling the counterfeit market. Unlike legitimate brands, counterfeiters operate outside of traditional supply chains and regulatory frameworks.
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Stephen Lamar, president and CEO of the American Apparel Footwear Association, warns that counterfeiters may become one of the biggest winners in a trade war, one of the “unintended consequences” of Trump’s drastic trade measures.
“Because their pricing is arbitrary — due to their nearly non-existent cost structure — counterfeiters can appear to be heroes by undercutting authentic, safe and responsibly sourced, but now more expensive, apparel, footwear and related accessories,” Lamar says.
Additionally, China has long been a major source of counterfeit goods, with weak intellectual property rights (IPR) protection enabling bad actors to thrive. By disrupting established, compliant supply chains without effectively addressing the root causes of counterfeiting, tariffs may create an environment where fake goods become even more appealing to consumers and harder for brands to combat.
Furthermore, government procurement policies favouring domestic products can limit market access for foreign fashion companies, sidelining international brands despite their competitive alternatives.
While tariffs are often the most discussed trade barrier, these NTBs present a complex and equally challenging web for the fashion sector.
Mixed signals emerge, however, as US fashion companies look to accelerate nearshoring within the Western Hemisphere. The delayed tariffs on textile and apparel imports from Mexico and Canada — both key US trade partners — send conflicting cues, says Lu. Instead of encouraging a shift towards regional sourcing, the tariffs create cost pressures from widespread price hikes, reducing the attractiveness of nearshoring. Moreover, with Trump’s past suggestion of imposing tariff hikes on imports from Central America, further uncertainty looms over the region, which serves as both a core apparel supplier and a source of US migration.
Beyond immediate trade barriers, cuts to US foreign aid programmes, such as USAID, could deter investment in Central America’s apparel sector, which relies on sustained funding to scale production and expand capabilities. Without this investment, nearshoring may fail to deliver on its promise, leaving domestic brands caught between rising costs and supply chain uncertainty, says Lu.
Buyer vs supplier
As tariff uncertainty escalates, some fashion companies are turning to ‘Trump Majeure’ clauses in their contracts, according to Ted Murphy, co-leader of law firm Sidley’s global arbitration, trade and advocacy practice, to acknowledge the growing likelihood of additional US tariffs on imports and define how both parties will respond.
According to Parsons’s Bishop, these provisions serve as a safety net, offering companies the legal latitude to manage disruptions more effectively.
While these clauses may help protect brands, the implications for factory owners and suppliers could be significant. When a brand cancels an order after work has begun, the factory is left with unused capacity and must decide whether to prioritise the returning brand or shift focus to new clients. This creates a ripple effect, potentially damaging long-term relationships and undermining trust between brands and their suppliers.
While larger companies are primarily focused on the financial bottom line, the evolving global trade and production dynamics highlight the growing importance of maintaining strong supplier relationships.
The responses of suppliers to Trump Majeure clauses depends largely on the size, leverage and order volume of the buyer. Notably, suppliers in China, once reluctant to engage in duty-savings programmes, are becoming more receptive, driven by the growing pressure from clients to mitigate the financial strain of tariffs, according to Angela Santos, partner and customs practice leader at law firm ArentFox Schiff.
Legal challenges of the latest US tariffs are inevitable, but will take years to materialise, says Greg Husisian, chair of the international trade and national security practice at Foley Lardner law firm. While cases could be brought before the US Court of International Trade or the World Trade Organisation (WTO), these mechanisms are slow moving, making them impractical for fashion brands facing immediate cost pressures. Instead, government-to-government negotiations will likely offer the fastest route to resolving trade disputes. For now, fashion companies must prepare for a prolonged period of uncertainty, with sourcing strategies and pricing decisions shaped by the shifting landscape of US trade policy.
The EU equation
The European Union could also face higher duties if Trump follows through on recent threats to slap 25 per cent tariffs on “cars and all other things” originating from the 27-country bloc. As luxury brands brace for the potential impact of tariffs amid a growing trade war, there is rising concern over the potential for price hikes to push consumers toward lower cost alternatives. The luxury sector, though not currently a primary target of the Trump administration, could still be sideswiped by broader tariff measures, especially as the threat of reciprocal tariffs from the EU looms. With much of a luxury product’s value tied to intellectual property versus raw materials, rising costs may fuel the growing trend of dupe culture, as consumers opt for cheaper alternatives that promise similar quality.
Quality is a topic central to the tariff and trade war conversation. Bishop anticipates that brands across the board will look to offset rising costs by cutting corners — swapping in lower quality fabrics, skimping on details like zippers and dialing back on construction. The result? A cheaper product disguised at the same or even at a higher price point.
“In the business of fashion, saving a couple of pennies on the cost of a garment makes a substantial difference,” continues Bishop. Skipping details like a folded hem or a rolled edge in favour of a raw finish eliminates an entire step in production — one of many ways brands are likely to cut costs. The gradual decline in quality over the past few years is only accelerating, and could soon reach a new level, she adds.
Santos sees her clients making every effort to maintain quality, but acknowledges that compromises may be inevitable. “At the end of the day, sourcing and design have to work towards a certain margin, and you have to find that margin somehow,” she explains. “Whether that means using lower cost materials, cheaper trims, or cutting back on construction, brands have to hit their numbers.”
If rising costs push baseline prices higher, retailers still have room to manoeuvre by layering promotions from an elevated starting point, says Gurhan Kok, founder and CEO of Invent.AI, which provides an artificial intelligence decisioning platform to retailers. Luxury and streetwear e-tailer Ssense is leveraging a diversified sourcing strategy to shield customers from the impact of rising tariffs, aiming to maintain pricing stability amid ongoing trade disruptions. But if companies find that price hikes dampen consumer demand, expect retailers to lean more heavily on discounting to keep inventory moving and maintain cash flow. Promotional strategies will remain essential in an environment where margins are under pressure.
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