On Saturday, President Donald Trump signed executive orders imposing tariffs on China, Mexico and Canada, the US’s largest trade partners, under the International Emergency Economic Powers Act (IEEPA). The tariffs would impact one-third of all goods shipped into the US — including clothing, footwear and beauty products.
Trump has framed the 25 per cent tariff on Mexican and Canadian goods as a measure to combat drug trafficking and illegal immigration, while the 10 per cent tariff on imports from China aims to address what he perceives as an unfair trade imbalance with the so-called “world’s factory”. As part of the IEEPA, Trump has also suspended the “de minimis” shipping exception, which allows parcels up to $800 in value, per importer per day, to enter the US without being taxed.
In response to Saturday’s executive orders, Canada authorised 25 per cent tariffs on a large swathe of US goods, Mexico pledged to enact retaliatory tariffs, and China’s Ministry of Commerce said it plans to challenge the Trump administration’s trade actions. By Monday, Mexican President Claudia Sheinbaum negotiated a deal to delay the tariffs by one month while Mexico and the US hashed out a plan for heightened border security. Shortly after, Canadian Prime Minister Justin Trudeau said that Canada had reached a similar agreement to pause tariffs for one month. A deal with China has yet to be announced.
Even as two of the three tariffs will hang in the balance, the fashion and beauty industries, both in the US and outside of it, are bracing for impact, with consumers likely to bear at least some of the brunt. (US customers of Canadian retailers like Ssense and Aritzia were already questioning how the changes would impact their orders; thanks to the de minimis loophole closure, they could end up paying more in taxes.) Many brands and retailers began preparing for the tariffs when they were first proposed last year, but how prepared are they?
As President-elect Donald Trump’s proposed tariffs threaten to disrupt global supply chains, beauty brands must adapt quickly, exploring reshoring and other strategies to stay competitive in a volatile trade landscape.
Strategies have emerged, such as tariff engineering, ‘Trump Majeure’ clauses and AI-powered inventory optimisation, to protect bottom lines. But industry experts warn that the lack of clarity surrounding Trump’s tariff plan may prove more damaging than the tariffs themselves.
“Overall, the uncertainty is killing merchants’ abilities to plan effectively,” says Sylvia Ng, CEO of Returnbear, a cross-border reverse logistics provider for e-commerce brands, noting that while the tariffs have been announced, there’s no telling how long they’ll stick around or which new ones might pop up. “There’s no silver bullet option because details are unclear, be that on timing or specific categories affected.”
Trump has indicated that his focus is on revitalising domestic manufacturing rather than targeting consumer products, notes Julia Hughes, president of the United States Fashion Industry Association. “Maybe that means that the tariff battles will focus on other products since there already are very high tariffs on apparel and footwear,” she says, referencing the current Section 301 tariffs, which apply a 7.5 to 25 per cent rate to many types of China-born clothing and shoes. “But we’re waiting to see.”
Although brands and retailers have long pursued sourcing diversification in the years since Trump’s 2018 trade war and Covid-related supply chain disruption, few are willing to move production without a clear understanding of where tariffs might hit next. Hughes fears that continued uncertainty and tension could escalate into a full-blown global trade war.
Blake Harden, VP of international trade at the US Retail Industry Leaders Association, emphasises the need for a balanced approach to trade. “Any trade policies debated by the administration — including the use of tariffs — should focus on protecting US interests, particularly from those seeking harm, while reducing costs and making daily essentials, such as food, clothing and household products, more affordable,” she says.
Sourcing struggles
Reshoring may seem like a promising solution to the potential for higher tariffs on popular sourcing nations, but domestic manufacturing partnerships remain elusive for many smaller firms. Large brands and international manufacturers have been quietly acquiring factories and mills in the US, Canada and Mexico for years, and this behaviour is only escalating, says Alice James, founder of AJG Fashion Consulting, a boutique agency that helps apparel brands manage the product-development lifecycle. Smaller brands are struggling to secure domestic production because their lower volumes make them less attractive partners, she explains.
For companies reliant on imported materials, the tariffs pose additional complications. Ruhee Rathod, director of operations and finance at sustainable jewellery brand Bario Neal, anticipates sourcing challenges, particularly with gemstones. The brand may have to reduce the range of stones it offers, even in its standard collections, Rathod says. To mitigate the impact, Bario Neal is considering limited-time promotions to keep customers engaged despite potential price increases.
While some brands brace for increased costs, suppliers may bear the brunt. “Based on conversations with our overseas factories, it seems likely that China and the factories themselves will absorb most of the tariff impact, either through currency devaluation or lower prices,” says Justin Baer, founder of menswear brand Collars Co. “China is a global leader in apparel manufacturing, and it’s unlikely they’ll let this business slip away.”
Some economic experts agree that currency manipulation is one potential tactic China may exploit to cushion its critical industries. “They have tried to control the value of their currency in the past to help exporters,” explains Michael Klein, an economist at Tufts’ Fletcher School and executive editor of Econofact. “But there is a tension between the monetary authorities, who worry that a weaker currency will fuel inflation, and the government authorities who want to promote industry.”
Brands and retailers are closely monitoring the situation. “In general, we do not believe that tariffs will be positive for international companies and international trade,” says a spokesperson for H&M Group. “There are many risks linked to trade barriers, such as higher prices for consumers and a reduced number of jobs.”
Tariff-fighting strategies
Brands and retailers are exploring ways to mitigate tariff-related costs.
Product designers might get creative — or quite the opposite — to deal with tariff turbulence. Some mid-market fashion companies may turn to tariff engineering, the modifying of product designs to reduce duties. Sonja Chapman, associate professor at the Fashion Institute of Technology (FIT) in New York, notes that fibre content changes or subtle design shifts can significantly impact tariff classifications. Woven shirts with pockets below the waist, knit “cold shoulder” tops, crop tops, halter styles and straight-back tank tops sans defined armholes are not merely sartorial whims — these designs command lower tariffs compared to their more conventional counterparts, offering a subtle-yet-strategic advantage in the current trade climate. “Anytime you see something and think, ‘Why did they do that?’ It’s probably related to the duty rate,” she says.
Liza Amlani, founder of industry consultancy Retail Strategy Group, advises clothing brands to manage higher tariff bills by consolidating their mill matrix — a strategy already adopted by leading fashion houses. This network of fabric suppliers, once a point of pride for its breadth and diversity, is now being scrutinised for efficiency and cost-effectiveness. By consolidating their supplier base, brands can exert greater control over the production process while simultaneously trimming costs. The logic is compelling: fewer mills mean reduced complexity in the supply chain and lower overheads associated with managing multiple relationships.
“What is important to understand is the return on investment from each of the mill relationships,” Amlani explains. “In other words, have a clear picture of which mills contribute the most to the overall product assortment. Even if tariffs end up being a bargaining chip, these process changes will deliver significant cost savings. Brands will also open up avenues for collaboration and innovation with vendor partners.”
Some companies are leaning on technology to solve tariff problems. Margaret Bishop, assistant professor and textile supply chain management expert at the Parsons School of Design, anticipates a surge in artificial intelligence-driven inventory optimisation. Brands will leverage AI to refine assortment planning and boost full-price sales, offsetting higher costs without resorting to price hikes, she says. Some may even eliminate replenishment stock altogether, mirroring Zara’s just-in-time model.
Steve Lamar, CEO of the American Apparel and Footwear Association, acknowledges generative AI’s potential in navigating tariff-related supply chain challenges but raises concerns about the tech’s contribution to intellectual property vulnerabilities and counterfeiting risks.
There’s no one-size-fits-all strategy for managing tariff-related inventory challenges, says Paul Magel, president of the supply chain technology division at retail software provider CGS. Stockpiling ahead of tariff hikes works for some businesses but can leave others with ageing inventory that may not sell.
Smaller brands are making changes where they can. Nicky Clarke, the premium hair tools brand, is exploring operational efficiencies, alternative packaging and improved shipping rates to offset tariff costs, according to CEO Robin Young. Meanwhile, Samreen Arshad, CEO of beauty brand Samreens Vanity, anticipates a 15 to 20 per cent increase in packaging costs due to tariffs on Chinese-made materials, a significant challenge given that packaging accounts for up to a quarter of total product costs. The brand is approaching these changes with targeted adjustments, absorbing some of the impact through reduced profit margins while selectively raising prices on product lines where market positioning and consumer demand allow. At the same time, Samreens Vanity is diversifying its supply chain, exploring partnerships with Mexican suppliers for secondary packaging to mitigate reliance on Chinese-made materials.
Some companies may consider utilising the tariff exclusion process if it becomes available, as it was during Trump’s initial term. However, the decision to pursue this option often hinges on the potential value gained from the time-intensive process, weighed against the typically low probability of success, according to Jonathan Todd, vice chair of transportation and logistics law at Benesch Law.
Todd elaborates on a key concern: “One potential sensitivity that sometimes concerns companies is the public availability of competitive or otherwise valuable information that you submit.” He explains that submitting requests often necessitates disclosing confidential information, which must be carefully marked during the submission process. If an exclusion is granted, the precise product description may indirectly reveal the company’s identity, potentially allowing competitors with similar products to benefit from the same exclusion for their imports.
Duty drawback and de minimis
Though Trump’s executive orders focused on new tariffs, they also suspended duty drawbacks along with the de minimis provision. The recess on duty-free $800-or-less shipments is set to impact not only major Chinese-founded e-commerce players such as Shein and Temu but also a range of smaller fashion and beauty retailers that have relied on this provision to optimise their international supply chains and facilitate direct-to-consumer shipments.
“The removal of the de minimis benefit will grab the headlines, and it will certainly be disruptive to the likes of Shein and Temu,” says Neil Saunders, managing director of retail at data analytics company Globaldata. “However, even if tariffs and taxes are applied to their products, they will still be comparatively cheap compared to many mainstream apparel retailers. As such, they’re not going to disappear or become completely irrelevant.”
Giants like Amazon and Walmart similarly use de minimis as a measure to serve cost-conscious consumers. By shipping directly to consumers, brands leveraging de minimis have been able to avoid costly warehousing in the US, reducing overhead and streamlining logistics. With its suspension, companies will now need to reassess their strategies.
Pausing duty drawbacks — a refund of 99 per cent of customs duties paid on imported goods that are later exported or destroyed — introduces another wrinkle into brands’ operational playbooks. This programme helps US businesses reduce costs by reclaiming duties on materials and products that don’t remain in the domestic market. The Trump administration’s suspension of duty drawbacks means brands can no longer recover tariffs on imported materials used in exported goods. This change increases production costs for brands that manufacture using globally sourced inputs, potentially leading to higher prices, thinner margins and shifts in supply chain strategies to offset the financial impact.
“The current rules allow for some flexibility in record-keeping so that duties can be recovered in retail supply chains even if the exact product that was entered is not the same item exported,” explains Todd. Eliminating the drawback means these duties will become a sunk cost no matter what eventually happens to those goods. “For example, excess inventories that must be moved to other foreign markets, or returned back to their foreign origins, will still be available for physical items although the duties originally paid will not be recoverable,” he says.
Going global for growth
Amid the current tariff climate, some brands may seek to maintain sales growth by exploring international markets. This could involve exporting directly from the US, forging partnerships with in-country retailers and distributors, or establishing bricks-and-mortar stores abroad. “One of the top legal issues to consider is whether your trademarks and intellectual property are available and protectable in the market,” says Todd.
Beyond legal aspects, operational considerations play a vital role. These include crafting contracts for retailer or distributor relationships, establishing global logistics partnerships, assessing the tax burden and evaluating whether customs duties, including retaliatory tariffs, might render goods prohibitively expensive in the target country. When venturing into international markets, brands must conduct thorough due diligence to ensure their expansion strategy is both legally sound and economically viable.
To navigate this shifting trade landscape, legal and supply chain experts are urging brands to take proactive measures to mitigate risk. Ted Murphy, a partner at Sidley Austin and co-leader of the law firm’s global arbitration, trade and advocacy practice, advises fashion and beauty brands to consider stipulating Trump Majeure clauses (supplier contract provisions that address the risk of additional tariffs being imposed). These clauses can provide a measure of protection against unexpected cost increases due to trade policy changes. In a similar vein, Greg Husisian, chair of the international trade and national security practice at Foley Lardner, recommends that brands develop and maintain a database of pre-approved secondary suppliers so they’re prepared to adjust their supply chains at a moment’s notice.
While Trump’s initial trade war focused solely on China, giving brands some measure of certainty despite the difficulties, the current landscape suggests a broader scope of potential targets. The volatility surrounding future tariff implementations has created a complex and murky environment for international trade.
“Unfortunately, the current atmosphere is very chaotic, and it’s hard to predict where tariffs will be implemented next,” says FIT’s Chapman.
This story has been updated to include the delay on Mexican and Canadian tariffs. (3 February 2025)
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