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Brands that produce in China can breathe a sigh of relief — for the next 90 days, at least.
On 12 May, in a joint statement, the US and China agreed to de-escalate their ongoing trade war: the Trump administration’s reciprocal tariffs on China will decrease from 145 per cent to 30 per cent; and China’s retaliatory tariffs on the US will fall from 125 to 10 per cent. These new percentages will remain in place until the end of the 90-day pause period, which is 10 August. The news follows a weekend of talks in Geneva, and, according to the statement, recognises “the importance of a sustainable, long-term and mutually beneficial economic and trade relationship” between the US and China. US stocks shot up on Monday morning following the announcement.
The update puts US tariffs on China more in line with existing global levies. The European Union is currently subject to 10 per cent tariffs; Mexico and Canada tariffs are both 25 per cent; the UK is also subject to 25 per cent (save for non-fashion-related exemptions). Former tariff rates revealed on 2 April, ranging from an additional 10 to 50 per cent and targeting Asian manufacturing countries, are currently on pause until 8 July.
Investors may be excited about the China pause, but for brand owners, it’s not all happy news as the looming 90-day deadlines mean more changes could come, adding to previous whiplash. But this does give brands some breathing room.
“Honestly, [it’s] a mix of relief and frustration,” says Georgia Cherrie, co-founder of ready-to-wear brand Paris Georgia. “Relief because it offers a momentary breather, but frustration because it still feels like we’re all caught in a game, and businesses like ours are being squeezed in the middle. The uncertainty is exhausting, and it’s already pushing some brands to the brink.”
“The pause is helpful to brands as it buys them more time and gives them more flexibility. However, it does not stop the uncertainty as there is still so much upheaval and chopping and changing in tariff policy — and the current change is only a pause,” says Neil Saunders, managing director of retail at market research firm Globaldata. “I expect most brands will still explore moving to a more balanced supply chain with less reliance on China. But some will now adopt a wait-and-see approach.”
Small to mid-size brands need to be careful about shifting strategy too fast, says Bernstein analyst Aneesha Sherman. “[They] will likely be pulling forward orders to get in before the 90 day mark and may end up with an inventory glut,” she cautions.
Those who were already considering moving sourcing out of China are likely to continue on this path, says Jessica Ramírez, co-founder of retail consultancy The Consumer Collective. She recalls Trump’s last term, when many brands either moved operations out of China, or, at the least, diversified their manufacturing locations. “We will see the second wave,” she says of this moment.
Paris Georgia, which was exploring shifting its China manufacturing elsewhere, is still planning to do so. If anything, this reinforces the founders’ plans, Cherrie says. “The landscape is so volatile right now that relying on a single region feels risky. We’re actively exploring alternative production hubs.”
A 30 per cent tariff — though far better than 145 per cent — is not insignificant. But it’s much more manageable, Ramírez flags. This is top of mind for Cherrie. “Even if tariffs settle between 50 to 80 per cent, that level of increase fundamentally shifts the economics of running a fashion business,” she says. “It would force significant price adjustments, which goes against what we stand for.”
Saunders expects that, even though equally high tariffs are unlikely, the final figure will remain higher than it was before Trump entered the Oval Office. Given this — and the president’s notoriously erratic policy strategy — brands must stay nimble. “The only thing brands can do is to ensure that supply chains remain flexible and that they are preparing for higher costs,” Saunders says. “Given all the shifts, it is still a case of prepare for the worst and hope for the best.”
Some brands had already hit pause on their US sales; others had decided to shift focus away from the US market. Australia-based Réalisation Par, which manufactures its silk garments in China, paused shipping to the US on 23 April in anticipation of the China tariffs kicking in on 2 May. “We’re working behind the scenes on long-term solutions to help reduce the impact of these changes and to get Réalisation back to our dreamgirls as soon as possible,” reads a note on the brand’s website. Others had toyed with price increases, like Lingua Franca, which planned hikes at the end of April before ultimately deciding to cover the higher costs itself. Amazon reportedly considered adding a tariff tax line to checkout for its Amazon Haul platform; though once received criticism from the Trump administration, it walked it back.
Will the lower rate mean stable prices for consumers? “The 90-day pause is welcome and may temporarily help unstick the effective trade embargo that has been in place with respect to US-China trade since 9 April,” American Apparel and Footwear Association president and CEO Stephen Lamar said in a statement. “Sadly, the residual 30 per cent tariff, stacked on top of the existing Section 301 and ‘Most Favoured Nation’ (MFN) tariffs, will still make for an expensive back-to-school and holiday season for most Americans.”
Lamar expects that, even with lower tariffs, prices may well continue to spike in the near term. “If freight rates spike due to the tariff-induced shipping disruptions — which will take months to unwind — we could see costs and prices creep up even further. What’s needed now is a long-term deal — not just with China but with all our trading partners — so we can predictably make long-term trade, investment and sourcing decisions,” he said.
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