President Trump’s proposed tariffs have sparked a lot of conversation and a lot of retaliation from countries such as Canada, Mexico, and China.
Although it is likely to shake up a lot of businesses, its impact on industries such as fashion comes with its own unique challenges, especially as countries like China continue to be a major source for textiles, fabrics, and clothing. And while both Mexico and Canada may not be as dominant in fashion manufacturing, tariffs on raw materials like cotton and leather could also hike production costs for brands that source from these countries.
While companies will likely take a direct hit on profits, consumers may be in for a loss too as costs could be passed down.
“If tariffs are imposed, fashion brands will likely face a 10% or more rise in input costs, which will ultimately be passed down the supply chain,” Madhav Durbha, Group VP of CPG and Manufacturing at retail planning platform Relex, told Retail Brew via email. “Brands that are unable to absorb these additional costs could see margin compression, potentially by 8%–10%, unless they optimize their supply chains and adjust their sourcing strategies.”
He added that aside from an increase in prices, brands might have to resort to switching to lower production quality or using inexpensive materials to offset the tariffs while maintaining an affordable pricepoint for the consumer.
“This would be similar to the ‘shrinkflation’ trend seen in consumer goods, but in fashion,” Durbha said. “It may result in thinner fabrics, less intricate detailing, or reduced durability in clothing.”
Of course, not every brand would want to compromise on quality or raise their price point, potentially risking a drop in sales. For them, diversifying their manufacturing sources may prove to be a valuable strategy, according to Anand Kumar, associate director of retail research at Coresight.
“In the long term, pressure from higher tariffs would force the companies to rethink supply chain and sourcing strategies, with diversifying their manufacturing base to circumvent tariffs and to remain competitive in pricing,” he said. “For manufacturers and retailers looking for tariff relief in 2025, dual sourcing from China and other regions will likely be a more doable approach for them, as establishing a mix of domestic and various international suppliers would spread the risk and manage costs effectively.”
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Durbha agreed that adding supply chain disruptions is likely to lead companies to seek alternative manufacturing sources but it won’t necessarily be easy. “The transition to new suppliers in countries like Vietnam, Bangladesh, and India could create short-term instability, as brands go through a learning curve with untested manufacturing partners,” he explained.
Another possibly positive side effect of the higher tariffs might be a revival of the “Made in America” movement as brands might find it more reasonable to manufacture domestically. “In the US, the rising tariffs on imported fashion goods may encourage brands to reshore production and source materials domestically to mitigate costs and supply chain risks,” Kumar said. “This shift could lead to a resurgence of domestic textile manufacturing and increased investment in automation to offset higher labor costs.”
While that also may help boost retailers’ sustainability efforts, Kumar said he believes that the transition from international supply chains could be “costly and time consuming, making it difficult for smaller brands to adapt as quickly as larger corporations.”
Ultimately, every solution is likely to come with its own challenges and while there may not be a one-size-fits-all alternative for retailers across the board, the best way to “mitigate” risks, per Kumar, is to not restrict manufacturing to a single place.
“By spreading out sourcing channels, retailers can reduce dependency on any single market and ensure a more resilient supply chain,” he explained. “This approach not only helps safeguard against geopolitical uncertainties but also provides consumers with a broader selection of fashion options from different regions. As a result, stores may increasingly feature a mix of local, European and Asian brands that align with both affordability and quality standards.”