Trump’s Tariffs Have Already Rewired the Global Fashion Industry

After The State of Fashion 2026 report was finalised, the Supreme Court heard the US tariffs case, and many legal and policy experts are expecting the court to walk back or even fully rescind the tariffs in their current form. BoF will be monitoring the situation; stay tuned for updates and analysis.

US tariffs have emerged as a defining force in global trade. In 2025, the US government introduced expansive new import duties. And since the US imports 89 percent of apparel and leather products sold in the country, those sectors are among the most impacted. Trading partners have responded with countermeasures, leaving global supply chains in flux.

The most significant impact occurred during the 90-day implementation period following the April 2025 announcement, when apparel and footwear tariffs spiked from 13 to 54 percent. Some tariffs were later reversed, but as of mid-October, the weighted average tariff rate for apparel and footwear from the top 10 importers stood at 36 percent — well above the industry-wide average of 17 percent for US exports. Considerable uncertainty around tariff rates persists, with potential hikes in China’s import duties on the horizon.

To assess competitiveness holistically, brands and suppliers must weigh tariffs alongside broader operating conditions, including energy, infrastructure and input costs, to identify sourcing hubs that remain viable in this new environment.

The apparel and footwear industry is among the most exposed to tariff impacts

The implications for the apparel industry are profound. Responding to this pressure, 76 percent of fashion executives say that responses to trade disruptions and tariffs will be the single most important factor shaping the industry in 2026.

Key fashion sourcing hubs are most affected by rising tariff rates — China, Vietnam, India, Bangladesh and Indonesia — which together account for 63 percent of US textile and apparel imports and roughly 75 percent of the incremental impact.

Apparel and footwear companies are implementing pricing, cost and sourcing levers

Adjusting prices: Between January 2025 and July 2025, US apparel prices rose 1.3 percent, and 55 percent of executives expect further increases in 2026 in response to tariffs. Several players have been explicit about price hikes — Nike, Hermès and Ralph Lauren among them. With inflation still elevated, 92 percent of consumers express concern about their household finances. Across price segments, over 80 percent of consumers say good value for money is a top buying factor.

Reducing costs: Brands are also optimising efficiency to offset margin pressures, such as by renegotiating supplier terms, consolidating shipments, streamlining assortments and improving logistics. For example, Walmart has asked Chinese suppliers for price reductions, while Levi’s is streamlining its holiday assortment, reducing complexity and inventory to focus on core, higher-margin products. Many suppliers, though, are already under strain from higher input costs, meaning both sides will need to find balanced ways to share the burden.

Adapting sourcing: Thirty-five percent of executives plan to shift sourcing to markets with more favourable trade agreements, illustrated by Shein’s expansion in Vietnam. For global brands, urgency depends on the extent of US exposure. However, the effects also extend beyond the US. As US orders retreat from China, global players may move in to fill the space, securing better terms and diversifying their suppliers.

Brand strength and flexible sourcing are important levers for protecting margins

The optimal balance of pricing and cost changes depends on the strength of a brand or retailer’s proposition and flexibility in sourcing operations. Brands with highly differentiated propositions and strong equity — such as those offering innovative or uniquely crafted products — are better positioned to offset costs through pricing levers without eroding demand.

Flexibility in sourcing operations adds a complementary dimension. Those with diversified supplier networks and agile operating models can adapt more effectively, whether by reallocating volumes, redesigning products or negotiating terms to offset cost pressures.

For suppliers, those with a diversified production base can be at an advantage in this environment, helping brands to navigate and reduce complexity, though only a subset currently can provide this breadth.

Volatility is disrupting factory utilisation, prompting suppliers to rethink global footprints

Tariffs have added yet another wave of uncertainty for suppliers

Many suppliers are being asked by brands to absorb part of the cost burden. Larger players are renegotiating contracts to add volume buffers (such as minimum order or capacity commitments) and broaden their customer bases, while others are exploring shifting production towards higher- or lower-value items to stay afloat.

Suppliers are reevaluating their footprints

• Cambodia has been gaining momentum as a fashion sourcing hub, supported by competitive wages, a young workforce and favourable trade terms compared to countries like China. US imports from Cambodia increased 42 percent over the last five years and local manufacturers say tariffs have driven up order volumes.
• US imports from China, by contrast, were down 30 percent from 2019 levels at the end of 2024. The open capacity in China could be partially filled by European and other non-US brands, which may secure competitive suppliers as US demand shifts elsewhere.
• Suppliers are also considering new locations outside traditional sourcing hubs. For example, Gokaldas Exports, one of India’s largest manufacturers and a supplier to Walmart, Gap and JCPenney, plans to expand production in Kenya and Ethiopia to counter tariffs.

How should executives respond to these shifts?

Brands should monitor market responses to price changes

Many brands and retailers have taken initial pricing and sourcing actions. In the medium term, they must track consumer reactions, test what the market will truly bear and adjust relative to competitors — leveraging social listening, demand forecasting and price benchmarking, among other tools.

Improving and communicating value for money will be key — through storytelling that highlights craftsmanship, quality or creative differentiation and through initiatives such as repair or resale that position products as lasting investments.

Suppliers should consider reassessing footprints

Suppliers must evaluate production footprints holistically, considering total sourcing costs and balancing tariffs, labour and competitiveness across hubs. The ability to shift volumes or redesign networks as trade conditions evolve will remain central to resilience.

To strengthen agility and offset cost pressures, suppliers should prioritise productivity gains through lean manufacturing — reducing waste, improving efficiency and optimising workflows — while complementing these efforts with targeted technology investments in automation and digitalisation to streamline operations and enhance visibility across the value chain.

Diversify and deepen key partnerships to maximise stability

Both brands and suppliers could reduce concentration risk by diversifying their customer and supplier bases. At the same time, they must strengthen their most strategic relationships. This can enable suppliers to update their facilities and processes and mitigate risks associated with volatility, for example through co-investment in initiatives that individual suppliers might otherwise struggle to finance.

For brands, digitising operations and leveraging AI to optimise and manage a diversified, multi-country supply base can reduce reliance on any individual sourcing partner and protect margins amid rising production costs.

This article first appeared in The State of Fashion 2026, an in-depth report on the global fashion industry, co-published by BoF and McKinsey & Company.