Category: USA

Apparel Sourcing and Trade Outlook for 2026

Top challenges in 2026

I believe the global fashion apparel industry will continue to face two macro-level challenges in 2026. One is the relatively weak consumer demand for clothing amid sluggish economic growth and persistent inflationary pressures. For example, according to the International Monetary Fund’s (IMF) October 2025 forecast, global GDP growth in 2026 is expected to decrease from 3.2% in 2025 to 3.1% in 2026. Specifically, U.S. GDP growth will be around 2.1% (down from 2.8% in 2024), and growth in the EU could drop to 1.1% (down from 1.2% in 2025).

Likewise, several consulting firms forecast that clothing retail sales in key apparel import markets, including the United States and Western Europe, could be stagnant or even decline in 2026. Notably, while Gen Z (i.e., those born between 1997 and 2012) has increasingly become a key customer group for many fashion brands and retailers, analysis shows that this generation has turned more cautious about shopping for clothing, especially for new items. The tariff-driven price increases could further discourage these groups from buying new clothing in the new year ahead.

Meanwhile, the trade policy environment facing the global fashion apparel industry could remain highly uncertain in 2026. Notably, in addition to tariffs, several trade agreements could create new uncertainties for fashion companies when sourcing from affected regions. Specifically:

The U.S.-Mexico-Canada (USMCA) trade agreement will begin its formal six-year review process in 2026. Despite broad industry support for upholding the existing agreement and calls to “do no harm,” we cannot rule out the possibility that the Trump administration might seek significant renegotiation or even replace the USMCA with separate bilateral trade deals.

Likewise, the outlook for the African Growth and Opportunity Act (AGOA) and the Haiti HELP/HOPE program, both of which expired in September 2025, remained highly uncertain. Because both programs play a critical role in supporting U.S. apparel sourcing from Sub-Saharan Africa and Haiti, whether and under which conditions they are renewed will directly influence fashion companies’ sourcing decisions and the long-term competitiveness and investment prospects of these regions.

Furthermore, even with several “trade deals” reached between the US and major trading partners like the EU, Vietnam, Cambodia, and potentially China and India, their implementation and enforcement will warrant close attention. In particular, the meaning and definition of critical terms like “transshipment” in these “trade deals” remain largely unclear. However, the impact could be significant for apparel sourcing if the Trump administration ultimately decides to revisit or set new rules of origin in these agreements to reduce the “China content” in products imported into the United States. Notably, according to OECD’s newly released “trade in value-added database,” apparel exports from Asian countries, including Vietnam and Cambodia, commonly contain 20-30% of value created in China.

Key apparel sourcing trends to watch in 2026

First, trade and economic impacts of tariffs could become more visible and significant in 2026. In particular, almost all U.S. apparel imports will be subject to the higher tariffs in 2026, leaving fashion companies with fewer options to use existing inventory to mitigate the effects. Consequently, fashion companies will face increased pressure to control their sourcing costs and protect their profit margins.

Second, fashion companies will continue to leverage sourcing diversification to navigate market and trade policy uncertainties. For example, according to the 2025 Fashion Industry Benchmarking Study released by the U.S. Fashion Industry Association (USFIA), a record-high percentage of surveyed U.S. fashion brands and retailers (i.e., over 80%) reported sourcing from 10 or more countries. Nearly 60% of respondents plan to source from even more countries in 2026. In a recent study I conducted, some leading U.S. and EU fashion companies mentioned in their 2025 Q2 earnings call transcripts that they intentionally seek vendors with production capacity across multiple countries to achieve sourcing diversification and mitigate risks.

Third, in addition to seeking competitive sourcing costs, fashion companies will increasingly look for vendors that can offer speed to market, flexibility, and agility. As one leading fashion company noted, “increasing the speed” does not necessarily mean “nearshoring,” but also refers to vendors that can deliver products quickly and at scale. Meanwhile, fashion companies increasingly expect suppliers to accommodate last-minute order changes, accept low minimum order quantities (MOQs), arrange raw material sourcing, and offer other value-added services. This shows why, based on trade data, Asian suppliers overall are more competitive and have captured more market share in the U.S. and EU markets in 2025 than “near-shoring” suppliers.

Additionally, China and Asia’s role in apparel sourcing could continue to evolve in 2026. I recently attended an industry event featuring textile and apparel manufacturers in Southeast Asian countries (ASEAN) and China. A few observations from the event stood out to me.

  1.  While the tariff was a top concern for most U.S. fashion companies, the conference mainly focused on facilitating investment and creating a more integrated, resilient, and sustainable textile and apparel supply chain in Asia. In other words, Asia-based textile and apparel suppliers did not seem panicked by the tariffs, nor do they believe the tariffs fundamentally challenge their long-term growth trajectory or hurt their export competitiveness.
  2. The Asia-based textile and apparel industry is becoming ever more global, mature, and advanced. Consistent with recent trade data, Asia-based fashion brands today commonly conduct global sourcing. They are investing heavily in new sustainable textile materials and digital technologies. They remain the largest buyer of the most sophisticated textile machinery in the world. Therefore, it is reasonable to expect that Asian suppliers as a whole will continue to dominate textile and apparel production and export into 2026 with no near competitors. 
  3. China’s leadership and influence within the Asia-based textile and apparel supply chain are increasingly visible. At the conference, ASEAN-based textile and apparel associations see China as a vital partner and source of investment. Through China’s Belt and Road Initiative (BRI), collaboration is extending from trade and investment to education and skills training. Overall, industry sentiment toward China in ASEAN differs significantly from the “decoupling” and “reducing China exposure” narratives that are gaining traction in the United States.
  4. An interesting question that I took away from the conference was whether China truly worries about losing market share in the U.S. and other markets for final apparel products. Perhaps not. Chinese industry leaders appear confident because they know that many Asian garment-producing countries remain heavily dependent on Chinese textile inputs, and many garment factories are funded or owned by Chinese investors. Given these dynamics, it will be interesting to observe how China’s confidence and its broader leadership role in Asia’s regional textile and apparel supply chain will continue to grow in 2026.

Opportunities in 2026

In 2026, we may see a significant increase in AI use in apparel sourcing. For example, fashion companies could use new AI tools to help optimize inventory levels and logistics, identify and evaluate new suppliers, and improve operational efficiency. AI may also play a more crucial role in supporting efforts around supply chain mapping, traceability, and sustainability data collection. Overall, we could see a more digitalized and data-driven sourcing process in the new year ahead.

On the other hand, in 2026, fashion companies could benefit from investing in and exploring new business models that support designing, making, sourcing, and selling sustainable apparel products. For example, a recent study of mine found that, by stock keeping units (SKUs) count, the number of clothing items made with recycled textile fibers increased by about 24% from 2024 to 2025 (August to October) in the U.S. retail market. Similarly, clothing items made with “regenerative” textile fibers surged by nearly 90% over the same period. These figures represent consumers’ increasing demand and fashion companies’ growing business interest in offering these products. New sustainability legislation, such as the Extended Producer Responsibility (EPR) at the state, regional, or international levels, will also create new incentives and pressure for fashion companies to revisit many of their current business practices. That said, balancing the sustainability benefits with other key sourcing metrics, such as costs, quality, and traceability, for these sustainable apparel products, will require ongoing efforts and improvements by fashion companies and their supply chain partners in 2026.

by Sheng Lu

How EU Fashion Companies Navigate Trump’s Tariffs (Updated November 2025)

This study aims to examine the impacts of the Trump administration’s escalating tariffs on the apparel sourcing and business practices of EU-headquartered fashion companies. Based on data availability, transcripts of the latest earnings call from about 10 leading publicly traded EU fashion companies were collected. These earnings calls, held between August and November 2025, covered company performance in the second quarter of 2025 or later. A thematic analysis of the transcripts was conducted using MAXQDA.

First, reflecting the global nature of today’s fashion apparel industry, many EU-based fashion companies also see tariffs as one of their top business concerns in the second quarter of 2025. However, overall, luxury fashion companies reported less significant tariff effects than fast-fashion retailers and sportswear brands. The result reflected luxury fashion companies’ distinct cost structure, supply chain strategies, and competitive factors, making them less sensitive toward tariff-driven sourcing cost increases.

Second, EU-based fashion companies generally regarded the rising sourcing costs and the resulting pressure on profit margins as the most significant impacts of Trump’s tariffs. Companies also noted that the tariffs’ financial impacts would be more noticeable in the coming months as more newly launched products became subject to the higher import duties. For example:

  • Adidas: “We already had the double digit hit when it gets to cost of goods sold already in Q2 in the U. S…the impact of these duties, if they are the way we have calculated them here, an increase in cost of goods sold of about CHF 200,000,000 (about $250 million USD).”
  • H&M: “Against that, we have the impact of the tariffs that will then, based on the tariffs we pay during Q3, a lot of those garments will be sold during Q4, and that’s when they affect our profit and loss.”

Third, EU-based fashion companies commonly adopted a sourcing diversification strategy to mitigate the tariff impact. Companies also increasingly look for vendors that can deliver speed, flexibility, and agility.  Furthermore, some EU companies have been strategically leveraging regional supply chains to meet the sourcing needs. For example:

  • Adidas: “We work with our suppliers who are mostly multi country…”
  • Hugo Boss: “Since our last update in early May, we have taken concrete steps to mitigate tariff-related impacts. Our well-diversified global sourcing footprint has a clear advantage in this regard. It enables us to swiftly adapt to changing conditions and optimize sourcing decisions.”
  • H&M: “We are working on how to increase the speed and reaction time in our supply chain. That’s a wide work that includes both, as we mentioned before, how we move production closer to the customer with what we call nearshoring or proximity sourcing, but it’s also working with a set of suppliers that can be much quicker and where they can support with a larger part of the product development process.”
  • C&A: “In the last quarter, we developed our logistics strategy to sustain C&A’s growth curve till 2030…This strategy was designed so as to bring greater speed and flexibility to our operational model through a more regionalized network, that is a network that is closer to the stores and major consumption centers, allowing us to have greater capacity to respond to the demands of each store.”

Fourth, like their U.S. counterparts, some EU fashion companies reduced their “China exposure” to lessen the impact of tariffs. Others establish a “China for China” supply chain due to perceived market opportunities there. For example:

  • Puma: “Our China exposure got reduced further for the Spring/Summer 2026 collection…The vast majority of our U. S. Imports originate from Asia, with Vietnam, Cambodia and Indonesia accounting for the majority…”
  • Adidas: “China is almost irrelevant for us because we have reduced the amount of China imports into the U. S. to only 2%…What we did is that we transferred the Chinese capacities to be mostly China for China…We have a more verticalized supply chain in China.”
  • Hugo Boss: “In particular, we have increased our inventory coverages in the U. S. And successfully rerouted product flows from China to other regions.”

Additionally, despite tariff-driven cost pressures, many EU-based fashion companies were cautious about raising prices, worried about losing customers in an overall weak market. Meanwhile, luxury fashion brands seem more comfortable raising prices than non-luxury brands. For example:

  • Adidas: “What kind of price increases could we take depending on the different duties, but there’s no decision on that…We are not the price leader, but we’d, of course, follow, a, what the market is doing, our competitor is doing and also, of course, look very closely what the consumer is accepting because in the end, it’s to keep the balance between all these factors.”
  • H&M: “That we do in the U.S., as we do in all other markets, and that leads to both price decreases and price increases to stay competitive. That’s an ongoing work. We are cautious about looking at the Q4 development in the U.S., given that we know we have already paid tariffs that will impact the gross margins as we look into the fourth quarter.”
  • Inditex (Zara): “With regards to the tariffs in the U.S. specifically, we have a stable pricing policy that we’re always talking about. Of course, all pricing activity, be it in the U.S. or any other geography, is primarily driven by commercial decisions, not financial ones. What we try to do in every market is maintain our relative position.”
  • Burberry: “19% of our revenues are from the US…We spent much of last year looking at the supply chain, looking at price elasticity…We took quite a surgical approach to price increases in the US, and…we really definitely understood where we had price elasticity there.”
  • Hugo Boss: “we will introduce moderate price adjustments globally with the upcoming spring 2026 collections, which will begin delivery towards the 2025. These steps aim to safeguard our margin profile while remaining aligned with broader market dynamics.”

by Sheng Lu

Interview with Modaes (Spain) about the Shifting Global Apparel Trade and Sourcing Patterns (November 2025)

Full interview in English HERE ; Spanish version HERE

Below is the interview summary

Q1. Since the pandemic, has the global fashion supply chain changed?

Key point: The pandemic taught fashion companies the importance of flexibility and agility in sourcing. Heavy reliance on China caused major disruptions during lockdowns, prompting companies to diversify their sourcing base and develop stronger supplier relationships to reduce various sourcing risks.

Q2. Is supply security now more important than price in sourcing decisions?

Key point: Security and sourcing are becoming more closely linked. Leading fashion companies understand that sourcing now requires balancing cost with other important factors such as flexibility, regulatory compliance, and risk management. New regulations related to sustainability demand increasingly detailed supply-chain documentation and transparency. Meanwhile, geopolitical tension between the U.S. and China further adds complexity to fashion companies’ sourcing decisions.

Q3. Are companies continuing to reduce the number of suppliers, and why?

Key point: Recent studies show that many fashion companies are diversifying sourcing beyond China, importing more from emerging supplying countries like Vietnam, Bangladesh, Indonesia, Cambodia, Pakistan, Egypt, and more. However, there are two divergent strategies: some brands expand their supplier base to spread risk and enhance capabilities in sustainable fibers, while others consolidate suppliers to strengthen partnerships with large vendors operating across multiple countries, many of which are still based in China.

Q4. Can the value chain function without China?

Key point: Not realistically. While China’s share of finished garment exports is declining, it still dominates in textiles raw materials. Even when apparel is made in other countries (like Vietnam and Cambodia), much of its fabric, investment, or ownership is Chinese. The newly released OECD data also show that about 30% of Southeast Asian apparel exports include Chinese content.

Q5. Which countries could take advantage of China’s declining role?

Key point: China’s dominance comes not only from its low costs but also from its capacity to produce almost any product category at large scale. To replicate this, companies need to use multiple sourcing locations — a “many-country model” instead of relying on just one. Therefore, diversification, rather than substitution, is the most practical approach. Firms seek to avoid over-dependence on any single country, especially given the volatility of tariffs and supply-chain disruptions.

Q6. Does “friendshoring” apply to fashion?

Key point: Politically appealing but impractical for apparel sourcing. The idea of friendshoring — trading only with “like-minded” nations — doesn’t fit with fashion’s global manufacturing system. Europe and the U.S. share values, but Europe lacks large-scale apparel production. Over 70% of U.S. apparel imports still come from Asia, where most countries are not formal U.S. allies. Therefore, political alignment cannot guide sourcing strategy in fashion; cost, capacity, and speed are more important.

Q7. Will geopolitics and the trade war reshape fashion sourcing in Europe or the U.S.?

Key point: Nearshoring remains a popular concept. European companies explore Eastern Europe and the Mediterranean; U.S. firms consider the Western Hemisphere and limited domestic production. Sustainability has emerged as the new opportunity for near-shoring. Fashion companies now aim to use more sustainable fibers in their clothing products. EU sustainability rules could also attract new investment to expand production in the EU. However, in general, small-sized firms need more resources and support to meet these high environmental standards, both to comply with the law and sustain their businesses.

Q8. Is de-globalizing production possible?

Key point: True de-globalization is unlikely. Instead, globalization is shifting toward greater transparency and accountability. Companies now need to track and report where products are made and how workers are treated, including the sourcing of raw materials. This encourages brands to work closely with their suppliers and promote stronger and strategic collaboration.

Q9. Are there enough incentives for production automation in fashion?

Key point: Yes — Automation provides a way to increase efficiency in high-wage countries like the U.S. With labor costs high and factories shrinking, machines and AI are being adopted to boost productivity and customization. Automation can also help cut down on overproduction — one of fashion’s major waste issues — by supporting made-to-order or small-batch manufacturing.

Q10. Why don’t we see full automation yet?

Key point: Cutting, sewing, and material handling today still require human labor, although factories increasingly use automated tools to boost productivity. Asian suppliers are upgrading equipment to handle smaller, faster orders. Automation is bringing back niche manufacturing (e.g., sock production in the U.S.) and supporting recycling efforts, such as sorting used garments. It helps lower minimum order quantities, matching production to uncertain consumer demand.

Q11. How can Europe maintain relevance amid the U.S.–China trade war?

Key point: Europe continues to be a key player in both textile and apparel manufacturing and consumption. Nearly half of the apparel in the EU is produced locally, often in high-wage countries like Italy, Germany, and France. Asian countries are looking for more market access to the EU because of higher tariffs imposed by the US (e.g., trade diversion). Europe also leads in sustainability and regulatory standards. Complying with EU rules often means meeting the highest global standards. Luxury branding (“Made in Italy/France”) remains highly influential, and the EU’s proactive trade agreements might even enable it to export textiles for processing in Asia, expanding supply chain integration.

Q12. Why hasn’t Africa become a viable textile hub yet?

Key point: Africa’s potential greatly relies on trade preferences like the African Growth and Opportunity Act (AGOA), which recently expired. Without duty-free U.S. access, U.S. companies are less likely to source there. However, the EU could help bridge the gap by forging partnerships for recycled textile materials and sustainable production. Regional collaboration could unlock Africa’s place in circular fashion supply chains.

For students in FASH455: Feel free to share your thoughts on any of the interview questions above. You may also challenge and debate any points raised in the interview and present your arguments.

Updated Impact of Increasing Tariffs on U.S. Fashion Companies’ Sourcing and Businesses

This study aims to examine the impacts of the Trump administration’s escalating tariffs on U.S. fashion companies’ apparel sourcing practices. Based on data availability, transcripts of the latest earnings calls from about 30 leading publicly traded U.S. fashion companies were collected. These earnings calls, held between August and October 2025, covered company performance in the second quarter of 2025 or later. A thematic analysis of the transcripts was conducted using MAXQDA.

Key findings:

First, U.S. fashion companies reported a more significant impact of the increasing tariffs on their financial performance as the tariff increase expands from China to other countries. Many companies regarded tariffs as one of their top-most pressing external challenges to profitability in 2025, especially in the second half and beyond.  For example:

  • G-III Apparel: “We expect the total incremental cost of tariffs to be approximately $155 million, up from the $135 million original estimate, and this is based on the latest tariff increases implemented for Vietnam, India and Indonesia, among others.”
  • American Eagle: “On tariffs, yes, we are providing the guidance here for the third and fourth quarter. About $20 million of impact from Q3. $40 million to $50 million in Q4. So that will pressure gross margin a bit.”
  • Hanesbrands: “When you think about tariffs and the impact on our business, first of all, we won’t be really experiencing that cost until Q4 because of the inventory that we have and the way cost flows off of our balance sheet.”
  • Victoria’s Secret: “Our projected net tariff impact of $100 million in 2025 is up $50 million versus our assumption embedded in our previous guidance. With approximately $10 million of net tariff impact already recognized in the first half of the year, our guidance assumes approximately $20 million of net tariff pressure in the third quarter with $70 million impact in Q4.”
  • Tapestry: “We are facing greater than previously expected profit headwinds from tariffs and duties, with the earlier-than-expected ending of de minimis exemptions being a meaningful factor. In aggregate, the total expected impact on profitability this year from tariffs is $160 million, representing approximately 230 basis points of margin headwind.”
  • Carter’s: “We’ve assessed the higher incremental tariffs, which have already been implemented, an additional 10% duty for all countries and higher incremental duties for products from China, Vietnam and Indonesia. Relative to a few months ago, we’re preparing for a world with higher and more permanent tariffs above the over $100 million in duties, which we have paid historically. Our estimate of the additional baseline tariffs is that it would represent a gross additional tariff amount between $125 million and $150 million on an annualized basis.”

Second, despite the higher tariff burdens, most U.S. fashion companies still try to avoid across-the-board price hikes due to concerns about losing consumers. Instead, most companies opt for selective price increases, value-based pricing, and closely monitor consumers’ price sensitivity. However, price increases could be more noticeable down the road. For example:

  • Oxford industries: “We’ve not done sort of an across-the-board approach to pricing. We’ve really looked at it on an item-by-item basis and balanced the need to protect our margins and try to recover some of the tariff impact with not wanting to get too far ahead of ourselves because that tariff number…as we get into spring ’26… And on average, that’s led to sort of low to mid-single digit or low mid-single-digit price increases…we’re just being very cautious about increasing the price too much before we really know where things are settled out.”
  • URBN: “our pricing strategy…is really to look at some gentle price increases where we feel like there’s the value that contributes to that. So making sure that we’re protecting some of the opening price points that the customer counts on and some programs that we know drive a lot of volume…Recognizing the value equation is really important to all of our consumers.”
  • TJX: “I think you’re gonna see a more of a little bit of a gradual increase in pricing as the tariffs come in…I don’t think you’ll see step all of a sudden Right. With the tariffs set,because I don’t wanna, I think, turn off customers immediately by seeing a dramatic price shift. So I think they might they might they might absorb it initially for a little bit, and eventually, they’ll get there.”
  • Columbia Sports: “We expect higher prices for many consumer goods will negatively impact consumer demand…In fall ’25, we’re working with our retail partner to deliver value to consumers and keep inventory and dealer margins healthy. As a result, we’re not making any significant price changes to our fall ’25 product line and expect to absorb much of the incremental tariff costs this year…Our goal is to offset higher tariffs over time through a combination of actions, including price increases, vendor negotiations, SG&A expense efficiencies and other mitigation tactics.”
  • Ralph Lauren: “The big unknown sitting here today is the price sensitivity and how the consumer reacts to the broader pricing environment and how sensitive that consumer is. And that’s what we’re watching very closely as we head into the second half.”
  • Ross stores: “Some of the India tariffs, especially if the 25 goes to 50…I think that you’ll see this go into next year, and I think we would expect to see price increases. And — but over time…we think it will reach equilibrium, and it will be business as usual.”
  • Burlington stores: “we are seeing that competitors are taking up retail prices. So far, though, I would say that those price increases have been quite selective and quite restrained…Part of it may just be the time lag between imports arriving in the country and those goods showing up in stores. But also my sense is that wholesalers and retailers have been reluctant to make decisions on raising prices until they know what the final tariff rates are going to be. Now it does feel like there is more clarity on this now than there was a couple of months ago. So it wouldn’t be surprising if retail prices were to go up across the industry in the back half of the year. Now of course, we know that our customer is very, very price sensitive.”
  • VF Corporation: “we have actions in place to mitigate the tariff impact through sourcing savings and pricing actions that will take effect later this year.”

Third, while U.S. fashion companies overall continue to reduce their apparel sourcing from China amid the current tariff and geopolitical tensions, some companies still regard China as a viable sourcing base given its many unique advantages, such as speed to market, production efficiency, and well-developed supply chain infrastructure. For example:

  • Carter’s Inc: “We’ve meaningfully reduced our exposure to China manufacturing over the last number of years. And now, as summarized here, our largest countries of origin are Vietnam, Cambodia, Bangladesh, and India.”
  • Abercrombie & Fitch: “Our approach and underlying principles for tariff mitigation remain unchanged, supported by a deep playbook and experience. We continue to expect China sourcing share in the U.S. will be in the low single digits for the year.”
  • Steve Madden: “Since the last call…We have moved certain production for fall back to China, where we felt it would be difficult to ensure on-time delivery, appropriate product quality and/or reasonable pricing in an alternative country. For fall 2025, we currently expect to source approximately 30% of our U.S. imports from China, down from 71% for the full year 2024..
  • Oxford industries: “With the recent tariff increases announced during the second quarter, including increased tariffs in countries like Vietnam and India that were included as part of our shift away from China, largely offset by the mitigation efforts we have undertaken, including accelerated inventory receipts and quickly shifting our sourcing network.”
  • American Eagle: “If you start with all the country of origin remixing…China where we know we were at a higher penetration coming into the year is mid-single digit now in a full year.”

Fourth, establishing a geographically diverse sourcing base continues to be a crucial strategy employed by U.S. fashion companies to mitigate tariff impacts and policy uncertainty. U.S. fashion companies are also intentionally adding speed, flexibility, and agility to their sourcing base and supply chain. However, given the complex sourcing factors fashion companies have to consider, plus the broad scope of “reciprocal tariffs, there is no clear winner. For example:

  • Kohl’s: “We have a diversified sourcing strategy from a country standpoint. We’re not heavily reliant on any one particular country, and we have the flexibility and agility to actually move production to other countries if necessary.”
  • PVH: “We work closely with an established network of global sourcing partners across more than 30 countries, and we continue to leverage our deep long-standingrelationships to further optimize our sourcing and production costs.”
  • American Eagle: “If you start with all the country of origin remixing…India is small for us. Rebalancing some things out of Vietnam.”
  • Steve Madden: “we were focused on moving a lot of product to Brazil. We’re going to have to wait and see what happens. I think that really goes not just for Brazil, but for a lot of the countries that we work with. So we’ve tried to create a more diversified sourcing footprint. And — but there’s obviously a lot of uncertainty still about where the ultimate tariff rates will land by country. And so we’re going to have to wait and see what happens and then react accordingly. That’s all we can do.”
  • Hanesbrands: “when you think about tariffs and the impact on our business…not only do you have the Q4 impact, but you have to think about those other offsets about meaningful U.S. content that we have in our products that are exempt from reciprocal, the good East-West balance that we have in our supply chain…”
  • Land’s End: “With regard to sourcing…we have been intentionally repositioning our sourcing network to better serve the business we are building leading to a more balanced supply chain that enables us to bring new solutions to customers with more speed and frequency throughout the year. For example, our licens epartners are becoming part of our sourcing network…By tapping into the full breadth of our sourcing matrix, we are able to swiftly and strategically reposition fabric and manufacturing as tariff conditions evolve.”

Fifth, as part of their tariff cost mitigation strategy, many U.S. fashion companies have been strategically but cautiously building preemptive stock, adopting a data-driven approach to optimize inventory, and simplifying product assortment. For example:

  • Levi’s: “And for Q4, we declared a dividend of 14¢ per share, which is up8% to prior year. We ended the quarter with reported inventory dollars up 12%, driven by purposeful investment ahead of the holiday and higher product cost than a year ago due to tariffs. In unit terms, inventory was up 8% versus last year. As of today (October 9, 2025), we have 70% of the product in the US needed for holiday.”
  • Ralph Lauren: “So we feel good about our inventory levels as we head into the fall season. So we ended Q1 (2025), as you know, with inventories up 18% versus Q1 of last year (2024)…if you think about sort of our Q2 revenue guide of up high single digits, relates to the strategic acceleration of largely core inventory receipts into the U.S. in Q1 during the tariff pause period…So if you back out that tariff-related strategic pull up, our inventory growth is actually a little behind our double-digit top line growth for Q1 and right in line with our expected high single-digit top line growth for next quarter, Q2. And…for the year to go, we expect inventories to moderate as we move throughout the fiscal year, and we plan on ending fiscal ’26 with levels generally in line with demand.”
  • PVH: “Inventory at quarter end (Q2, 2025) was up13% compared to Q2 last year (2024), including a 1% increase due to tariffs, and reflects a planned improvement compared to up 19% in Q1.”
  • Hanesbrands: “we’re leveraging advanced analytics with the use of AI to drive operational improvement around the globe, including inventory and assortment management as well as demand planning and forecasting.”
  • Tapestry: “We’re bringing more innovation to the assortment while we streamline our offering, reducing handbag styles by over 30% by fall, allowing us to stand behind our big ideas with clarity and intention.”

by Sheng Lu

FASH455 Video Discussion: Textiles, Trade & National Security: A Conversation with Parkdale Mills COO Davis Warlick

Discussion questions (for students in FASH455, please answer at least three questions from below)

  • #1 Use 1-2 examples from the video and explain how CAFTA-DR and USMCA help shape the Western Hemisphere textile and apparel supply chain.
  • #2 Based on the video, what do you see as the main opportunities for textile and apparel nearshoring or reshoring in the Western Hemisphere? Please also identify 1–2 key bottlenecks (e.g., cost, infrastructure, labor, sustainability, or trade policy) and explain your viewpoint.
  • #3 The speaker argues for a sectoral trade policy for textiles and apparel rather than broad “free trade.” What is your evaluation? Please make 1-2 specific points and use specific examples from the video to illustrate your viewpoint.
  • #4 How does the video help deepen your understanding of the complex economic and non-economic factors related to textile and apparel nearshoring and reshoring in the Western Hemisphere? Explain at least one insight that challenges your prior assumptions/views about sourcing and trade.

Patterns of Global Textile and Apparel Trade Measured by Origin of Value Added (updated October 2025)

Textiles and apparel today are produced through a global supply chain. For clothing labeled as “Made in Vietnam,” it is likely that the textile raw materials, such as yarns, fabrics, and trims, are sourced from elsewhere.

According to the newly released 2025 OECD trade in value added estimation, as of 2022, a country’s apparel exports commonly contain value added created in another country due to the use of imported textile materials and other inputs. This is the case for exports from leading apparel exporting countries in Asia, such as Vietnam (44% foreign value added), ASEAN members (35% foreign value added), Cambodia (45% foreign value added), India (21% foreign value added), and Jordan (42% foreign value added). Other emerging apparel sourcing destinations in North, South, and Central America, as well as the EU, also used substantial imported inputs for their apparel exports, such as Mexico (27.3% foreign value added), Türkiye (23.9% foreign value added), and Egypt (19.7% foreign value added). [See detailed data here]

Notably, among the sixteen countries and regions examined, they mostly increased the use of non-domestic value added in textile and apparel exports between 2015 and 2022 (note: paired T-test result was statistically significant at the 99% confidence level). This suggests that co-production through regional or global supply chains, rather than 100% domestic production, has become a more prominent phenomenon in the textiles and apparel industry. [See detailed data here]

Furthermore, the value added from China appears to be increasing in the textile and apparel exports of many countries. Specifically, between 2015 and 2022, textile and apparel exports from several countries contained a higher percentage of value added from China, including not only Asian countries such as Vietnam (up 6 percentage points), ASEAN (up 4.1 percentage points) and Jordan (up 6.1 percentage points), but also those in other regions such as Egypt (up 3.3 percentage points), Mexico (up 1.7 percentage points), and South & Central America as a whole (up 4.7 percentage points). [See detailed data here] This result reflected China’s deliberate effort to expand its global economic presence through foreign direct investment, Belt and Road initiatives, and new trade agreements in recent years. 

The latest data from the World Trade Organization (WTO) also shows that while China’s market share in the world clothing exports fell to 29.6% in 2024—the lowest level since 2010—China’s market share in textile exports increased to 43.3% in 2024, up from 41.5% a year earlier. In other words, consistent with the stage of development theory, China’s role as a major textile supplier to other apparel-exporting countries continues to grow, despite a decline in its finished garment exports. [See detailed data here]

In comparison, while the United States remained an important contributor to the value added of textile and apparel exports from Mexico and Canada, its contribution slightly declined between 2015 and 2022 (i.e., from about 12%-14% to 11%). As the USMCA undergoes its mandated six-year review, it is critical to strengthen, rather than weaken, this North American co-production supply chain, which has a significant impact on the economic interests of the U.S. textile and apparel industry. This is particularly important given that supply chain collaboration between the U.S. and Asian or EU countries for textile and apparel production has been limited, with little indication of growth: According to OECD data, the U.S. value added in Asian and EU countries’ textile and apparel exports remained only around 1.5% [See detailed data here].

by Sheng Lu

(This post is not open for discussion due to its technical nature)

FASH455 Exclusive Interview with Shannon Brady, Import and Product Operations Manager at LoveShackFancy

About the interview

In this exclusive FASH455 interview, we are thrilled to welcome Shannon Brady, Import and Product Operations Manager at LoveShackFancy and a proud UD & FASH alum, to share her experiences navigating global apparel sourcing for fashion students. Shannon offered first-hand insights into the latest sourcing trends in the fashion apparel industry and reflected on her career journey in sourcing and trade. Specific topics covered in the interview include:

  • Apparel sourcing process in general
  • The current U.S. tariff situation and its impacts on apparel sourcing
  • Why do apparel sourcing orders still mostly go to Asia?
  • Outlook for apparel on-shoring and near-shoring
  • Sustainability and sourcing in practice
  • Career opportunities in apparel sourcing and trade

Note: This interview is for informational purposes only and reflects Shannon’s personal perspectives. What was shared in this interview should not be taken as, and does not constitute, official policy, position or guidance from LoveShackFancy.

About Shannon Brady

Shannon Brady is the Import and Product Operations Manager at LoveShackFancy. With over four years of experience in product development and sourcing, she specializes in driving vendor performance, optimizing supply chains, and leading cross-functional initiatives. Before her current role, she worked for the U.S. Fashion Industry Association in Washington, D.C., and then joined Party City as a Sourcing Operations Manager.

Shannon graduated magna cum laude from the University of Delaware with a B.S. in Fashion Merchandising. She was a 2018 UD summer scholar, and her co-authored case study Managing the used clothing trade  was published in the Bloomsbury Fashion Business Cases.

About Emilie Delaye (moderator)

Emilie Delaye is a master’s student & graduate instructor in Fashion and Apparel Studies at the University of Delaware, with a specific interest in supply chain, global sourcing, and sustainability. 

New USITC Report: HELP/HOPE Program Expiration Would Significantly Hurt Haiti’s Apparel Exports to the U.S.

In a newly released study, the U.S. International Trade Commission (USITC) suggests that if the HOPE (Haitian Hemispheric Opportunity through Partnership Encouragement) Acts and HELP (Haiti Economic Lift Program Act of 2010) are not renewed soon after their expiration on September 30, 2025, it could severely impact Haiti’s apparel exports to the U.S. further. Specifically: 

First, the apparel sector matters significantly for Haiti. Apparel accounted for over 90% of U.S. merchandise imports from Haiti. The apparel sector also provided over 60,000 jobs in Haiti in 2021, though this number declined to nearly 22,000 by 2024 due to political instability and security concerns. Further, according to the USITC report, “Haiti’s apparel production primarily consists of basic apparel items such as T-shirts and cotton goods. Cotton knit T-shirts and manmade fiber knit T-shirts were the top products imported to the United States during 2022–24.”

Second, the HOPE and HELP programs have been critical in supporting Haiti’s apparel exports to the U.S. Data from the Office of Textiles and Apparel (OTEXA) shows that of the total $549 million U.S. apparel imports from Haiti in 2024, about 66% claimed the duty-free benefits under HOPE/HELP.

While Haiti’s apparel exports to the US could also enjoy preferential duty benefits under other U.S. trade preference programs, particularly the Caribbean Basin Economic Recovery Act (CBERA) and its enhanced version–the Caribbean Basin Trade Partnership Act (CBTPA), the apparel rules of origin under HOPE/HELP were far less restrictive. For example, whereas CBTPA requires Haiti to use U.S.-made yarns and fabrics, HOPE/HELP allows Haiti to use textile input from any country, as long as other eligibility criteria (including value-added or quota limits) are met.

Third, related to the previous point, without HOPE/HELP, Haiti’s apparel exports to the U.S. could face significant challenges. The USITC report noted that “The expiration of the HOPE/HELP program at the end of September 2025 would significantly reduce the competitiveness of textile and apparel exports from Haiti to the United States by removing key duty-free access provisions.”

Other studies cited by the USITC report argued that “compliance costs of preferential trade agreements are associated with rules of origin requirements, which can be cumbersome, especially for small firms in developing countries…if rules of origin are not ‘sufficiently simple and transparent,’ their compliance costs (may) exceed their benefits.”

Fourth, the expiration of HOPE/HELP could complicate the regional textile and apparel supply chain that involves the U.S. textile input, Haiti, and the Dominican Republic. Specifically, in 2024, about 28.8% of U.S. apparel imports from Haiti were under CBTPA’s “Knit apparel from regional or U.S. fabric from U.S. yarn” or “T-shirts made of regional fabric from U.S. yarn” provisions. This percentage rose to a new high of 32.5% in the first seven months of 2025 (was 23.7% over the same period in 2024). As the USITC report noted that “U.S. yarn is used in downstream fabric production in the Dominican Republic-Central America FTA (CAFTA-DR) countries, which is then used in apparel production in Haiti. Haiti’s preferences further allow for integrated textile and apparel trade with the Dominican Republic, with many inputs imported and finished goods exported through the country.”

However, the report also concluded that “although Haiti would still be able to take advantage of the CBTPA provisions, without the HOPE/HELP program, CBERA exports of textile products are likely to decline sharply, as producers face increased production costs relative to other U.S. trading partners.” In other words, “forcing” Haiti to rely exclusively on U.S. yarns could make its apparel too costly compared with Asia suppliers or CAFTA-DR members, leading U.S. fashion companies to reduce or even withdraw sourcing from Haiti.

(note: due to its technical nature, this post is not open for FASH455 discussion)

Summary by Sheng Lu

Patterns of U.S. Apparel Imports (updated September 2025)

First, as a result of the IEEPA reciprocal tariff, the average tariff rate for U.S. apparel imports (HS Chapters 61 and 62) reached 26.4% in July 2025, marking a new high in decades (note: was 25.4% in June, 23.8% in May and 20.2% in April 2025), and a substantial increase from 14.7% in January 2025, prior to Trump’s second term. Even apparel imports from traditional U.S. free trade agreement partners, such as CAFTA-DR members, now have to be subject to about 10% applied tariffs. And apparel imports from Mexico still enjoyed a relatively low 1.6% tariff rate in July 2025. [Check the applied US apparel import tariff rate here]

Second, U.S. apparel imports fell in July 2025, negatively impacted by the hiking of tariffs and consumers’ growing hesitancy in clothing spending amid uncertainty about their household financial outlook. Specifically, U.S. apparel imports in July 2025 decreased by 3.0% in value and 5.2% in quantity from a year ago, indicating both an overall shrinking import demand and a more notable import price increase. [Check U.S. apparel import index here]

Statistics also show that after removing the seasonal factor, the average U.S. apparel import price went up by nearly 3% from April to July. This trend could become even worse in the coming months as more countries face even higher “reciprocal tariffs” starting from August 2025. However, the average U.S. apparel retail price has not significantly increased, likely because fashion companies fear losing sales at a time when consumers’ clothing spending is already weak. [Check the U.S. clothing retail price index here]

Third, continuing the trends from previous months, U.S. apparel imports from China again fell sharply in July 2025. Facing nearly 50% tariff rates—much higher than those applied to other sourcing countries—U.S. apparel imports from China decreased by 38.4% in value and 27.3% in quantity in July 2025 from a year ago. As a result, in value, China’s market share fell to just 15.6% in July 2025 (was 24.6% in July 2024), significantly lower than Vietnam’s 22.1% (was 19.1% in June 2024). In other words, it may signal a new era where China is no longer the top source of U.S. apparel imports. [Check market shares in U.S. apparel imports here]

Fourth, while Asia as a whole still dominates, trade data suggests more notable trends of sourcing diversification. In July 2025, about 72.9% of U.S. apparel imports came from China, far exceeding the Western Hemisphere (14.8%) and the rest of the world (12.4%). However, Asia’s market share in July 2025 was slightly lower than 74.7% a year ago, suggesting that more imports came from other regions. For example, at the country level, US apparel imports from several emerging Asian suppliers and those in the Middle East and Africa enjoyed fast growth, including Vietnam (up 12.5%), Cambodia (up 25.2%), Pakistan (up 14.7%), Jordan (up 21.6%), and Egypt (up 30.3%).

Meanwhile, U.S. apparel imports from India in July 2025 also increased by over 15%, although the newly imposed higher tariffs on India could alter the trend in the next few months.

Additionally, there is still no evidence that Trump’s tariff policy has meaningfully boosted nearshoring from the Western Hemisphere. On the contrary, in July 2025, U.S. apparel imports from Mexico grew by just 0.5%, despite the significant tariff advantage offered to USMCA-qualifying products. Similarly, imports from CAFTA-DR members decreased by 2.7%. The results revealed the adverse effects of uncertainty in the Trump administration’s tariff policy on encouraging long-term sourcing and investment commitment to the region.

(note: this post is not open for discussion)

By Sheng Lu

FASH455 Video Discussion: The Lesotho Garment Industry in the Shadow of Trump’s Tariffs

Discussion questions: (for students in FASH455, please address at least two questions below in your response. There is no need to repeat the question, but please mention the question #)

  • #1 How do you see the importance of the garment industry to Lesotho—economically, socially, and politically?
  • #2 Why and how could the 15% additional tariff have a significant impact on Lesotho’s garment industry?
  • #3 What responsibilities do U.S. fashion brands and retailers have toward Lesotho in the situation described in the videos?
  • #4 If you were a U.S. garment worker, would you support more favorable trade terms for Lesotho? Why or why not?

Background

  • According to the World Trade Organization (WTO), textiles and apparel accounted for 56.6% of Lesotho’s manufactured goods exports in 2023.
  • UNComtrade data shows that between 2023 and 2024, about half of Lesotho’s apparel exports went to the United States, its largest export market. Other countries in Sub-Saharan Africa (SSA) made up an additional 44% of Lesotho’s apparel exports.
  • Industry sources further indicate that between January 2024 and July 2025, about 60% of apparel labeled “Made in Lesotho” for sale in the U.S. retail market were tops, including 41% of T-shirts. All of these clothes targeted the mass and value market segments, and they were typically priced even lower than those “Made in Bangladesh.”
  • The African Growth and Opportunity Act (AGOA), a trade preference program enacted in 2000, has played a critical role in supporting Lesotho’s apparel export to the U.S. market.
  • Data from the Office of Textiles and Apparel (OTEXA) under the U.S. Department of Commerce shows that U.S. apparel imports from Lesotho totaled $151 million, or 0.19% of total U.S. apparel imports, in 2024. Notably, all of these imports claimed the AGOA duty-free benefits, and 96.8% were entered under the “third-country fabric” provision, which allows least developed countries (LDCs) like Lesotho to use textile raw materials sourced from third countries.

[Discussion is closed for this post]

FASH455 Video Discussion: Inside the Costs and Challenges of Making Textiles and Apparel in the U.S.

Video 1: How an Oklahoma denim-maker supports creating American-made jeans
Video 2: President Trump’s Tariffs Backfire on US Textile Exporters

Discussion questions (note: for students in FASH455, please respond to at least two questions listed below in your comment)

  1. Based on the videos, what is your evaluation of the opportunities and challenges of making textiles and apparel in the U.S.?
  2. In what ways has international trade influenced the growth, decline, or transformation of U.S. textile and apparel production?
  3. What do you think about the Round House Jeans owner’s strategy of selling imported jeans from Bangladesh at a higher profit margin to “subsidize” its low-margin U.S.-made jeans? Do you think this could be a sustainable business model in the long run?
  4. Based on the videos, why do you think U.S. textile and apparel production experienced even greater losses in the first half of 2025, despite higher tariffs on imports? [Detailed data HERE]
  5. If you were invited to offer policy recommendations to boost U.S. domestic textile and apparel manufacturing, what would you propose, and why?

Additional reading:

2025 USFIA Fashion Industry Benchmarking Study Released

The full report is HERE.

Key findings of this year’s report:

#1 This year, the top business challenges facing U.S. fashion companies center on the Trump Administration’s escalating tariff policy and its wide-ranging impacts on companies’ sourcing and business operations.

  • 100 percent of respondents rated “Protectionist U.S. trade policies and related policy uncertainty, including the impact of the Trump tariffs” as one of their top business challenges in 2025. This included as much as 95 percent of respondents who ranked the issue among their top two concerns.
  • Respondents also expressed significant concerns about the wide-ranging effects of Trump’s tariff policy, including “Inflation and economic outlook in the U.S. economy” (80 percent), “Increasing production or sourcing cost” (nearly 50 percent), and “Protectionist trade policies and policy uncertainty in foreign countries, including retaliatory measures against the U.S.” (52 percent).
  • Over 70 percent of surveyed companies reported that the higher tariffs increased sourcing costs, squeezed profit margins, and led to higher consumer prices. Approximately half of the respondents reported a decline in sales, and 22 percent stated that they had to lay off employees due to increased tariffs.

#2 Maintaining a geographically diverse sourcing base has been one of the most popular strategies adopted by U.S. fashion companies to mitigate the impact of rising tariffs and policy uncertainty. 

  • This year, respondents reported sourcing apparel products from 46 countries, similar to the 48 countries reported in 2024 and an increase from 44 countries in 2023. At the firm level, approximately 60 percent of large companies with 1,000+ employees reported sourcing from ten or more countries in 2025, a notable increase from the 45–55 percent range reported in 2022 and 2023 surveys.
    • Amid escalating tariffs and rising policy uncertainty, Asia has become an ever more dominant apparel sourcing base for U.S. fashion companies in 2025. Respondents reported increased use of several Asia-based sourcing destinations other than China in 2025 compared to the previous year, including Vietnam (up from 90 percent to 100 percent), Cambodia (up from 75 percent to 94 percent), Bangladesh (up from 86 percent to 88 percent), Indonesia (up from 75 percent to 77 percent), and Sri Lanka (up from 39 percent to 53 percent).As part of their sourcing diversification strategy, U.S. fashion companies are also gradually increasing sourcing from emerging destinations in the Western Hemisphere and beyond, such as Jordan, Peru, and Colombia.
    • Most respondents intend to build a more geographically diverse sourcing base and broaden their vendor network over the next two years. Nearly 60 percent of respondents plan to source apparel from more countries, and another 40 percent plan to source from more suppliers or vendors. Reducing sourcing risk, especially to minimize the impact of rising tariffs and tariff uncertainty, is a key driver of companies’ sourcing diversification strategies

#3 U.S. fashion companies remain deeply concerned about the future of the U.S.-China relationship during Trump’s second term and intend to further “reduce China exposure” to mitigate sourcing risks.

  • While 100 percent of respondents reported sourcing from China this year, a record-high 60 percent of respondents reported sourcing fewer than 10% of their apparel products from China, up from 40 percent in 2024. Approximately 70 percent of respondents no longer used China as their top apparel supplier in 2025, representing a further increase from 60 percent in 2024 and significantly higher than the 25-30 percent range prior to the pandemic.
  • Despite the announcement of the reaching of a U.S.-China “trade deal” in May 2025, more than 80 percent of respondents plan to further reduce their apparel sourcing from China over the next two years through 2027, hitting a new record high. Many large-scale U.S. fashion companies are already limiting or plan to limit their apparel sourcing from China to a “low single-digit” percentage by 2026 or earlier, mainly due to concerns about the increasing geopolitical and trade policy risks associated with sourcing from the country.
  • Still, respondents rated China as highly economically competitive as an apparel sourcing base compared to many of its Asian competitors regarding vertical manufacturing capability, low minimum order quantity (MOQ) requirements, flexibility and agility, sourcing costs, and speed to market. However, non-economic factors, particularly the perceived extremely high risks of facing U.S. import restrictions, geopolitical tensions with the U.S., and concerns about forced labor, are driving U.S. fashion companies to continue their de-risking efforts.

#4 No evidence indicates that the Trump Administration’s tariff policy has successfully encouraged U.S. fashion companies to increase domestic sourcing of “Made in the USA” textile and apparel products or to expand sourcing from the Western Hemisphere.

  • Only about 44 percent of respondents explicitly say that they would expand sourcing from the Western Hemisphere, and even fewer respondents (17 percent) plan to source more textiles and apparel “Made in the USA” amid the tariff increase.
  • This year, fewer respondents reported sourcing apparel from Mexico and Canada (down from 60 percent in 2024 to 50 percent in 2025) and members of the Dominican Republic-Central America Free Trade Agreement, CAFTA-DR (down from 75 percent in 2024 to 64 percent in 2025).
  • About half of the respondents plan to expand apparel sourcing from Mexico and CAFTA-DR members over the next two years. Notably, nearly all of these companies also intend to increase sourcing from Asia, indicating that U.S. fashion companies view near-shoring from the Western Hemisphere as a complement, not a replacement, to their broader sourcing diversification strategy.
  • Respondents consider the most urgent capacity-building needs within CAFTA-DR lie in the production of textile raw materials (e.g., spandex) and accessories (e.g., zippers, threads, and buttons). Meanwhile, USMCA members are considered to have relatively stronger capacities in yarn and fabric production but face more pressing shortages in accessories.

#5 Respondents overall remain highly committed to sustainability, social responsibility, and compliance issues in the sourcing process.

  • This year, the top sustainability and compliance areas where respondents plan to allocate more resources include “Investing in technology to enhance supply chain traceability or isotopic testing” (53 percent), “Providing sustainability and social compliance training for internal employees” (50 percent) and “Providing sustainability and social compliance training for suppliers” (50 percent). 
  • As part of U.S. fashion companies’ sustainability efforts, all respondents (100 percent) report sourcing clothing made with “sustainable textile fibers” in 2025. Having 11–50% of apparel products containing various “sustainable textile fibers” is the most common (40 percent of respondents), followed by having 1–10% of the total sourcing value or volume(30 percent of respondents).
  • Moreover, most respondents (over 70 percent) plan to increase their use of various “sustainable fibers” in clothing over the next three years. This trend is especially strong for recycled materials, with 80 percent of respondents indicating they intend to increase their use.
  • The top three positions with the highest demand among respondents from 2025 through 2030 are “Environmental sustainability-related specialists or managers,” “Trade compliance specialists,” and “Data scientists”—more than 40 percent of respondents plan to increase hiring. There is also strong demand for “Textile raw material specialists” and “Sourcing specialists.”

#6 With the upcoming expiration of the trade preference program this September, respondents again underscore the importance of immediate renewal of the African Growth and Opportunity Act (AGOA) and extending the agreement for at least another ten years.

  • Due to the upcoming expiration of AGOA and uncertainty about its future, this year, respondents sourced from only six SSA and AGOA members (i.e., Kenya, Ethiopia, Ghana, Madagascar, Mauritius, and Tanzania), fewer than the seven countries in 2024.  And none of these countries were used by more than 20 percent of respondents.
  • Nearly 80 percent of respondents support “renewing AGOA for at least another ten years,” and no one opposes. This shows a consistent and wide base of support for AGOA among U.S. fashion companies.
  • More than 70 percent of respondents say that securing a long-term renewal of AGOA for at least ten years is essential for expanding apparel sourcing from the region. Similarly, another 60 percent of respondents believe that a long-term renewal of AGOA is necessary for U.S. fashion companies and their supply chain partners to commit to new investments in the region. 
  • Respondents warned that AGOA’s pending renewal has already begun to harm the region’s prospects as an apparel sourcing base. Approximately 30 percent of respondents explicitly stated that they had already reduced sourcing from AGOA members due to the uncertainty surrounding the agreement’s renewal.

About the study

Authored by Dr. Sheng Lu in collaboration with the United States Fashion Industry Association (USFIA), this year’s benchmarking study was based on a survey of executives from 25 leading U.S. fashion companies from April to June 2025. The study incorporated a balanced mix of respondents representing various businesses in the U.S. fashion industry. Approximately 85 percent of respondents were self-identified retailers, 60 percent were self-identified brands, and about 50 percent were importers/wholesalers.

The survey respondents included large U.S. fashion corporations and medium-sized companies. Around 90 percent of respondents reported having over 1,000 employees; the rest (10 percent) represented medium-sized companies with 100-999 employees.

Average Tariff Rates for U.S. Apparel Imports under Trump’s “Reciprocal Tariff” Policy (Updated July 2025)

The latest data from the U.S. International Trade Commission (USITC) indicates that Trump’s “Reciprocal Tariff” has led to higher import duties on U.S. apparel imports, although the impact on sourcing appears to be more nuanced than expected. Specifically:

As a result of the reciprocal tariff, the average tariff rate for U.S. apparel imports (HS Chapters 61 and 62) reached 23.8% in May 2025, increased further from 20.8% in April 2025 and much higher than 13.9% in May 2024 and 14.7% in January 2025, prior to Trump’s second term. This tariff rate also hit its highest level in decades. Similarly, while the value of U.S. apparel imports in May 2025 decreased by 7% from May 2024, the import duties skyrocketed by nearly 60% over the same period. [View detailed data HERE]

Due to numerous punitive tariffs beginning in February 2025, the average tariff rate for U.S. apparel imports from China reached an unprecedented 69.1% in May 2025, a further increase from 55.0% in April 2025, 37.0% in March 2025 and 22.1% in January 2025. In theory, U.S. apparel imports from China in May should be subject to a tariff rate of over 145%, as mandated by a series of executive orders. However, as “goods loaded onto a vessel at the port of loading and in transit on the final mode of transit before 12:01 a.m. eastern daylight time on April 5, 2025,“ were excluded from Trump’s reciprocal tariffs, it explains why the actual tariff rate in April and May 2025 appeared lower than the theoretical one.

Nonetheless, affected by the high tariffs, the value of US apparel imports from China in May 2025 was cut by more than half from a year ago (down 52%). China’s market share in US apparel imports in May 2025 also dropped to 9.9%, a new low in decades (note: was 19.9% in May 2024). [View detailed data HERE]

Additionally, the average tariff rate for U.S. apparel imports from countries other than China reached 18.9% in May 2025, up from 15.2% in April 2025. Although this rate was higher than approximately 12-13% before Trump’s second term in early 2025, the increase was still much more modest than the theoretical 10% universal reciprocal tariff rate announced by the Trump administration. The average tariff rates for U.S. apparel imports from leading Asian suppliers such as Vietnam, Bangladesh, and Cambodia followed similar patterns (i.e., higher tariff rates but well below a 10% increase). Similar to China’s case, it appears that U.S. apparel imports from other countries in April 2025 included a significant proportion of products that were exempt from reciprocal tariffs because they were “loaded onto a vessel” early enough. [View detailed data HERE]

It is interesting to note that the reciprocal tariff resulted in the most significant increase in tariff rates on U.S. apparel imports from CAFTA-DR members. While imports from these countries were supposed to be duty-free under the trade agreement, the average tariff rate reached 10% in May 2025, up from 6.7% in April 2025. In other words, the short shipping distance unintentionally “disadvantaged” near-shoring imports from being exempted from the reciprocal tariffs, as they could be mostly loaded after the deadline.

Overall, it remains uncertain how the U.S. apparel tariff rates will continue to evolve in response to Trump’s shifting tariff policy. It appears that the trade volume and timing of shipment will be highly sensitive to short-term tariff rate changes, whereas adjusting sourcing bases and product structures will be a consideration for U.S. fashion companies in the medium to long term.

By Sheng Lu

Additional reading: Apparel Tariffs Climbed to Historic Highs in April (Sourcing Journal, June 13, 2025)

Impacts of Trump’s Escalating Tariffs on Apparel Sourcing: U.S. Fashion Companies’ Perspective

Updated study available: Updated Impact of Increasing Tariffs on U.S. Fashion Companies’ Sourcing and Businesses (October 2025)

(Note: The figure above shows how frequently the term “tariff” was mentioned alongside other key issues in the earnings calls. A higher frequency indicates a more significant impact and a closer connection between tariffs and a specific theme.)

This study aims to examine the impacts of the Trump administration’s escalating tariffs on U.S. fashion companies’ apparel sourcing practices. Based on data availability, transcripts of the latest earnings calls from approximately 25 leading publicly traded U.S. fashion companies were collected. These earnings calls, held between mid-May and June 2025, covered company performance in the first quarter of 2025. A thematic analysis of the transcripts was conducted using MAXQDA.

Overall, the results indicate that the Trump administration’s escalating tariffs and policy uncertainties have financially hurt U.S. fashion companies and disrupted their apparel sourcing practices. To mitigate these impacts, most companies plan to further reduce their “China exposure,” maintain a geographically diversified sourcing base, and prioritize flexibility in sourcing and shipping. However, there is no clear evidence that the current policy environment has successfully incentivized U.S. companies to expand apparel sourcing from the Western Hemisphere, let alone commit to new long-term investments. Meanwhile, U.S. fashion companies have adopted a strategic pricing approach by not passing the entire cost increase to consumers through widespread retail price hikes.

A few key findings:

First, far from surprising, many leading U.S. fashion companies expressed concerns that the Trump administration’s escalating tariffs have resulted in higher sourcing costs and cut companies’ profit margins. For example:

  • Company G (specialty store): if current tariffs of 30% on most imports from China and 10% on most imports from other countries remain for the balance of the year, we estimate a gross incremental cost of approximately $250 million to $300 million.
  • Company O (a parent company of several leading apparel brands): We expect that gross margin will contract approximately 200 basis points for the year. This contraction includes $40 million in additional tariff costs.
  • Company V1 (underwear brand): gross tariff impact of approximately $120 million, which assumes 30% China tariffs and 10% non-China, with tariff mitigation of approximately $70 million for a net impact to fiscal year 2025 of approximately $50 million.

Second, with the hiking tariff rate on U.S. apparel imports from China and increasing strategic competition between the two countries, many leading U.S. fashion companies plan to reduce their apparel sourcing from China to a single-digit, if not move out of the country entirely. For example:

  • Company A1 (apparel brand): We’re on track to reduce our sourcing exposure to China to under 10% this year with fall and holiday season down to low single digits.
  • Company A2 (specialty store): For China specifically, we have worked for some time now to relocate the supply resources, and this year’s sourcing volume from China will be in the low single digits.
  • Company L (apparel brand): Less than 8% of our purchase order dollars last fiscal year were utilized on buys of China.
  • Company O (a parent company of several leading apparel brands): By the second half of 2026, we currently plan to be substantially out of China.
  • Company V2 (a parent company of several leading apparel brands): over the past several years we’ve strategically diversified our supply chain and proactively reduced our US finished goods sourced from China to less than 2%.
  • Company K2 (a parent company of several leading apparel brands): China for us is de minimis.

Third, maintaining a geographically diverse sourcing base remains a popular strategy for U.S. fashion companies to mitigate the impacts of increasing tariffs and ongoing policy uncertainties. Companies particularly intend to avoid “putting too many eggs in one basket” and limiting the reliance on any single supplying country. For example:

  • Company K1 (retailer): our talented and experienced global sourcing team has done an incredible job diversifying our countries of production to ensure that we are not overly reliant on any one country. Although tariffs remain a fluid and uncertain situation, the teams continue to work to reduce our exposure to high tariff countries by leveraging our diverse factory network to move production, adjusting orders based on pricing elasticity analysis.
  • Company G (specialty store): Most other countries represent less than 10%, Vietnam and Indonesia represented 27%, and 19% of our sourcing last year, respectively, and our goal is for no country to account for more than 25% by the end of 2026.
  • Company R (apparel brand): While tariffs will primarily impact our gross margins… we have a proven toolkit to manage cost inflation headwinds. This includes first, significant supply chain diversification…No single country accounts for more than 20% of our production volumes, with most countries representing a single-digit percentage.
  • Company U (retailer): The remaining third is strategically diversified across a number of other countries, each representing a low to mid-single-digit percentage. This deliberate diversification creates a well-balanced portfolio, reducing reliance on any single market and enhancing our ability to navigate geopolitical, costs and supply chain complexities from a position of strength.

Notably, while a limited few companies specifically mentioned the possibility of expanding sourcing from the Western Hemisphere amid the current business environment, most did not. For example:

  • Company L (apparel brand): We intentionally drove significant change in our supply chain as we accelerated production in the Western Hemisphere, giving us both speed and additional avenues to mitigate tariffs and provide resiliency.
  • Company G (specialty store): Diversification also means near-shoring as well as domestic investment.

Fourth, U.S. fashion companies have leveraged shipping timing, piled up inventory, and delayed or cancelled existing orders to mitigate the tariff impacts as much as possible. For example:

  • Company C (sportswear): For products that are impacted by the reciprocal tariffs, we are accelerating shipments to the extent possible in order to receive products during the 90-day tariff.
  • Company K1 (retailer): Inventory was up 1.7% compared to last year, driven by inventory strategies implemented to navigate the tariff pressure, including the pull forward of receipts and pack in holding seasonal inventory to be sold in the back half of the year.
  • Company B (off-price retailer): Our reserve inventory was 48% of our total inventory versus 40% of our inventory last year. In dollar terms, our reserve inventory was up 31% compared to last year, reflecting the great deals we were able to make to get ahead of tariffs.
  • Company M (retailer): With the recent announcement of these tariffs, we’ve renegotiated orders with suppliers, and we’ve canceled or delayed orders where the value proposition is just not where it needs to be.

It should be noted, however, that adjusting shipping and inventory could incur additional costs. For example:

  • Company V1 (underwear brand): More than half of the gross margin rate pressure in the quarter was due to a combination of elevated and expected airfreight rates, some tariff-related order adjustments…

Fifth, despite higher sourcing costs and increasing financial pressures, many U.S. fashion companies have avoided widespread price hikes but have implemented selective increases in less price-sensitive apparel categories. For example:

  • Company V1 (underwear brand): [price increase driven by higher tariffs] And so we are going to sort of play in the middle where we see value. So and it won’t be across all categories. As we think about our business, it’s really that strategic case by case, category by category look that we’re taking.
  • Company U (retailer): gently and sparingly raising some prices. Please note that any price increases will be very strategic, protecting opening price points and only targeting areas where we believe we could raise prices without affecting the overall customer experience.
  • Company A2 (specialty store): we are not planning broad-based ticket increases. As we’ve done season after season, our goal is to deliver high-quality product and align inventory and promotions with our customers’ value perception.
  • Company P (a parent company of several leading apparel brands): We will evaluate strategic discounts to mitigate the potential tariff impact. While we are focused on delivering price value for the consumer, we are also ready to take calibrated targeted pricing actions where we have pricing power.

by Sheng Lu

Additional reading: Tariffs Upend Fashion Sourcing and Disrupt Cash Flow Amid Widening Trade Gap (Sourcing Journal, June 27, 2025)

USDA Released 2025 China Cotton Report

The U.S. Department of Agriculture (USDA) recently released its latest annual China cotton report. Below are the key findings most relevant to U.S. apparel sourcing from the country.

First, China’s retaliatory tariffs could severely impact US cotton exports. Faced with geopolitical tensions and rising competition from other suppliers like Brazil, U.S. cotton exports to China fell sharply by 73% in the first seven months of Marketing Year (MY) 24/25 (i.e., August 2024-February 2025), resulting in a decrease in the U.S. market share to 17.1%, down from 29.6% during the same period in MY 23/24. As noted in the report, “Beijing’s imposition of 140 percent tariffs on U.S. cotton will all but stop further imports from the United States.” Meanwhile, China’s overall demand for raw cotton could fall to a five-year low in MY 24/25, due to insufficient domestic demand and limited growth in textile and apparel exports.

Second, Xinjiang still dominated cotton production in China. Despite the Uyghur Forced Labor Prevention Act (UFLPA), Xinjiang accounted for approximately 92.3% of cotton production in China during MY 24/25 (note: was 90.9% in MY 23/24) and enjoyed an 11.4% year-on-year increase in total production. According to the USDA report, cotton production, yarn spinning, and textile manufacturing in Xinjiang received numerous subsidies from the government, such as support provided to farmers and cotton planting incentives.

The USDA report also noted that, in addition to raw cotton, textile production has experienced substantial growth in Xinjiang. For example, by the end of 2024, Xinjiang’s yarn spinning capacity reached 29.1 million spindles with 62,400 looms in operation, both marking the highest growth rates in history. “The spinning capacity is expected to rise further as the Xinjiang government plans to spin 45 to 50 percent of the Xinjiang cotton by 2028,” according to the USDA.

Third, China’s textile and apparel exports are facing growing headwinds. The USDA report predicted that “With ongoing market turbulences and uncertainties, China’s textile and apparel exports are expected to decrease in the remainder of MY 24/25” due to higher tariffs and the de minimis rule changes. While large-scale textile and apparel companies in China have been relocating some production to Southeast Asia, small-scale companies with limited resources may struggle to adapt. Additionally, according to the USDA, citing industry sources, the profit margin on China’s clothing exports to the US might be 10% or even lower and “the established textile manufacturers will face increased costs and administrative burdens for all import values, potentially disrupting their supply chains and reducing profit margins” due to the recent de minimis rule changes.

Further reading: U.S. and Xinjiang Cotton Are Locked in a Trade War of Their Own (Sourcing Journal)

FASH455 Current Event Discussion: Ongoing Tariff War and Apparel Sourcing and Trade (Updated April 2025)

Video 1: Is U.S. Clothing Manufacturing at Risk? Tariffs and Competition Threaten Jobs (RT≠ Endorsement)
Video 2: Northern Virginia T-shirt brand faces challenges (RT≠ Endorsement)
Video 3: Tariffs could raise wedding dress prices for American brides (RT≠ Endorsement)
Video 4: Bangladeshi garment industry sweating on Trump tariffs (RT≠ Endorsement)
Video 5: Trump’s Tariff Twist: Can Pakistan’s Textiles Fill China’s Shoes? (RT≠ Endorsement)
Video 6: Tariffs: Europe’s textile sector holds its breath

Discussion questions (note: you may answer any of the following questions. However, you must watch all the videos above and use examples from the videos to support your viewpoints and arguments. For this learning activity, students are expected to form their own independent assessments of the topic.)

#1 Based on the videos, how do you expect the apparel sourcing strategy of US fashion companies to evolve in response to the tariff increase? For example, will companies continue to diversify sourcing, wait and see, or focus on expanding sourcing to countries or regions regarded as “safe havens”?

#2 Do you expect the higher tariffs on U.S. imports, including textiles and apparel, to benefit domestic “Made in the USA” production? Why or why not?

#3 As consumers, how do you perceive the impact of the tariffs on your shopping behavior and experiences? Have you noticed any changes, such as in price and product availability, while shopping for clothing recently? Feel free to share your observations.

#4 Are there any other notable impacts of the tariff increase on the global fashion apparel industry that we should be aware of? What additional questions do you have in mind about the tariff impacts?  

State of U.S. Textile and Apparel Manufacturing, Employment and Trade (updated April 2025)

Textile and apparel manufacturing in the U.S. has significantly decreased over the past decades due to factors such as automation, import competition, and the changing U.S. comparative advantages for related products. However, thanks to companies’ ongoing restructuring strategies and their strategic use of globalization, the U.S. textile and apparel manufacturing sector has stayed relatively stable in recent years. For example, the value of U.S. yarns and fabrics manufacturing (NAICS 313) totaled $24 billion in 2023 (the latest data available), up from $23.3 billion in 2018 (or up 2.8%). Over the same period, U.S. made-up textiles (NAICS 314) and apparel production (NAICS 315) moderately declined by only 1.8% and 1.6%.

More importantly, the U.S. textile and apparel manufacturing sector is evolving. Several important trends are worth watching:

First, “Made in the USA” increasingly focuses on textile products, particularly high-tech industrial textiles that are not intended for apparel manufacturing purposes.  Specifically, textile products (NAICS 313+314) accounted for over 83% of the total output of the U.S. textile and apparel industry as of 2023, much higher than only 56% in 1998 (U.S. Census, 2025). Textiles and apparel “Made in the USA” are growing particularly fast in some product categories that are high-tech driven, such as medical textiles, protective clothing, specialty and industrial fabrics, and non-woven. These products are also becoming the new growth engine of U.S. textile exports. Notably, between 2019 and 2022, the value of U.S. “nonwoven fabric” (NAICS 31323) production increased by 12.32%, much higher than the 1.15% average growth of the textile industry (NAICS 313). Similarly, while U.S. textile exports decreased by 13.75% between 2019 and 2024, “nonwoven fabric” exports surged by 10.48%--including nearly 40% that went to market outside the Western Hemisphere (U.S. International Trade Commission, 2025).

Second, U.S. apparel manufacturers today are primarily micro-factories, and they supplement but are not in a position to replace imports. As of 2021 (the latest data available), over 76% of U.S.-based apparel mills (NAICS 315) had fewer than 10 employees, while only 0.7% had more than 500 employees. In comparison, contracted garment factories of U.S. fashion companies in Asia, particularly in developing countries like Bangladesh, typically employ over 1,000 or even 5,000 workers.

Instead of making garments in large volumes, most U.S.-based apparel factories are used to produce samples or prototypes for brands and retailers.  In other words, replacing global sourcing with domestic production is not a realistic option for U.S. fashion brands and retailers in the 21st-century global economy. Nor are U.S. fashion companies showing interest in shifting their business strategies from focusing on “designing + managing supply chain+ marketing” back to manufacturing.

Meanwhile, due to mergers and acquisitions (M&A) and to leverage economies of scale, approximately 5% of U.S. textile mills (NAICS313) had more than 500 employees as of 2021–this is a significant number, considering that textile manufacturing is a highly capital-intensive process.

Third, employment in the U.S. textile and apparel manufacturing sector continued to decline, with improved productivity and technology being critical drivers.  As of 2024, employment in the U.S. textile and apparel manufacturing sector (NAICS 313, 314, and 315) totaled 270,700, a decrease of 18.4% from 33,190 in 2019. Notably, U.S. textile and apparel workers had become more productive overall—the labor productivity index of U.S. textile mills (NAICS 313) increased from 89.7 in 2019 to 94.4 in 2023, and the index of U.S. apparel mills (NAICS 315) increased from 105.8 to 110.78 over the same period.

On the other hand, clothing retailers (NAICS 4481) accounted for over 75.7% of employment in the U.S. textile and apparel sector in 2024.

Fourth, international trade, BOTH import and export, supports textiles and apparel “Made in the USA.” On the one hand, U.S. textile and apparel exports exceeded $12.5 billion in 2024, accounting for more than 30% of domestic production as of 2023 (NAICS 313, 314 and 315). Thanks to regional free trade agreements, particularly the U.S.-Mexico-Canada Agreement (USMCA) and the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), the Western Hemisphere stably accounted for over 70% of U.S. textile and apparel exports over the past decades. However, for specific products such as industrial textiles, markets in the rest of the world, especially Asia and Europe, also become increasingly important. Thus, lowering trade barriers for U.S. products in strategically significant export markets serves the interest of the U.S. textile and apparel industry.

On the other hand, imports support textiles and apparel “Made in the USA” as well. A 2023 study found that among the manufacturers in the “Made in the USA” database managed by the U.S. Department of Commerce Office of Textile and Apparel, nearly 20% of apparel and fabric mills explicitly say they utilized imported components. Partially, smaller U.S. textile and apparel manufacturers appear to be more likely to use imported components–whereas 20% of manufacturers with less than 50 employees used imported input, only 10.2% of those with 50-499 employees and 7.7% with 500 or more employees did so. The results indicate the necessity of supporting small and medium-sized (SME) U.S. textile and apparel manufacturers to more easily access their needed textile materials by lowering trade barriers like tariffs.

By Sheng Lu

Exploring the “Pink Tariff”

Begin at 36 minutes; Students are expected to form their own independent assessments of the topic.

Additional readings:

Discussion questions:

  • What do you think about the pink tariff? How does the pink tariff affect different stakeholders, including consumers and fashion companies?
  • How can fashion companies respond to or navigate pink tariffs in their global sourcing, particularly considering the tariff escalation in 2025?
  • What role can governments and international trade organizations play in addressing pink tariffs, and what policy changes could help eliminate the disparities? What are the challenges?

Textile and Apparel Industry Stakeholders Comment on Trump’s “Reciprocal Tariffs”

Background: Pursuant to the America First Trade Policy Presidential Memorandum and the Presidential Memorandum on Reciprocal Trade and Tariffs, the Office of the U.S. Trade Representative (USTR) solicited public comments on the proposed “Reciprocal Tariffs” from February to March 2025. Below is a summary of comments submitted by stakeholders in the textile and apparel industry.

The United States Fashion Industry Association (USFIA), whose members include many leading U.S. fashion brands and retailers, opposes raising tariffs and argues for lowering tariffs on textile and apparel products where the U.S. imposes a higher tariff rate than its trading partners. According to USFIA, higher tariffs on apparel and textiles would disproportionately impact lower-income U.S. consumers:

  • “A true ‘reciprocal’ trade policy would lower tariffs on the products of trading partners that maintain lower tariffs than the United States.”
  • “We recommend that the most successful policy to achieve trade reciprocity would be for the United States to lower the tariff rates of products for which our trading partners apply lower tariff rates. For consumer products such as textiles and apparel, this would help combat inflation and assist consumers who struggle to afford basic necessities.”​

The American Apparel and Footwear Association (AAFA), representing U.S.-based “apparel, footwear and other sewn products companies”, opposes broad tariffs on apparel, footwear, and textiles. It is of concern to AAFA that the apparel and footwear sector already faces some of the highest tariffs in the U.S., and tariffs are a “hidden, regressive tax that falls harder on lower-income Americans.” Even worse, AAFA worries that higher tariffs would benefit “Illicit traders” and tariff threats would undermine the regional textile and apparel supply chain in the Western Hemisphere:

  • “Illicit traders are better positioned to escape paying proper duties or any duties at all. Higher tariffs end up maximizing the profit and market access they can gain at the expense of legitimate shippers.”
  • “Recent tariff threats particularly on our neighbors, Canada and Mexico, are especially concerning as the U.S.-Mexico-Canada Agreement (USMCA) review is about to begin. Canada is a key export market for U.S. made apparel and footwear while Mexico is a major source of a wide variety of apparel, including denim imports. Not only does the threat of tariffs cast uncertainty but it also undermines future investment and nearshoring opportunities.”

National Council of Textile Organizations (NCTO), representing U.S. textile mills, supports targeted tariffs against “unfair trade” but opposes penalties on Western Hemisphere trading partners:

  • “We strongly recommend that the Trump administration take a targeted approach to raise tariffs on specific countries that disrupt markets through the use of blatantly unfair and often illegal trade practices, while simultaneously operating in home markets that remain mostly closed to our products.”
  • “We must preserve and strengthen existing trade relationships with U.S. free trade agreement (FTA) countries in the Western Hemisphere that offer valuable markets for U.S.-made textiles.”
  • “We strongly believe that reciprocity should not mean a race to the bottom with lower tariffs on imports from other countries into our market. Rather, reciprocity should hold bad actors accountable for systemic unfair trade practices that have hurt domestic manufacturers.”
  • “We urge the Trump administration to take several actions immediately to make textile and apparel trade more reciprocal and to support the domestic industry…Aggressively raise tariffs on imports of textile and apparel products from China and other trade predators in Asia…Close the de minimis loophole for all countries…”

SMART (Secondary Materials and Recycled Textiles Association), representing businesses engaged in the collection, reuse, conversion, and recycling of textiles and other secondary materials, advocates for addressing trade barriers that affect U.S. secondhand clothing exports. SMART also opposes CAFTA-DR members using the “yarn-forward” rules of origin for imports of secondhand clothing (HTS 6309) from the U.S. under the agreement.

National Retail Federation (NRF), generally representing all types of U.S. retailers, opposes broad-based tariffs, arguing that they increase consumer costs, disrupt supply chains, and hurt retailers. NRF supports targeted measures against unfair trade practices but warns against policies that could lead to unnecessary retaliation from U.S. trading partners.

  • “We believe that high, across-the-board tariffs will undermine the economic growth signaled by the other features of the president’s agenda and have lasting negative consequences for consumers and workers. If the goal of reciprocal tariffs is to enter into negotiations to remove barriers to trade, this will unlock economic growth and reduce prices for consumers. However, if the goal is primarily to raise tariffs, then the opposite is true.”
  • “There are plenty of areas where U.S. tariffs are actually much higher than our trading partners, for example, especially when you look at U.S. tariffs on low value apparel and footwear. These regressive tariffs hurt low- and middle-income consumers the most.”
  • “The administration should also consider the potential for retaliation from our trading partners on any reciprocal tariffs that are established. We are already witnessing our trading partners respond to strong tariff actions by the administration. This will further impact our farmers and manufacturers who are looking to gain access to those foreign markets.”
  • “We need to focus on key high-priority sectors where it makes sense to return manufacturing home or areas where there is strategic competition. High tariffs on everyday household goods, which could raise consumer prices, should not be the focus of such a policy.”

Parkdale Mills, a leading producer of spun yarns based in North Carolina, expressed concerns about “unfair trade practices” from its Asian competitors. Parkadel also calls for closing the “De minimis” loophole.

  • “Each week millions of pounds of product move through our free trade agreement partner countries illegally causing significant damage to the domestic textile industry. Non qualifying goods are shipped using false HTS codes, False Certificates of Origin, and illegal inputs to circumvent the required duty for US entry.”
  • “Section 321 De Minimis (imports)…are shipped into the US each day without inspection or any type of customs enforcement causing millions in lost revenue and again, thousands of lost jobs. This loophole must be closed.”

Apparel Import Tariff Rates around the World (updated March 2025)

Apparel products are often subject to high tariffs for various reasons. In developed countries such as the United States, apparel has long been considered an “import-sensitive” sector, with relatively high tariff rates imposed primarily to “protect” specific domestic interest groups with political influences.

However, as importers, not exporters, pay the tariffs, heavy import duties have been a significant concern for US fashion companies for decades. According to data from the US International Trade Commission (USITC), in 2024, apparel (HS chapters 61 and 62) accounted for about 2.5 percent of total US imports but contributed approximately 15.6 percent of total tariff duties. Likewise, US fashion companies paid $11.9 billion in tariffs on apparel imports in 2024, an increase from $11.6 billion in 2023. The average applied tariff rate for apparel items reached 14.6% in 2024, a notable increase from 13.7% before the imposition of Section 301 tariffs on Chinese products. Additionally, due to retail markups, every $1 in tariffs could result in a $1.50 to $2 increase in the final retail price.

Meanwhile, developing countries, especially those least developed, also often impose high tariffs on apparel—either to protect their nascent domestic industries from import competition or to generate government revenues. For example, in Africa, the apparel import tariff rate commonly exceeds 35% as of 2023 (the latest data available).

In February 2025, President Trump announced the imposition of a so-called “reciprocal tariff,” aiming to  “match” the tariff rates that other countries impose on US exports, thereby promoting “fairer trade practices.” However, the details of the “reciprocal tariff” idea remain highly uncertain.

In theory, if strict “tariff matching” is required on a product-by-product basis, US apparel imports from most leading sourcing destinations—particularly those in Asia without a free trade agreement with the US–would face a significant increase in tariffs. Similarly, beneficiary countries under the African Growth and Opportunity Act (AGOA) could face a similar issue, as AGOA is a trade preference program that does not provide duty-free market access for US products in Africa. If apparel exports from AGOA-member countries to the US were subjected to the same 35%+ tariff rates that US products currently face in their markets, it would be a devastating scenario.

By Sheng Lu

(note: this post is not open for comment/discussion)

VF Corporation’s Evolving Apparel Sourcing Base: 2023-2024

VF Corporation (VF) is one of the largest apparel companies in the US, with an estimated global sales revenue to exceed $10 billion in 2024. VF owns several well-known apparel and outdoor performance brands, including The North Face, Timberland, and Icebreaker. VF also has a global presence. According to its latest annual report, in Fiscal 2024, “VF derived 52% of its revenues from the Americas, 33% from Europe, and 15% from Asia-Pacific.”

The following analysis is based on VF’s publicly released supplier list. Only factories identified as producing “apparel” products and related textile raw materials are included in the analysis.

First, while VF maintained a geographically diverse global sourcing base, it reduced the number of factories it sourced from between 2023 and 2024. Specifically, as of Q3 2024 (the latest data available), VF sourced apparel from 36 countries, the same number as in Q1 2023. These countries spanned almost all continents, including Asia, the Americas, Europe, and Africa. Similarly, over the same period, VF sourced textile raw materials for apparel production—including factories producing polymers—from approximately 30 countries.

However, between Q1 2023 and Q3 2024, VF reduced the number of apparel factories it contracts with from 463 to 426. The number of textile mills VF contracts also declined, from 665 to 546. This pattern aligned with the findings of other industry studies, which indicate that many U.S. fashion companies, particularly larger ones, are consolidating their vendor base to reduce sourcing risks and enhance operational efficiency.

Additionally, VF’s annual reports indicate that no single supplier accounted for more than 6% of its total cost of goods sold during Fiscal Year 2024, the same as in 2023, but lower than 7% in Fiscal Year 2021.

Second, in line with macro trade data, Asia served as VF’s largest apparel sourcing base in Q3 2024, led by China (23.1 percent) and Vietnam (11.5 percent). Specifically, as of Q3 2024, approximately 55.3 percent of VF’s garment factories were located in Asia, an increase from 48.8 percent in Q1 2023. Meanwhile, VF is also adjusting its apparel sourcing strategy within the Asia region. For example, between 2023 and 2024, VF decreased the number of garment factories it worked with in China (down 5), Bangladesh (down 12), and India (down 17), while adding more contract factories in Vietnam (up 36), Cambodia (up 7), and Indonesia (up 4).  The pattern indicates that while VF may attempt to reduce its “China exposure,” it also actively seeks new sourcing opportunities within Asia. 

Conversely, in Q3 2024, around 21.2 percent of VF’s garment factories were based in the Western Hemisphere, a decrease from 27.0 percent in Q1 2023. In most situations, VF worked with about 10-20 garment factories in each Western Hemisphere country. Furthermore, from 2023 to 2024, VF cut the number of garment factories in Mexico (down 16) and the United States (down 10), indicating that expanding near-shoring and on-shoring was not the company’s preferred strategy in the current environment. 

Third, compared to garments, VF’s supply of textile raw materials relies even more heavily on Asia, especially China. Specifically, as of Q3 2024, approximately 83.5 percent of VF’s textile raw material suppliers were located in Asia, the same as in Q1 2023. Notably, China represented nearly half of VF’s textile material suppliers in Q3 2024, including 41.2 percent of textile yarn and fabric mills and 50.9 percent of trim mills. Although VF reduced the number of textile mills in China from Q1 2023 to Q3 2024, China’s share of VF’s total textile raw material supplier base remained the same. Overall, the pattern aligns with previous research suggesting that finding alternative sourcing bases for textile raw materials outside of China and Asia will be more difficult and time-consuming for US fashion companies, considering the capital-intensive nature of making textile products.

Fourth, VF’s contract garment factories worldwide varied in size, reflecting the company’s diverse sourcing needs. Specifically, in Asia, garment factories in China typically were small and medium-sized, with 11-100 workers (43.9 percent) or 101-500 workers (33.7 percent). In contrast, nearly 90 percent of VF’s contract garment factories in Bangladesh had more than 1,000 workers, with similar patterns observed in Vietnam (52.2 percent), Cambodia (50.0 percent), Indonesia (63.2 percent), and Pakistan (100 percent). These findings suggest that VF may use China as a sourcing base for relatively small, diverse orders while relying on other Asian countries with lower labor costs for high-volume production.

Meanwhile, in the Americas and Africa, VF’s contract garment factories in Haiti, Honduras, El Salvador, Kenya, and Jordan included more large-scale operations with over 1,000 workers. These locations could serve as emerging alternatives to sourcing from Asia, especially for specific categories. In contrast, VF’s contract garment factories in Mexico, the US, and Guatemala featured many medium and small operations, which are more likely to fulfill replenishment orders or produce specialized products.

by Sheng Lu

Outlook 2025–Key Issues to Shape Apparel Sourcing and Trade

In December 2024, Just-Style consulted a panel of industry experts and scholars in its Shape of apparel sourcing in 2025 briefing. Below is my contribution to the report. Welcome any comments and suggestions!

What’s next for apparel sourcing

Although the world economy is predicted to grow at a similar pace in 2025 from 2024, the slowing US and Chinese economies could impose new challenges to apparel sourcing, from weakened demand to intensified price competition.

Regarding the macroeconomic environment in 2025, which “sets the tone” for apparel sourcing, the International Monetary Fund (IMF) and the World Bank estimated that the world economy would grow by approximately 2.7-3.2 percent in 2025, with almost no change from the previous year. Similarly, the World Trade Organization (WTO) projected that world merchandise trade would increase by 3.3 percent in 2025, slightly higher than 2.6 percent in 2024.

Despite this incremental improvement, the world’s two largest economies–the US (with 2.2 percent GDP growth in 2025, down from 2.8 in 2024 and 2.9 in 2023) and China (with 4.5 percent GDP growth in 2025, down from 4.8 in 2024 and 5.2 in 2023) are expected to experience slower economic growth in the new year ahead. This slowdown means that apparel producers around the world, particularly those developing countries making large-volume basic items, will likely continue to struggle with a shortage of souring orders in 2025 due to overall weak import demand.

Even more concerning, as China grapples with declining domestic sales, the world clothing market could see an additional influx of low-cost Chinese products, especially through new e-commerce channels. Notably, less than half of China’s clothing production is exported, indicating its significant untapped export capacity. Furthermore, while China’s wage levels are higher than those in many other Asian apparel-producing countries, the unit price of U.S. apparel imports from China measured in dollar per square meter equivalent ($/SME) dropped by more than 21% between 2018 and 2024 (up to October). In contrast, U.S. apparel import prices from the rest of the world increased by 7.8% over the same period. Related to this, what is often overlooked is that even Shein, the “ultra-fast fashion” retailer known for its exceptionally competitive pricing, deliberately opted out of the vast Chinese market due to concerns about the intense price competition there. In other words, disregarding the new Trump tariff, 2025 could see an escalation of trade tensions targeting Chinese products in the US market and beyond.

Meanwhile, due to concerns about rising geopolitical tensions worldwide and trade policy uncertainty during Trump’s second term, fashion companies will likely continue to leverage sourcing diversification to mitigate risks. However, the “reducing China exposure” and sourcing diversification movement has yet to substantially benefit near-shoring or emerging sourcing destinations such as the Western Hemisphere and Sub-Saharan Africa (SSA). This result was mainly because fashion companies utilized China to source a wide range of various products, whereas Western Hemisphere and SSA suppliers can only produce a few basic categories.

For example, my latest studies show that in the first nine months of 2024, even excluding major platforms like Shein, Amazon, and Temu, US fashion companies sourced more than 60K Stock Keeping Units (SKUs) of clothing items from China. In comparison, India and Vietnam each supplied approximately 15K SKUs, Cambodia and Bangladesh each contributed 3,000 SKUs, Mexico provided only 2K SKUs, and CAFTA-DR and AGOA member countries supplied around 200 SKUs each. Therefore, even if fashion companies report sourcing from more countries, they are likely to stay sourcing from more Asian countries with closer export capacity and structure to China. Meanwhile, the total value or volume of trade may not fully capture the whole picture of sourcing diversification. This trend may persist in 2025, even with new tariff escalations.

Apparel industry challenges and opportunities

Today’s fashion business is highly global and relies heavily on the frequent movement of goods and services across borders. Thus, the uncertain and protectionist nature of U.S. trade policy during Trump’s second term could present significant challenges to the fashion industry in 2025. Of particular concern is that Trump’s new tariff actions would raise fashion companies’ sourcing costs, create additional inflationary pressure, reduce US consumers’ purchasing power on clothing, and trigger retaliatory trade measures from U.S. trading partners, ultimately hurting the U.S. economy. Notably, when the 7.5% Section 301 tariff was imposed on selected Chinese clothing products in 2018, the U.S. Consumer Price Index (CPI) growth was relatively low at 1.9%. However, imposing a 20% global tariff, a 60% tariff on Chinese products, and the existing 15%-30% regular tariff on clothing when the CPI is historically high is like “adding fuel to the fire.”

Besides tariffs, in 2025, if not sooner, U.S. fashion companies and many e-commerce suppliers worldwide will closely watch how Congress and the new Trump administration reform the de minimis rule, which currently exempts small-value shipments under $800 from tariffs and most customs procedures.  With Trump’s new tariffs looming, some argue that closing the de minimis “loophole” has become even more urgent, as it creates more financial incentives to use the rule to bypass the tariff increase. Meanwhile, proposals under consideration suggest removing textile and apparel products entirely from de minimis, a move that could be an “earthquake” for those fashion companies utilizing the rule heavily.

Trump’s approach and philosophy toward conventional trade agreements and trade preference programs in 2025 also deserve attention. During his first term, Trump launched a few bilateral trade negotiations, from the one with the United Kingdom and Japan to Kenya. Back then, Trump saw a bilateral agreement would give the U.S. more leverage for a better “deal.” Specifically related to apparel sourcing and trade, two flagship U.S. trade preference programs–the African Growth and Opportunity Act (AGOA) and the Haiti HOPE/HELP Act, will expire in September 2025. It remains uncertain whether the new Trump administration will support the early renewal of these two trade preference programs with minimal changes or prefer to renegotiate them and add new bilateral elements.

Additionally, even though the new Trump administration may not prioritize addressing climate change, it is an irreversible trend for fashion companies to allocate more resources to comply with upcoming or newly implemented sustainability and environmental-related legislation, whether from the EU or the US state level. Unlike in the past, when being more sustainable only meant adding operational costs or paying a “one-time fee,” today’s new generation of sustainability-focused regulations—such as Extended Producer Responsibility (EPR)—requires companies to shift their mindset and demonstrate continuous improvement. Interestingly, my recent study tracking apparel products’ sustainability claims shows that vague terms like “sustainable” and “eco-friendly” are gradually being replaced by more neutral, fact-based keywords such as “regenerative,” “textile waste,” and “low impact.”

Meanwhile, offering “sustainable” apparel products and those using “preferred sustainable fibers” could provide fashion companies new opportunities to diversify their sourcing base and expand their vendor networks. For example, studies show that in the U.S. market, China and many other Asian countries are not necessarily the top suppliers of clothing made with recycled materials. Instead, Europe and countries in the Western Hemisphere or even Africa present unique sourcing advantages and capacities due to the unique nature of such products. Therefore, in 2025, we can expect an ever-closer collaboration between design, product development, merchandising, sourcing, and legal teams within fashion companies, working together to meet the growing demand for sustainable apparel and ensure compliance with evolving regulations.

by Sheng Lu

Interview with the National Committee on U.S.-China Relations: The Geopolitics of Fast Fashion–U.S.-China & the World

About the interview: Fashion is possible because of international trade. Each year, the global fashion industry generates more than $4 trillion USD and provides families with affordable clothing options. However, as fast fashion continues to grow, so does awareness of pressing issues such as labor standards and environmental sustainability. How are the United States and China involved in the global fashion industry? How can they collaborate on the issues facing the global fast fashion industry, from production to consumption?

Sheng Lu joins the National Committee to discuss how fast fashion is a global phenomenon and how the United States and China can address common areas of concern.

Learn more about the National Committee on U.S.-China Relations (NCUSCR)

New Study: Exploring the US as a Sourcing Base for Clothing Using Recycled Cotton

The full article is published in Just-Style and below is the summary:

Market Size

Reflecting fashion companies’ interest in carrying more sustainable apparel products to meet consumers’ demand, there has been a notable increase in clothing using recycled cotton in the U.S. retail market since 2022. For example, based on information collected from US apparel retailers’ websites, only about 100 Stock Keeping Units (SKUs) of “Made in the USA” clothing explicitly indicated that they contained recycled cotton in 2022 and 2023, respectively. However, in the first nine months of 2024, this number had already doubled to around 200.

Despite the impressive growth, clothing containing recycled cotton remains a “niche” in the U.S. retail market. As of 2024, the total SKUs of “Made in the USA” clothing containing recycled cotton accounted for only about 0.1% of those made with regular virgin cotton.

Meanwhile, measured by SKU count, 70% of “Made in the USA” clothing containing recycled cotton was sold in the mass and value segments in the U.S. retail market from 2022 to 2024.  In comparison, over the same period, “Made in the USA” clothing made with regular cotton catered to a more diverse consumer base, with a relatively balanced distribution across the mass and value segment (57%) and the luxury and premium segment (43%).

Product Features

There appears to be a notable distinction between the product categories of “Made in the USA” clothing using recycled cotton and those made with regular cotton. Specifically, from 2022 to 2024, by SKU count, “Made in the USA” clothing containing recycled cotton mainly focused on basics such as T-shirts (35.6%), jeans (20.1%), other bottoms (20.7%) and other tops (18.4%). Particularly, jeans appear more likely to contain recycled cotton than any other apparel category.

Using recycled cotton also appears to affect clothing’s design patterns. For example, from 2022 to 2024, nearly 85% of “Made in the USA” clothing containing recycled cotton chose plain design patterns compared to only 65% of those exclusively using regular cotton. These results echo findings from previous studies, suggesting that the shorter fiber length and lower quality of recycled cotton may limit the use of more intricate and complex design details.

Fiber Content

Reflecting the significant limitations of the quality and properties of the fiber, clothing labeled as using “100% recycled cotton” was rarely available in the U.S. retail market from 2022 to 2024, regardless of where the item was made. In most cases, recycled cotton accounted for no more than 30% of the total fiber content in a garment, with typical labels read like “49% cotton, 21% recycled cotton, 17% recycled polyester” (jeans), “Made from 70% cotton and 30% recycled cotton” (T-shirt), and “Made from 70% cotton, 29% recycled cotton, and 1% elastane” (skirt).

Results show that over 95% of “Made in the USA” clothing containing recycled cotton was blended with regular virgin cotton, and 92% of imported clothing did the same. According to textile scientists, this blend helps overcome the physical limitations of recycled cotton and enhances the fabric’s durability and softness. Approximately 14% of “Made in the USA clothing” containing recycled cotton was blended with polyester. This blend was commonly used for jeans and T-shirts to improve durability and flexibility and may also reduce production costs. However, compared with “Made in the USA” clothing made from regular cotton, it was uncommon to see recycled cotton blended with specific fiber types such as nylon, spandex, rayon, and linen. This result again revealed the physical limitations of recycled cotton and explained the narrow range of apparel products currently suited for its use.

Sustainability Claims

In practice, the sustainability claims of “Made in the USA” clothing containing recycled cotton in the U.S. retail market appear to be a “mixed bag.” On the one hand, as anticipated, “Made in the USA” clothing containing recycled cotton seems to be more likely to highlight its sustainability attributes than those using regular cotton only. From 2022 to 2024, by SKU count, more than 23.1% of “Made in the USA” items containing recycled cotton mentioned the word “sustainable” in the product description or label, and another 16.2% mentioned “eco-friendly.” In comparison, less than 2% of “Made in the USA” clothing made from regular cotton included these two terms.  Similarly, a higher percentage of “Made in the USA” clothing using recycled cotton also featured other sustainability-related terms such as “impacts,” “waste,” and “certified,” compared to those made from regular cotton.

On the other hand, however, the sustainability claims of “Made in the USA” clothing containing recycled cotton are not without concerns. For example, in many cases, the product descriptions or labels provide no detailed and verifiable information about the actual “sustainability benefits” of producing and consuming clothing made from recycled cotton aside from vaguely saying the product was “sustainable,” “eco-friendly,” or “certified.”

To complicate the issue further, as clothing made from regular cotton increasingly emphasizes its sustainability benefits as a natural fiber, it somehow diminishes the exclusivity of recycled cotton as a sustainable option. For example, there is no clear evidence indicating that consumers generally perceive clothing using “recycled cotton” as more or less sustainable than those using “organic cotton” or cotton certified by reputable programs such as the “Better Cotton Initiative, BCI” and the “U.S. Cotton Trust Protocol.” In other words, “recycled cotton” faces intense competition as the preferred sustainable fiber among many choices available to fashion companies, including regular cotton. 

Pricing Practices

Results show that “Made in the USA” clothing containing recycled cotton is not always “cheap” for U.S. consumers. For instance, for those targeting the mass market segment, between 2022 and 2024, adding recycled cotton increased the selling price of “Made in the USA” clothing by more than 10% compared to items made with virgin cotton, with jeans being the only exception (i.e., 12% lower).

Price data also show that “Made in the USA” recycled cotton items generally have higher price tags than comparable non-U.S.-made items across both mass and premium markets, particularly in popular categories like T-shirts and bottoms. This trend suggests that higher U.S. domestic production costs, particularly the higher wage level than Asian countries, could contribute to these elevated prices.

Reflections

As the findings highlighted, while visibility is increasing, promoting recycled cotton in clothing still encounters significant challenges. For instance, technical advancements in the quality of recycled cotton fiber are critical to enhancing its competitiveness among other “preferred sustainable fibers,” raising its perceived market value and enabling its use across a broader range of clothing categories beyond T-shirts and jeans.

Notably, due to slow progress in improving the physical properties of recycled cotton, some have seemingly “given up” on using it for clothing and suggest focusing more on repurposing recycled cotton for other categories, such as non-wovens, carpets, packaging, and home textiles. However, as sustainability legislation, such as the Extended Producer Responsibility (EPR) law, increasingly mandates fashion companies to recycle textile waste, not promoting recycled cotton could lead to greater reliance on recycled polyester or other man-made fibers in clothing, which may not serve the long-term business interests of the cotton industry.

by Katherine Yasik (Fashion Design and Product Innovation major & Sustainable apparel minor, Fashion and Apparel Studies, University of Delaware) and Sheng Lu

New Study: How Has the Uyghur Forced Labor Prevention Act (UFLPA) Affected U.S. Apparel Import?

Implemented in June 2022, the Uyghur Forced Labor Prevention Act (UFLPA) prohibits U.S. companies from importing apparel wholly or in part produced in China’s Xinjiang region. UFLPA could significantly alter U.S. apparel import patterns as fashion companies have begun or anticipate adjusting their sourcing base to comply with the law and mitigate the forced labor risks in the supply chain.

This study quantitatively evaluated the impacts of the UFLPA on U.S. apparel imports nearly two years after the law’s implementation. Unlike existing studies primarily focusing on UFLPA’s political or legal aspects, this study’s findings would enhance our understanding of the economic and trade implications of the new law.

A panel regression model was adopted to evaluate the quantitative impact of UFLPA on U.S. apparel imports based on data collected from OTEXA (2024) and USITC (2024), the most authentic government data source. Four countries in three categories were included in the study: 1) China; 2) Vietnam and Bangladesh representing top Asian apparel exporting countries other than China; 3) member countries of the Central America Free Trade Agreement (CAFTA-DR) representing near-shoring sourcing destinations. The annual trade activities of these four countries from 2010 to 2023 (the latest available) were used for the analysis.

The panel regression model suggests several interesting findings*:

Firstly, the results showed that holding other factors constant, U.S. cotton apparel imports from China decreased significantly by approximately 350 million square meter equivalent (SME) annually following UFLPA’s implementation. In other words, the result confirmed that UFLPA had negatively affected U.S. cotton apparel imports from China. This result is far from surprising as Xinjiang accounted for nearly 90% of China’s cotton production, causing significant forced labor risks associated with importing cotton apparel from China.

Secondly, holding other factors constant, U.S. cotton apparel imports from Vietnam and Bangladesh and CAFTA-DR also respectively decreased by approximately 81 million SME, 51 million SME, and 20 million SME annually after UFLPA’s implementation in 2022. The results revealed U.S. fashion companies’ concerns about UFLPA compliance risks associated with sourcing from countries other than China, particularly Asia, due to their heavy reliance on cotton yarns and fabrics from China through a highly integrated regional supply chain.

Thirdly, the results revealed a more significant positive relationship between U.S. cotton exports to China, Vietnam, Bangladesh, and CAFTA-DR countries and U.S. cotton apparel imports from these countries after UFLPA’s implementation. Related, trade data also showed a declining ratio of U.S. cotton apparel imports from China, Vietnam, Bangladesh, and CAFTA-DR countries relative to these countries’ cotton imports from the U.S. This pattern implies a closer alignment in the trade flow of raw cotton from the U.S. to these countries and the return of finished cotton apparel to the U.S. It could be the case that leading apparel exporting countries increasingly used US cotton after UFLPA to mitigate the forced labor risks.

Additionally, there was a negative relationship between U.S. cotton apparel imports from China, Vietnam, Bangladesh, and CAFTA-DR members and U.S. MMF apparel imports from these countries. In other words, cotton apparel and MMF apparel appear to compete within the total U.S. apparel import market. However, UFLPA’s implementation has not significantly impacted the relationship. Nonetheless, MMF apparel has accounted for a growing share of China’s total apparel exports to the United States after UFLPA’s implementation (down from 46% in 2010 to only 19% in 2023).

The study’s findings revealed a broad trade impact of UFLPA’s implementation that goes far beyond China. Notably, cotton apparel exporters from other Asian countries and those in the Western Hemisphere also appeared to be negatively affected by the new law. Also, unlike theoretical prediction, no clear evidence shows that UFLPA has significantly expanded the near-shoring of U.S. cotton apparel imports from the Western Hemisphere, such as CAFTA-DR members.

Meanwhile, the results call for further investigation of the net impact of UFLPA on U.S. cotton exports. While UFLPA may help U.S. cotton gain more shares in the global marketplace, the reduced U.S. import demand for cotton apparel due to forced labor risk concerns may also unexpectedly “shrink the pie size.”

*:The fixed effects (FE) model was selected for the study based on the likelihood ratio test results (p<.01). The result of the F-test suggests the FE model is statistically significant at the 99% confidence level (p<.01). The value of R2 exceeds 0.90, indicating an overall high goodness-of-fit of the panel regression. All the independent variables were statistically significant at the 99% confidence level (p<.01).

By Sheng Lu and Emilie Delaye

Note: The study will be presented at the 2024 International Textile and Apparel Association (ITAA) annual conference in November 2024.

[This blog post is not open for comment]

Event Recording: Regulating and Reforming De Minimis (October 2024)

The event was hosted by the Washington International Trade Association on October 9, 2024

Panelists

  • Ralph Carter, Staff Vice President, Regulatory Affairs, FedEx
  • Kim Glas, President & CEO, National Council of Textile Organizations; Commissioner, U.S.-China Economic and Security Review Commission
  • Melissa Irmen, Director of Advocacy, NAFTZ-National Association of Foreign-Trade Zones
  • John Pickel, Senior Director, International Supply Chain Policy, National Foreign Trade Council
  • Felicia Pullam, Executive Director, Office of Trade Relations, U.S. Customs and Border Protection
  • Ana Swanson, Trade and International Economics Reporter, The New York Times (Moderator)

Event summary: Competing views about de minims and its reform

Arguments supporting De Minimis: Proponents like Ralph from FedEx argue that de minimis reduces trade friction, drives international supply chain efficiency, and allows U.S. companies to offer competitive pricing through free returns and streamlined customs processes. Meanwhile, they argue that the de minimis supports low-income U.S. consumers and enables small U.S. businesses to remain competitive.

Criticism of De Minimis: Critics, including Kim Glas from the National Council of Textile Organizations (NCTO), argue that it undercuts U.S. manufacturers, especially in industries like textiles, by allowing cheap imports from countries like China, often bypassing tariffs and safety regulations. They also say that de minimis was unfair to U.S. retailers that pay millions of dollars of tariff duties. Additionally, there are significant concerns about the safety risks posed by counterfeit goods and dangerous products (e.g., fentanyl) entering under de minimis exemptions.

Challenges of dealing with de Minimis: Felicia from the U.S. Customs and Border Protection (CBP) emphasizes the strain on the agency’s resources due to the sheer volume of de minimis shipments—it surged from about 2.8 million shipments per day in fiscal year 2023 to close to 4 million shipments per day in fiscal year 2024. She highlighted challenges such as the often unreliable information the de minimis imports submitted and the outdated authorities that hinder CBP’s enforcement.

Equal treatment for U.S. Foreign Trade Zones: U.S. Foreign Trade Zones (FTZs) are designated areas within the United States that are considered outside U.S. customs territory for import duties. They allow businesses to import, store, assemble, manufacture, or process goods with deferred or reduced customs duties, which are only paid when goods leave the FTZ and enter U.S. commerce. Currently, U.S. FTZs do not benefit from the de minimis exemption, meaning goods imported directly into the U.S. from overseas warehouses can qualify for de minimis, but goods entering through U.S. FTZs do not.

Melissa Irmen from NAFTZ-National Association of Foreign-Trade Zones advocates for U.S. foreign trade zones to be given the same de minimis privileges as foreign warehouses, arguing that this would ensure better oversight and security while maintaining trade efficiency. Critics, however, say that expanding de minimis in this way would exacerbate the problem rather than fix it.

Reforming the De minimis: There is a push for comprehensive reform of the De minimis system, with proposals ranging from raising duties on certain products to eliminating the exemption altogether for specific categories of goods (e.g., textiles, products subject to Section 301 tariffs).

Particularly, in a face sheet released in September 2024, the Biden Administration announced it would address “the significant increased abuse of the de minimis exemption, in particular China-founded e-commerce platforms.” The announcement said the Biden Administration would issue a Notice of Proposed Rulemaking that would exclude from the de minimis exemption all shipments containing products covered by tariffs imposed under Sections 201 or 301 of the Trade Act of 1974, or Section 232 of the Trade Expansion Act of 1962. The announcement also called for Congress to pass new legislation to reform the de minimis rule comprehensively. 

Related readings:

New USITC Report: Apparel: Export Competitiveness of Certain Foreign Suppliers to the United States

The United States International Trade Commission (USITC) released its new fact-finding report examining the competitiveness of Bangladesh, Cambodia, India, Indonesia, and Pakistan as apparel suppliers to the United States. The study was conducted in 2024 based on input from secondary sources (e.g., trade statistics, public hearings, and desk studies) and fieldwork. Below are summaries of the key findings regarding apparel export competitiveness.

Factors that affect export competitiveness in the global apparel sector

One key issue the study explored is what factors affect a country’s apparel export competitiveness and how to become a preferred apparel sourcing base for U.S. fashion companies.

The studies suggest that four types of factors are most important (see the figure above). However, consistent with existing literature, the USITC report could not determine which factor is decisive in fashion companies’ apparel sourcing decisions. For example, the report found that:

  • “cost—the price buyers pay their suppliers—plays a key role in sourcing decisions, although opinions vary regarding the importance of cost relative to other factors.”
  • “Depending on the product, target consumer, and identity of a brand or buyer, apparel buyers will place varying degrees of importance on product differentiation factors such as quality, specialization, product mix, and full package offerings, which include design services, finishing, packaging, and logistics.”
  • “The emphasis on reliability has particularly grown in response to various recent disruptions to global apparel supply chains such as a global pandemic, geopolitical conflicts, and trade policy.”
  • “Although emerging research suggests that compliance programs concerning wages, social inclusion, and climate change mitigation may increase competitiveness, buyers and brands remain divided on the topic…the relative importance, or “weight,” of such compliance in sourcing decisions remains a topic of active study and discussion within the industry.”

Cost and export competitiveness

The USITC report highlighted the complex and nuanced relationship between “costs” and a country’s apparel export competitiveness. Several patterns are noteworthy:

  • Apparel is a buyer-driven industry, meaning “the global apparel supply chain gives buyers the power to negotiate based on price, which can push down prices and transfer greater costs to the supplier.”
  • The ability to produce textile raw materials locally can provide cost advantages in garment production—“Material inputs are widely recognized as the largest component in the cost of a final apparel product, and these prices are largely determined by the presence of a domestic textile industry or costs of importing textiles.”
  • It is difficult to compare wages across countries to measure labor competitiveness. In particular, low labor costs “do not reflect the true cost of doing business (e.g., via wage suppression)” in a country and “they can harm a country’s reputation for social compliance and negatively affect labor productivity.”

Buyer-supplier relationships in apparel sourcing

The USITC report revealed some positive developments in the buyer-supplier relationships involving U.S. fashion companies.

  • Fashion companies increasingly recognize the value of building long-term relationships with their vendors. Buyers emphasize that maintaining these relationships is a key factor in sourcing decisions, largely due to the cost and time involved in finding and establishing relationships with new suppliers.
  • Fashion companies’ efforts to improve supply chain transparency and traceability also need  “suppliers who will act in line with their brand’s values.”
  • Suppliers benefit from the long-term relationship, too. As the USITC report noted, some fashion companies guarantee suppliers a particular profit margin to ensure their continued operation. Additionally, some buyers gain a deep understanding of their suppliers’ cost structures, enabling them to calculate the costs of compliance with various standards and assist suppliers in reducing costs where possible.
  • Subcontracting is still regarded as necessary for the garment industry. As noted in the USITC report, apparel orders fluctuate seasonally, making it impractical for suppliers to hire additional permanent workers or invest in machinery for peak demand. To meet buyer expectations during busy periods, manufacturers often subcontract parts of orders and increase overtime or rely on temporary contract workers. This practice is seen as essential for ensuring a reliable supply of apparel.

Social and environmental responsibility and apparel sourcing

The USITC report acknowledged the growing importance of social and environmental compliance to a country’s apparel export competitiveness. However, the relationship remains complex.

  • The extent to which voluntary social and environmental responsibility programs and their associated auditing practices have influenced outcomes, especially regarding worker rights, remains unclear.
  • Suppliers report that the increased frequency of flooding and high temperatures due to climate change negatively affect their ability to meet labor and environmental standards.
  • Increased compliance with social and environmental standards raises supplier costs, negatively impacting their cost competitiveness. Many stakeholders note that while brands and consumers demand greater responsibility, this often does not come with a “price premium” for suppliers, who ultimately absorb these increased costs.

Note: The USITC report also evaluated the export competitiveness of each apparel-exporting country it examined, including their respective competitive advantages and issues to address.

FASH455 Learning Activity: Exploring US Import Tariffs

Part I: Watch the following two videos on tariffs—one from an economic perspective and the other from a political perspective.

Part II: Check the respective tariff rate for the following products by copying and pasting the HS code into the search box

  • Product 1 (men’s and boys’ overcoat, cotton): HS code 6101.20.00
  • Product 2 (cotton): HS code 5201.00.05
  • Product 3 (smartphone): HS code 8517.13.00

Discussion question: Based on the videos and your findings, how would you explain the differences in tariff rates for these products? Do you think tariffs are still necessary in the 21st century?

Additional readings (RT≠ endorsement):

FASH455 Video Discussion: How Team USA’s 2024 Olympic Outfits Were Made by Ralph Lauren

Discussion questions for FASH455:

How does the video enhance your understanding of the complexity of apparel supply chain and sourcing? What is your evaluation of Ferrara Manufacturing’s strategies and best practices for maintaining apparel production in New York? Are high-end luxury brands the only viable opportunity for apparel “Made in the USA”? Feel free to share your thoughts and other reflections on the video.

2024 USFIA Fashion Industry Benchmarking Study Released

The full report is HERE

Key findings of this year’s report:

#1 Respondents reported growing sourcing risks of various kinds in 2024, from navigating an uncertain U.S. economy, managing forced labor risks, and responding to shipping and supply chain disruptions to facing rising geopolitical tensions and trade protectionism.

  • Over half of the respondents ranked “Inflation and economic outlook in the U.S.” and “Managing the forced labor risks in the supply chain” as their top business challenges in 2024.
  • The issues of “Shipping delays and supply chain disruptions” and “Managing geopolitics and other political instability related to sourcing” have newly emerged among respondents’ top five concerns in 2024.
  • About 45 percent of respondents rated “Protectionist trade policy agenda in the United States” as a top five business challenge this year, a jump from only 15 percent in 2023.

#2 U.S. fashion companies leverage sourcing diversification to respond to the growing sourcing risks and market uncertainty in 2024.

  • Nearly 70 percent of large-sized companies with 1,000+ employees reported sourcing from ten or more countries, significantly higher than the 45-55 percent range in the past few years. It also has become more common for medium to small-sized companies with fewer than 1,000 employees to source apparel from six or more countries in 2024 than in the past.
  • Nearly 80 percent of respondents plan to source from the same number of countries or even more countries through 2026, aiming to mitigate sourcing risks more effectively. However, their approaches differ at the firm level—some U.S. fashion companies plan to work with fewer vendors, while others intend to source from more.

#3 Managing the risk of forced labor in the supply chain continues to be a top priority for U.S. fashion companies in 2024.

  • U.S. fashion companies have adopted a comprehensive approach to comply with UFLPA and mitigate forced labor risks. On average, each surveyed company has implemented approximately six distinct practices across various aspects of their business operations this year, up from an average of five in 2023.
  • More than 90 percent of respondents say they are “Making more efforts to map and understand our supply chain, including the sources of fibers and yarns contained in finished products.” Notably, nearly 90 percent of respondents report mapping their entire apparel supply chains from Tier 1 to Tier 3 in 2024, a significant increase from about 40 percent in the past few years.
  • More than 80 percent of respondents say they “intentionally reduce sourcing from high-risk countries” in response to the UFLPA’s implementation. Another 75 percent of respondents explicitly state that their company has “banned the use of Chinese cotton in the apparel products” they carry.
  • About 45 percent of respondents have been actively “exploring sourcing destinations beyond Asia to mitigate forced labor risks.” However, this year, fewer respondents (i.e., under 10 percent) plan to cut apparel sourcing from Asian countries other than China directly, implying a more targeted and balanced approach to mitigating risks and meeting sourcing needs.
  • Based on field experience, respondents call for greater transparency in U.S. Customs and Border Protection (CBP)’s UFLPA enforcement, specifically in shipment detention and release decisions and in targeted entities and commodities information. Respondents also suggested that CBP reduce repeated detentions, focus on “bad actors” only, clarify enforcement on recycled cotton, and continue to partner with U.S. fashion companies on UFLPA enforcement.

#4 U.S. fashion companies remain deeply concerned about the deteriorating U.S.-China bilateral relationship and plan to further “reduce China exposure” to mitigate risks.

  • A record 43 percent of respondents sourced less than 10 percent of their apparel products from China this year, compared to only 18 percent in 2018. Likewise, nearly 60 percent of respondents no longer use China as their top apparel supplier in 2024, much higher than the 25-30 percent range before the pandemic.
  • Respondents rated China as economically competitive as an apparel sourcing base compared to many of its Asian competitors regarding vertical manufacturing capability, relatively low minimum order quantity (MOQ) requirements, flexibility and agility, sourcing costs, and speed to market. However, non-economic factors, particularly the perceived high risks of forced labor and geopolitical tensions, are driving U.S. fashion companies to move sourcing out of China. This trend applies to surveyed U.S. fashion companies selling products in China.
  • Nearly 80 percent of respondents plan to reduce their apparel sourcing from China further over the next two years through 2026. Consistent with last year’s results, large-size U.S. fashion companies with 1,000+ employees currently sourcing more than 10 percent of their apparel products from China are among the most eager to “de-risk.”

#5 U.S. fashion companies are actively exploring new sourcing opportunities, with a particular focus on emerging destinations in Asia and the Western Hemisphere.

  • This year, more respondents reported sourcing from India (89 percent utilization rate) than from Bangladesh (86 percent utilization rate) for the first time since we began the survey. Also, nearly 60 percent of respondents plan to expand apparel sourcing from India over the next two years, exceeding the planned expansion from any other Asian country.
  • For the second year in a row, three non-Asian countries made it to the top ten most utilized apparel sourcing destination list in 2024, including Guatemala (ranked 7th), Mexico (ranked 7th), and Egypt (ranked 10th). All three countries also witnessed an improved utilization rate in 2024 compared to last year’s survey results.
  • This year, a new record 52 percent of respondents plan to expand apparel sourcing from members of the Dominican Republic-Central American Free Trade Agreement (CAFTA-DR), over the next two years, up from 40 percent in 2023. However, most U.S. fashion companies consider expanding near-shoring from the Western Hemisphere as part of their overall sourcing diversification strategy. For example, nearly ALL companies that plan to increase sourcing from CAFTA-DR over the next two years also plan to increase sourcing from Asia.
  • 75 percent of respondents identified the “lack of sufficient access to textile raw materials” as the main bottleneck preventing them from sourcing more apparel from CAFTA-DR members. Respondents say the local manufacturing capability for yarns and fabrics using fiber types other than cotton and polyester, such as spandex, nylon, viscose, rayon, and wool, was modest or low in the CAFTA-DR region, even when including the United States.
  • The U.S.-Mexico-Canada Trade Agreement (USMCA) entered into force on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA). Within the context of expanding nearing-shoring from the Western Hemisphere, in 2024, about 65 percent of respondents reported sourcing from Mexico and Canada (or USMCA members), a noticeable increase from about 40 percent in 2019-2020. About 36 percent of respondents say their companies “expanded apparel sourcing from USMCA members because of the agreement.”

#6 Respondents underscore the importance of immediate renewal of AGOA before its expiration in September 2025 and extending the agreement for at least another ten years.

  • This year, respondents reported sourcing from seven AGOA members or countries in Sub-Saharan Africa (SSA), including Lesotho, Ethiopia (note: lost AGOA eligibility in 2022), Kenya, Madagascar, Mauritius, Tanzania, and Ghana, an increase from four countries in 2023, and six countries in 2022. Most respondents sourcing from AGOA in 2024 are typically large-scale U.S. fashion brands or retailers with 1,000+ employees. Generally, these companies treat AGOA as part of their extensive global sourcing network.
  • Over 86 percent of respondents support renewing AGOA for at least another ten years, and none object to the proposal. This reveals U.S. fashion companies’ strong support for the trade preference program and the non-controversial nature of continuing this agreement.
  • Over 70 percent of respondents say another 10-year renewal of AGOA is essential for their company to expand sourcing from the region.
  • About 30 percent of respondents reported that they had already held back sourcing from AGOA members due to the pending renewal of the agreement and associated policy uncertainty. This figure could increase to half of the respondents if AGOA is not renewed by the end of 2024.
  • Another 30 percent of respondents indicate that keeping the flexible rules of origin in AGOA, such as the “third country fabric provision” for least-developed members, is essential for their company to source from the region.

Other topics the report covered include:

  • 5-year outlook for the U.S. fashion industry, including companies’ hiring plan by key positions
  • The competitiveness of major apparel sourcing destinations in 2024 regarding sourcing cost, speed to market, flexibility & agility, minimum order quantity (MOQ), vertical integration and local textile manufacturing capability, social and environmental compliance risks and geopolitical risks (assessed by respondents)
  • Respondents’ detailed sourcing portfolio in 2024 for garments and textile materials (i.e., yarns, fabrics and accessories)
  • Respondents’ latest strategies to mitigate forced labor risks in the supply chain and fashion companies’ suggestions for CBP’s UFLPA enforcement based on field experience
  • U.S. fashion companies’ latest social responsibility and sustainability practices related to sourcing
  • U.S. fashion companies’ trade policy priorities in 2024

About the study

This year’s benchmarking study was based on a survey of executives from 30 leading U.S. fashion companies from April to June 2024. The study incorporated a balanced mix of respondents representing various businesses in the U.S. fashion industry. Approximately 80 percent of respondents were self-identified retailers, 60 percent were self-identified brands, 41 percent were importers/wholesalers, and 3 percent were manufacturers.

The survey respondents included large U.S. fashion corporations and medium-sized companies. Around 80 percent of respondents reported having over 1,000 employees; the rest (20 percent) represented medium-sized companies with 100-999 employees.