How Fashion Brands and Retailers Can Respond to New Tariff Laws

Complex trade policies between the U.S. and other countries have always defined the fashion industry. But the current environment represents a far-reaching shift in how tariffs and trade can be used as an economic tool and lever.  

With the new administration’s January 2025 America First Trade Policy, the White House has rapidly escalated its tariff strategy. In addition to a 25% punitive tariff on imports from Canada and Mexico announced in January 2025, the administration has since introduced a sweeping 10% universal tariff on all imports, alongside steep country-specific tariffs—34% on goods from China, 46% from Vietnam and 26% from India.

As of May 2, 2025, the de minimis exemption will also be eliminated for shipments from China and Hong Kong, significantly raising costs for fashion brands that rely on low-value direct-to-consumer imports or samples from Asia.

While tariffs on Canada and Mexico have been temporarily paused for 30 days amid ongoing negotiations, the volatility and scope of these measures are creating planning nightmares for those in the fashion industry.

What makes this moment particularly challenging is not just the scale of the tariffs, but their unprecedented breadth and unpredictability. Previous trade actions often targeted specific countries or product categories, but as they currently stand, today’s tariffs take a broad, systematic approach, impacting everything from raw materials to finished goods.

To put this in perspective, data from Dr. Sheng Lu at the University of Delaware shows that between 2015 and 2024, average US apparel tariff rates fluctuated between 12% and 17%. The current trajectory suggests we could see even higher rates, potentially pushing retail prices upward after the typical two-month lag observed in previous tariff implementations.

For fashion brands and retailers, this presents a multilayered challenge: Dr. Lu notes that although the Consumer Price Index (CPI) has risen by 34% since 2015, the prices of imported apparel to the U.S. has only risen 6%. Consumers are used to—and expect—affordable clothing options and fashion brands are used to keeping prices in check in order to compete with brands that drive prices down.

Brands considering diversifying their suppliers and supply chains also don’t have an easy answer, as there has also been a consideration of levying tariffs against the European Union and even Latin America. There may be no “safe harbors” that are out of reach of new U.S. tariffs in coming years. 

Adding another layer of complexity are non-tariff barriers (NTBs)—regulatory hurdles, import licensing requirements and compliance standards—that trading partners could implement in response to U.S. tariffs. These less visible obstacles can be equally disruptive, affecting everything from production timelines to documentation requirements.

What is the main takeaway of all this uncertainty? 

First, volatility will be the new normal for quite some time. Even if tariffs are paused, removed or reduced in the future, there’s no telling when they’ll be reimplemented or changed. 

Fashion brands must take a holistic view of tariffs and trade policy that accounts for this volatility and build space in their operations to have margin for tariff-related costs and disruptions. 

The next generation of fashion product development must emphasize diversification, adaptability, agility, data and technology in order to thrive and pivot toward what’s to come in the future.

The implementation of new tariffs presents a complex set of challenges for fashion brands, retailers and manufacturers. 

From rising costs to supply chain disruptions and sustainability setbacks, companies must navigate an increasingly volatile trade environment. Here are some of the main challenges fashion brands can expect to face.

Increased Costs and Margin Pressure

Perhaps the most immediate and obvious impact of tariffs is the increase in costs. 

When governments impose new tariffs on imported goods, someone has to absorb that additional expense—and it’s rarely just one party. The cost burden typically cascades through the supply chain, affecting everyone from manufacturers to end consumers.

For fashion brands, this creates a difficult decision: absorb the costs and accept lower profit margins, or pass them on to customers and risk losing sales. Neither option is ideal. 

Even a 10% tariff can cut into margins by three or four percentage points—a significant hit in an industry where margins are often already razor-thin. And depending on the product and logistical challenges, a 25% tariff is enough to erase profitable margins altogether. 

The math becomes particularly challenging for mid-market brands, which lack both the premium pricing power of luxury labels and the volume efficiencies of mass-market retailers. 

These companies often operate with net profit margins of just 8-10%, leaving little room to absorb additional costs without significant operational changes.

Supply Chain Disruptions

Beyond direct costs, tariffs introduce considerable uncertainty into supply chain planning. Fashion operates on lengthy lead times—typically 6-12 months from design to store—making it difficult to pivot quickly when trade policies change.

Consider a brand that has built its production network around Chinese manufacturing. When faced with new tariffs on Chinese imports, potentially shifting production to Vietnam or Bangladesh isn’t as simple as flipping a switch. 

Instead, this requires finding new suppliers, negotiating contracts, ensuring quality standards and potentially redesigning products to work with different manufacturing capabilities—all while maintaining on-time deliveries for upcoming seasons.

This uncertainty extends to inventory management as well. Brands may feel pressured to stockpile inventory before tariffs take effect, leading to increased warehousing costs and potential overstock issues if consumer demand doesn’t materialize as expected.

Pricing Strategy Complications

Tariffs force fashion brands to reconsider their entire pricing architecture. When costs increase, the traditional retail markup formulas no longer yield sustainable margins. This challenge is compounded by consumer price sensitivity and the transparency that online shopping has brought to retail.

Today’s consumers can instantly compare prices across dozens of retailers, making it difficult to pass on cost increases without losing market share. Additionally, the psychological pricing thresholds that brands have carefully established—those $49.99 price points that convert better than $52.99—become harder to maintain when input costs rise unpredictably.

The complexity increases for multinational brands that must maintain pricing consistency across markets affected differently by tariff policies. A blouse manufactured in China might face a 25% tariff when sold in the United States but no additional duties when sold in Southeast Asia, creating significant price disparities unless the brand implements market-specific pricing strategies.

Sourcing Limitations and Quality Control

As brands scramble to diversify their manufacturing base away from high-tariff countries, they often encounter limitations in production capacity and expertise elsewhere. 

While Vietnam, Indonesia and other Asian nations have developed robust apparel manufacturing sectors, they still lag behind China in terms of technical capabilities, infrastructure and skilled labor for certain product categories.

Additionally, spreading production across multiple countries introduces new quality control challenges. 

Maintaining consistent product standards across disparate manufacturing partners requires additional oversight, more frequent factory visits and robust quality assurance systems—all of which add costs that partially offset the tariff savings.

For products requiring specialized skills or equipment—like intricate beadwork or complex footwear construction—options outside established manufacturing centers may be severely limited, forcing brands to either absorb tariff costs or compromise on product features.

Environmental and Ethical Considerations

The rush to relocate production in response to tariffs can also undermine sustainability initiatives and ethical sourcing commitments. Brands that have invested years in developing responsible supply chains in one region may find themselves starting from square one when forced to quickly shift to new manufacturing partners.

Moreover, longer and more fragmented supply chains often have larger carbon footprints, as components and materials crisscross the globe to avoid tariff hotspots. This directly conflicts with the growing consumer and regulatory pressure for more sustainable and transparent supply chains.

For brands focused on sustainability measures, tariffs can bring a whole new set of challenges when it comes to finding ethical and sustainable partners. This can force some brands into compromising their initiatives for the future.

“Consumer goods companies cannot afford to overlook sustainability amid short-term trade concerns,” said Colin Browne, CEO of Cascale, as reported in Vogue Business. “Trade policies may shift, but the need for decarbonisation and equitable labour practices is non-negotiable.”

Resilience in the new tariff landscape begins and ends with diversification and agility. 

The fashion brands showing the greatest resilience to tariff shocks are those that had already diversified their supplier base before trade tensions escalated. Rather than treating supplier diversification as a reactive measure, forward-thinking companies approach it as a fundamental risk management strategy.

Effective diversification goes beyond simply having manufacturing partners in multiple countries. It involves strategically matching product categories with regional manufacturing strengths while maintaining some redundancy for critical items.

A fashion brand, for example, might allocate basic knitwear to Bangladesh, technical outerwear to Vietnam, premium denim to Mexico and keep small-batch, quick-turn production capabilities in domestic markets for trend-responsive items.

Building these relationships takes time and investment. Brands that have successfully navigated recent tariff challenges typically began their diversification efforts years earlier, allowing them to scale production with trusted partners rather than scrambling to build new relationships during a crisis.

Vertical Integration and Nearshoring

Another powerful strategy for tariff resilience is selective vertical integration—bringing key production capabilities in-house or closer to home markets when possible.

While complete vertical integration isn’t practical for most fashion brands, strategic ownership of certain manufacturing processes can provide both tariff advantages and operational benefits.

For instance, Spanish fast-fashion giant Zara maintains approximately half its production in Spain, Portugal and Morocco, despite higher labor costs in these regions. This “nearshoring” approach allows for faster market response and reduces exposure to trans-Pacific tariffs while creating marketing advantages around European craftsmanship.

Similarly, some premium denim brands have invested in North American production facilities to maintain quality control while insulating themselves from overseas tariff exposure. 

These investments, while capital-intensive, create long-term structural advantages that extend beyond tariff avoidance to include faster turn times and greater production flexibility.

Reimagining Product Development and Material Sourcing

Innovative product engineering represents an often-overlooked pathway to tariff resilience. By reassessing material choices, construction methods and product architecture, brands can reduce their exposure to highly taxed components or processes.

Material substitution offers one approach. When tariffs target specific fabrics or raw materials, R&D teams can develop alternatives that deliver similar performance and aesthetic qualities. During recent trade disputes, several outdoor apparel brands successfully replaced tariff-affected synthetic fabrics from China with functionally equivalent materials from Taiwan and South Korea.

Product engineering can also create opportunities for “tariff engineering”—the legitimate practice of designing products to qualify for more favorable tariff classifications. Certain footwear products with fabric uppers, for example, may qualify for lower duty rates than similar styles with leather uppers. 

Understanding these nuances allows brands to make strategic design decisions that reduce duty exposure without compromising product integrity.

Price Segmentation

Rather than implementing across-the-board price increases in response to tariffs, sophisticated brands employ targeted approaches that protect their most price-sensitive product categories while capturing more value from premium offerings.

This strategy might involve:

• Maintaining entry price points on key traffic-driving items while accepting lower margins on these products
• Adding value through design enhancements to justify price increases on mid-tier products
• Introducing new premium product tiers with higher margins that offset compression elsewhere in the line
• Strategic de-specification (removing non-essential features) of certain products to maintain price points

A brand may keep their core line of products priced steadily, for example, but also introduce a higher-priced product line designed to improve overall margins. This kind of strategy can help brands with the balancing act of pricing, margins and overall brand perception in the marketplace.

In the world of tariff volatility, technology serves as a strategic differentiator for fashion brands navigating complex global trade waters. 

Integrated software solutions—like product lifecycle management (PLM) platforms—create unprecedented visibility across the entire value chain, allowing executives to see in real-time how tariff changes cascade through their business, from raw material sourcing to retail margins.

The most forward-thinking brands are leveraging AI, real-time data and predictive analytics to model tariff impacts before they materialize. These systems can simulate how a 10% tariff on Chinese textiles might affect the profitability of specific product lines six months into production, enabling proactive decision-making rather than reactive crisis management. 

Modern PLM solutions, like Centric Software®, incorporate automated compliance checks that flag potential tariff exposures during the earliest design stages, when pivoting carries minimal cost.

And tariffs or not, digital supply chain mapping has evolved from a nice-to-have feature into a mainline necessity. This technology creates a comprehensive digital twin of your supply network, identifying single points of failure and suggesting alternative sourcing scenarios when tariff thresholds trigger action. 

Perhaps most valuably, having the right technology systems can help fashion brands build institutional knowledge around tariff navigation, creating a digital memory that preserves expertise even as personnel and operations change. 

This collective intelligence becomes increasingly valuable as regulatory complexity grows, enabling brands to transform potential tariff threats into opportunities for competitive advantage. PLM solutions offer a level of navigation, structure and visibility that few other platforms can achieve.

How tariffs will change U.S. fashion imports is still to be seen, but what’s clear is that the industry is at an inflection point. Brands that rely on outdated, disjointed or fragmented supply chains will struggle to adjust to rises in costs or disruptions in supply chains.

But fashion brands and retailers that embrace digital solutions focused on agility and data-driven insights will gain an immediate competitive edge. 

Centric PLM™ Software helps fashion brands reduce costs, optimize supply chains, maintain quality standards and adapt to market shifts—all from a single, connected platform. With the right tools, businesses can turn uncertainty into long-term opportunity.

Our “single source of truth” platform provides the visibility, analytics and agility needed to navigate complex tariff regimes while maintaining speed-to-market and product integrity. And when the next wave of tariff policy changes comes, your business will be ready to pivot once again.