US President Donald Trump's 'liberation day' tariffs were unveiled on 2 April sending shockwaves through the international apparel community and resulting in a Wall St crash yesterday
The wider apparel sector worries of the impact to supply chains as all countries were hit with a 10% tariff hike and others - many of which are key apparel exporters to the US - were impacted with steeper duties.
GlobalData apparel analyst Alice Price comments the tariffs will have "significant ramifications on the apparel market," especially as major manufacturing hubs like China, Vietnam, and Bangladesh have been hit with rates as high as 54%.
"With the US having the largest apparel market globally, these tariffs will hugely impact global players like Abercrombie & Fitch and Nike, which have very diverse supply chains and import huge quantities into the country, while value players like Shein will see their low-cost propositions rocked. Players importing into the US will therefore have to find ways to offset these higher costs, and consumers may expect availability issues while they try to navigate these new challenges.
"It is most likely that brands will either push the additional costs onto US consumers, putting further strain on a region already grappling with inflationary challenges, or increase their prices globally to spread the impact more thinly. Players are also expected to move their production away from regions that have been hit with the highest rates, or negotiate cheaper prices with their suppliers to cut costs. However, with industry margins already razor-thin, the pressure to reduce production costs risks an increase in exploitative labour conditions.
"While the tariffs have been imposed to encourage domestic production and self-reliance in the US, the logistics of moving manufacturing to the US will be challenging. The US lacks the infrastructure and specialisation needed to produce apparel at competitive prices, and brands will still need to import materials from abroad, which will also be subject to tariffs, resulting in apparel prices still increasing. The impact of these duties on the global economy and inflation will also further squeeze consumer sentiment in an already testing macroeconomic climate, negatively impacting discretionary spending.”
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