US fashion industry reacts cautiously to the prospect of tariffs (#1683170)

Less than two months before the inauguration, President-Elect Trump seems to be making good on his campaign promise-slash-threat to impose tariffs, continuing a theme from his first term as President. These charges are paid by the American companies who import them and will affect goods in the apparel, toys, furniture, household appliances, footwear, and travel categories, according to the National Retail Federation (NRF).

In the latest development, Trump has specifically called out 25 percent tariffs for Mexico and Canada and 10 percent for China, the United States of America’s three largest trade partners, for which the U.S. imported more than $1.2 trillion worth of goods in 2023. In a social media post, the President-Elect cited he would impose these until “such time as Drugs [sic], in particular, Fentanyl, and all Illegal Aliens [sic] stop this Invasion [sic]of our Country [sic].”

In particular, with the countries named, the U.S. fashion industry relies heavily on raw materials such as textiles from China, with the others also contributing to the goods needed to produce clothing. Clothing brands from the U.S.’s neighbor to the north would also be impacted. Thus, these tariffs are bound to affect goods made by American designers and fashion brands, with smaller brands being less likely to be able to mitigate costs without passing increases on to the end consumer.

FashionNetwork.com queried several brands in the industry to gauge the temperature regarding the incoming cost prices. Overall, the mood was wait and see, as many declined even to ponder what may come.

In particular, Collection 18, an accessories producer known for their silk scarves, which makes everything from handbags, hats, toppers, cold weather goods, and belts for brands such as Nine West, Vince Camuto, and the BCBG Group, knows all too well the effect of tariffs. Andrew Pizzo, president and owner of Collection 18 spoke to FashionNetwork.com about how the first round of tariffs affected its business and what they see in store for the second Trump presidency.

“It absolutely affected our business. We have six business categories, each tariffed in 2018, ranging from 7.5% to 25%.  We were unable to pass along price increases to our customers.  Accessories are an emotional purchase for the consumer but not a necessity.  We trade in high-quality/value-priced merchandise. In 2018, we were able to absorb the cost increases through loss of margin and price negotiations with multiple vendors in China. Tariffs above this level cannot be overcome with the same strategy,” Pizzo told FashionNetwork.com, adding Collection 18’s strategy, mainly if high percentage tariffs occur.

“Over the last six years, we have been developing an alternative supply chain to China. These efforts were considerably increased over the last year in anticipation of the new administration taking power. We have moved specific categories to alternative countries, such as handbags, belts, and cold-weather knit accessories. Still, in many of our categories, we depend on China for materials, yarns, dyeing, embellishments, etc. Though difficult, at a potential 60% tariff (or less), we will have no choice but to move our production completely offshore. Developing new supply chains comes with plenty of headaches, from quality control and delivery schedules to production capacity and shipping schedules/costs. We have been doing this for a long time, and finding solutions to problems is how we win. But again, it will not be fun.”

Karen Giberson, president and CEO of the Accessories Council, has followed the issue since the first Trump presidency to help members navigate the changes starting in 2018.

“Many companies initially felt the squeeze then, especially those with fixed purchase orders and limited flexibility on pricing. These tariffs, unfortunately, became part of the cost of goods, with most of the increase passed on to consumers. Given the vast range of items produced in China—from shipping containers and cranes to critical components along the supply chain—the cost of each step has risen. While some companies have diversified their supply chains, moving production to other countries, this approach offers limited relief. The reality is that specialized raw materials, skilled labor, and essential equipment are often concentrated in regions still subject to tariffs,” she offered.

The NRF recently released a study, prepared by Trade Partnership Worldwide, called “Estimated Impacts of Proposed Tariffs on Imports: Apparel, Toys, Furniture, Household Appliances, Footwear, and Travel Goods,” which examines how former President Donald Trump’s tariff proposals – a universal 10-20% tariff on imports from all foreign countries and an additional 60-100% tariff on imports specifically from China – would impact the six consumer products categories named. (Note: This study and Andrew Pizzo’s remarks were made before Trump announced a 10 percent tariff on China, significantly lower than most expectations.)

Key findings from the study include: 

• The proposed tariffs on the six product categories alone would reduce American consumers’ spending power by billion to billion every year the tariffs are in place. 
• The proposed tariffs would have a significant and detrimental impact on the costs of a wide range of consumer products sold in the United States, particularly on products where China is the major supplier. 
• The increased costs as a result of the proposed tariffs would be too large for US retailers to absorb and would result in prices higher than many consumers would be willing or able to pay. 
• Consumers would pay .9 billion to billion more for apparel; .8 billion to .2 billion more for toys; .5 billion to .1 billion more for furniture; .4 billion to .9 billion more for household appliances; .4 billion to .7 billion more for footwear, and .2 billion to .9 billion more for travel goods. 
• For all categories examined, total average tariffs would exceed 50% in the extreme tariff scenario, up in most cases from single or low double digits currently. 
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Perhaps as it is an ever-changing story, partly due to Trump’s mercurial nature and tendency to talk a bigger game plan than he actually has in store or ability to implement, many designers and brands queried declined to comment, instead taking the wait-and-see approach.

In speaking to emerging designer Bach Mai at a recent Fashion Trust US cocktail event, Mai shared this view with FashionNetwork.com.

“My brand is currently manufactured 100 percent stateside, but we were planning to open some aspects of our manufacturing in China. It doesn’t make sense to set it up when the terms could change if tariffs are imposed. So, we are holding off on making those changes until we see what happens,” he said.

Mai’s statement also succinctly wraps up the mood of the country at large now, as campaign promises for the second Trump Presidency sound more nefarious and downright doomsday scenario-esque for at least about half of the country’s electorate and is a starkly different mood than previous administrations on either side in terms of its bold measures. While tariffs Trump imposed in 2018, which were continued and added to by the Biden administration, were found not to affect inflation, there is no guarantee that brands, especially small ones, can keep these increased costs out of the customer’s pocketbook.