How Tariffs Are Reshaping the U.S. Fashion Industry

Written by Tirsa Parrish

Even in uncertain times, fashion remains dynamic, fresh, and exciting. Shopping for a new outfit or the perfect accessory can be the highlight of your week! However, shifting political and economic policies are significantly impacting many industries, including fashion. 

One major factor affecting fashion businesses today is tariffs on imported goods. These trade regulations increase production costs, which inevitably lead to higher retail prices for consumers. The only apparel items unaffected? Those that are 100% sourced and manufactured in the US. 

What Are Tariffs?

A tariff is a tax imposed by a government on imported goods. Collected by customer authorities when products enter their country tariffs are paid by the importing company – not the exporting country.

Governments often use tariffs as a form of trade regulation, designed to protect domestic industries from foreign competition. By making imports more expensive, tariffs ideally encourage consumers to buy domestically produced goods. However, since many American-made apparel items still rely on imported components, the effects ripple across the supply chain.

Apparel supply chain. Source: Compiled by USITC staff. Image via USITC.gov

How Do Tariffs Affect the US Fashion Industry?

The United States is the largest single-country apparel importer. In 2023, the nation spent $79.3 billion on imported apparel, with the majority sourced from Asia. 

While China remains the largest supplier to the US, its dominance has declined. Vietnam, Bangladesh, Cambodia, India, and Indonesia accounted for 42% of US apparel imports in 2023.

China: A Changing Landscape

The Biden administration’s closure of the de minimis loophole has already impacted apparel exporters – excluding Temu and Shein. New import duties on apparel items regardless of parcel price, will push retail prices higher.

For example, Shein's average dress price jumped to $17 in 2024 – a 27% increase from 2023, and 40% higher than in 2022!

Additionally, recent US tariffs on Chinese goods mean finished products and essential supply chain components from China will become more expensive in American markets.

Bangladesh apparel exports in 2023 in billions of dollars. Source: S&P Global, GTAS database, HS chapters 61 and 62, apparel, assessed June 17, 2024. Image via USITC.gov

Bangladesh: A Rising Power in Apparel

As the world's second-largest apparel exporter, Bangladesh has robust manufacturing capabilities – especially for bulk production of basic garments. Competitive labor costs, skilled workers, and duty-free access to US markets makes Bangladesh an attractive sourcing destination. 

The existing infrastructure could enable factories in Bangladesh to meet increased demand if US companies look outside China to import fashion products with fewer tariffs. 

Cambodia: A Competitive Yet Dependent Market

Cambodia’s apparel industry is known for cut, make, and trim (CMT) production – meaning it assembles garments from imported materials. Its commitment to social responsibility has boosted global competitiveness, but its reliance on fabric and yarn imports (primarily from China and Vietnam) limits agility.

Despite the challenge, Cambodia benefits from duty-free access to many trade partners and short transport times from key suppliers.

What This Means for the US Fashion Companies & Consumers

With rising import costs, fashion brands and big-box retailers will likely raise prices to maintain profit margins. Some, like Target, already reported lower profits during the 2024 holiday season as inflation slowed consumer spending.

However, shifting production takes time. While US-based manufacturing has benefits - like quality control and speed to market - higher labor, material, and energy costs often make it less economically viable. For US manufacturing to be viable, facilities need to invest in efficiency tools that will modernize manufacturing and streamline processes. Meanwhile, moving to another foreign supplier, like Vietnam or Bangladesh, carries its own risks as future tariffs remain uncertain.

A Silver Lining: Conscious Consumerism

One potential upside? Reduced overconsumption. Higher prices may slow the demand for fast fashion, encouraging shoppers to invest in quality, long-lasting apparel instead of disposable trends.

As tariffs reshape the industry, brands and consumers alike must navigate evolving trade policies while making thoughtful decisions about fashion’s future.

Want to connect with sustainable manufacturers and ethical suppliers? Explore Fashion Index to discover resources that align with your business goals.