How Tariffs Are Reshaping the U.S. Fashion Industry

By Tirsa Parrish•Last Updated: July 8, 2026

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.

Garment supply chain with examples for fibers, yarns, fabrics, and apparel. Each section may be impacted by apparel tariffs.

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! In mid-2025, average prices across Shein's clothing categories had risen another 8 to 12% with the de minimis closure.

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

World map showing Bangladesh’s apparel exports for 2023 as a heat map. Nearly $7 billion in apparel was exported to the US. Apparel tariffs will impact this market.

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.

Alt Text: Brightly painted wood blocks spelling out update on a weathered wooden surface.

2026 Update: SCOTUS Tariff Ruling and De Minimis Status

On February 20, 2026, an executive order was signed extending the suspension of the de minimis exemption, requiring almost all imported, low-value packages (previously under $800) to pay duties and taxes, regardless of origin. All shipments, including those from e-commerce giants, are subject to duties, taxes, and enhanced customs inspection.

Also on February 20, 2026, the Supreme Court of the United States ruled on Learning Resources, Inc. v. Trump, to decide whether the International Emergency Economic Powers Act (IEEPA) authorizes the President to impose tariffs. In a 6 - 3 ruling, the court unambiguously said IEEPA does not give a president the power to unilaterally impose tariffs. The Court did not resolve the refund question. The opinion does not set out a refund mechanism, does not order restitution, and does not address the administrative processes by which duties already paid might be recovered. Several companies are already suing the United States for tariff duties paid.

Section 122 tariffs expire July 24, 2026

The Section 122 tariff expires after 150 days, on July 24, 2026, unless Congress affirmatively votes to extend it, and there are open questions about whether they can be renewed immediately after expiration.

June 2026 Update: Section 122 Rates Normalize

Following the Supreme Court ruling, the wildly divergent country-specific tariff rates that had reshaped sourcing throughout early 2026 were replaced with a uniform 10% Section 122 rate. Vietnam's rate dropped from 46% to 10%, and Bangladesh's rate dropped from 37% to 10%, making both countries competitive again almost overnight after orders had been redirected to Mexico and Central America.

The new uniform rate eliminated the tariff-driven distortions that had reshuffled global apparel supply chains over the prior year. However, brands are not fully unwinding those sourcing shifts. The temporary nature of Section 122, which is set to expire in July 2026, has created enough planning uncertainty that many companies are hedging by maintaining dual sourcing from both Asian and Western Hemisphere factories.

De Minimis Exception Ends: What It Means for Fashion Brands

How De Minimis Reform Could End Fast Fashion's Duty-Free Ride

Navigating the De Minimis Exception: Impact on Fashion, Trade, and Labor Standards