This week, President Donald Trump unleashed American “liberation” on global markets, introducing a shockwave of tariffs on imports into the world’s biggest consumer market.
Under the new regime, all goods coming into the US will face a universal tax of 10 percent from April 5. Dozens of countries will face much higher “reciprocal” duties from April 9. Most of fashion’s biggest manufacturing hubs featured on that line up.
The announcement hit the industry like a tonne of bricks. Many fashion stocks tanked. Brands, retailers and manufacturers were left scrambling to digest the news, which went well beyond what many analysts had expected.
“It’s mind boggling what’s going on,” said Sanjeev Bahl, CEO at Vietnam-based denim manufacturer Saitex. “This is an existential crisis.”
What comes next?
Much remains uncertain. Trump’s mercurial approach to policy means many hold out hope that these tariffs won’t stick, or at least not in such a severe form. Hard-hit countries are figuring out whether to negotiate or retaliate.
Still, it’s hard to understate how severely the new tariff regime could affect the fashion industry.
More than half of the clothes sold in the US each year are made in China, Vietnam or Bangladesh. If the tariffs go ahead as announced, imports from these three countries will face duties of 54 percent, 46 percent and 37 percent respectively.
Brands have a few different options to navigate these swingeing changes to trade economics. None of them are particularly good.
Companies could eat the cost themselves, but with tariffs exceeding 50 percent of the cost of goods in some cases, that seems too high a price for most brands to bear. Rates for air freight have already soared, as companies scramble to get goods into America before the highest tariffs hit.
Brands can also try and renegotiate prices with manufacturers, pushing the cost of tariffs down the supply chain. Factories across the industry are bracing for the squeeze, but the sector already operates on razor thin margins. Price pressure usually means corners will get cut elsewhere, often on labour and climate.
Once the dust settles, there’s likely to be a scramble to reallocate orders to manufacturing countries with lower tariff exposures. Turkey, Morocco and many parts of Latin America could stand to benefit here. But most brands can’t just change up complex sourcing strategies overnight and a lot of specialised manufacturing for sportswear and sneakers is concentrated in countries like Vietnam and Cambodia. Meanwhile, Trump’s vision of shifting production to the US isn’t really an option in the near term; building up the necessary skills and infrastructure domestically will take years of hefty investment.
Finally, brands can pass the cost onto consumers and raise their selling prices. How much, will depend on each brand’s exposure to the new regime. Luxury goods companies will need to raise prices an average of 6 percent to offset the impact of 20 percent duties on imports from Europe, according to analysis from UBS. That’s probably digestible by high-net-worth consumers. On the other hand, mass market and sportswear companies, including giants like Nike and Adidas with exposure to production in Vietnam and other high-tariff countries, will likely have to consider bigger price adjustments.
Consumption in an Age of Uncertainty
US shopper are already rushing to stock up on their favourite goods before tariff-related price hikes hit. For fashion, it may prove a last hurrah before consumer austerity hits.
The biggest risk is that the President’s trade war gamble triggers a global economic slump, dampening trade, devastating US-oriented export economies and killing the world’s engine of consumption: the American shopper. Consumer confidence in the US is already at its lowest level since the pandemic.
Amid the fashion selloff over the last 48 hours, mid-market and sportswear brands have been particularly hard hit, as investors sour on their exposure to Asian manufacturing and bet against the idea that middle income consumers will have any appetite to buy new handbags in a recession.
The share prices of brands including Nike, VF, Victoria’s Secret and Gap have all tumbled double digit percentages this week. The off-price giant TJX was among the few retailers to trade in the green, signalling investors are betting consumers are set to trade down en masse.
Highly exposed mega brands already struggling to stave off competition, like Nike and Lululemon, are likely to face the most flight from consumers, while more premium labels with high heat should prove more sticky, according to analysis from Bernstein. But no brand will be spared the fall out from an increasingly likely global recession.
“There will be no winner in a trade war,” said Sheng Lu, professor of fashion and apparel studies at the University of Delaware.
THE NEWS IN BRIEF
FASHION, BUSINESS AND THE ECONOMY
Goldman Sachs will lead €2.5 billion ($2.74 billion) financing for Prada-Versace deal. €1.5 billion would be used for the acquisition, while the remaining €1 billion would be used to relaunch the struggling brand, Reuters reported.
Trump signs order ending duty-free treatment for cheap shipments from China. The trade loophole known as “de minimis” that helped fast fashion companies Temu and Shein will close on May 2.
Calvin Klein’s owner PVH sees its sales slump ending in 2025. Shares jumped 16 percent in extended trading after PVH Corp. announced the expectation of flat or slightly positive growth this year, surpassing analysts’ expectations of a 0.5 percent revenue decline.
Fashion rental service CaaStle faces ‘immediate liquidity challenge’ after founder accused of financial nisconduct. The clothing rental logistics services company has furloughed all employees and faces liquidity following fraud allegations against founder and former CEO Christine Hunsicker.
Walmart keeps price pressure on suppliers after Beijing pushback. The world’s largest retailer has remained firm in its requests to Chinese suppliers to cut prices by as much as 10 percent for each round of tariffs, even after Beijing officials summoned the US retailer’s executives last month to discuss the issue, Reuters reported.
Fashion traceability platform Fairly Made raises €15 million. The sustainable fashion scale-up, which works with LVMH, Balmain and SMCP to help trace supply chains and measure environmental impact, has raised €15 million ($16.2 million) from a group of impact-focussed venture funds with the goal of global expansion.
Duran Lantink wins the 2025 Woolmark Prize. The Dutch designer whose Autumn/Winter 2025 collection went viral for opening with a female model wearing a silicone six-pack and closing with a male model wearing silicone breasts has become known for his exaggerated silhouettes and will receive a cash prize of AU$300,000 ($126,000).
LVMH announces finalists for 2025 Prize for Young Designers. The final will take place on Sept. 3 in Paris. Winners will receive a year of mentorship by LVMH, alongside a cash prize for the LVMH Prize, the Karl Lagerfeld Prize and Savoir-Faire Prize for craftsmanship.
THE BUSINESS OF BEAUTY
Estée Lauder faces a US legal challenge over China sales practices. A US District Judge said shareholders identified “half-truths” in the cosmetics company’s disclosures regarding the negative sales impact of a 2022 government crackdown on the “daigou” grey market, which caused shares to plunge 19 percent and decimated about $8.7 billion of market value.
Hailey Bieber is reportedly exploring a sale of her beauty brand Rhode. The model has tapped investment bankers at JPMorgan Chase and Moelis to find a buyer for her cosmetic brand, which could be worth more than $1 billion, anonymous sources told Reuters.
L’Oréal is aiming for 5 percent growth in China this year. North Asia chief executive Vincent Boinay said the French cosmetics conglomerate’s goals are aligned with China’s forecasted GDP growth, though L’Oréal faces “changing demographics, deflation, declining population and … a real challenge in consumer confidence.”
Unilever acquires refillable deodorant brand Wild. Financial details were not disclosed, but an earlier Sky News report indicated the sale would proceed for £230 million ($286 million).
Bread Beauty Supply acquired by Cost of Doing Business, the holding company led by Topicals founder. CODB Holdings, which was co-founded by Topicals founder and CEO Olamide Olowe, will own and operate the luxury hair care brand following a deal whose financial terms were not disclosed.
PEOPLE
Michael Kors owner Capri’s finance head jumps ship to Macy’s. Thomas Edwards will join Macy’s in June to assist CEO Tony Spring’s cost-cutting, luxury-focussed turnaround efforts. Following the announcement, shares of Macy’s rose nearly 3 percent, while Capri’s shares fell 1 percent, in early trading.
Willow Lindley named style director of WSJ Magazine. In a significant hire for editor-in-chief Sarah Ball, Lindley, who previously served as editor and fashion market and collaborations director at Vogue, will join WSJ Magazine on Apr. 28.
Vanity Fair editor-in-chief Radhika Jones to step down. A spokesperson confirmed that Jones will leave the Condé Nast publication in the spring, after seven years.
Swiss running brand On transitions to single CEO. The Swiss shoemaker On Holding AG, whose New York shares have gained nearly 25 percent in the past year, is streamlining its leadership. Martin Hoffman will take over as sole CEO, the latest move in On’s shift from its early phase into a more mature company.
MEDIA AND TECHNOLOGY
Amazon submitted a bid for TikTok on Wednesday with the US sale deadline nearing. The e-commerce giant’s proposal is allegedly not being considered seriously by the Trump Administration. The proposal joins other publicly known offers, including from a group led by billionaire Frank McCourt and Reddit co-founder Alexis Ohanian.
Compiled by Jessica Kwon.