Why the U.S. Apparel Sector Is Backing Nicaragua Tariffs and What It Means for Nearshoring Decisions
Recent reporting from Just Style highlights a notable shift in sentiment across the U.S. apparel sector: growing industry support for tariffs on Nicaragua, driven less by cost concerns and more by supply chain risk, compliance exposure, and geopolitical uncertainty. For brands and retailers already under pressure to stabilize lead times, ensure ethical production, and protect margin, this development is less a surprise than a confirmation of where the industry is heading.
For MTAR and our partners, the message is clear: risk adjusted sourcing now matters more than headline pricing.
Why Nicaragua Is Being Reconsidered
Historically, Nicaragua has been a competitive player in Central America due to low labor costs and proximity to the U.S. market. However, the Just Style analysis underscores why many U.S. apparel stakeholders now view the country as a structural risk rather than a strategic advantage.
Key concerns driving support for tariffs include:
Political instability and governance risk creating uncertainty for long-term sourcing
Labor rights and compliance scrutiny, increasing the likelihood of brand exposure
Rule-of-law and transparency challenges, complicating auditability and remediation
Tariff escalation risk, particularly under evolving U.S. trade policy frameworks
In short, reminders that cheap capacity can become expensive very quickly when risk premiums are applied.
Tariffs as a Risk Signal, Not Just a Cost Lever
What is especially telling is who is backing these tariffs. This is not limited to policymakers—it includes brands, trade associations, and sourcing executives who increasingly see tariffs as a forcing function to address over-concentration and fragility in supply chains.
Rather than a blunt protectionist tool, tariffs are acting as a market signal:
Diversify sourcing
Reduce dependency on politically volatile regions
Prioritize compliance ready, transparent manufacturing ecosystems
This mirrors the same strategic recalibration we have seen post-China, post-COVID, and amid ongoing Section 301 and IEEPA discussions.
Guatemala’s Strategic Advantage in This Moment
As brands reassess Nicaragua, attention is rapidly shifting to lower risk CAFTA-DR alternatives, particularly Guatemala.
From an MTAR perspective, Guatemala stands out for several reasons:
Stable trade relationship with the U.S. under CAFTA-DR
Strong compliance culture across labor, security, and environmental standards
Deep vertical integration in knits, fleece, and core apparel programs
Faster transit times and more predictable lead-time performance
Lower tariff volatility compared to Nicaragua and certain Asian sourcing hubs
For brands seeking to nearshore without introducing new geopolitical or reputational risk, Guatemala offers a compelling balance of cost, speed, and certainty.
What Smart Brands Are Doing Now
Forward-looking brands are not waiting for tariffs to fully phase in. Instead, they are:
Actively modeling landed cost scenarios with and without Nicaragua exposure
Rebalancing capacity toward Guatemala and other compliant CAFTA partners
Reducing SKU and fabric complexity to unlock nearshore efficiencies
Embedding compliance and traceability earlier in product development
Treating sourcing decisions as enterprise risk management, not procurement alone
This is no longer about chasing the lowest needle-point cost—it is about protecting brand equity, margin stability, and operational continuity.
MTAR’s Point of View
At MTAR, we view the industry’s support for Nicaragua tariffs as a rational, data driven response to systemic risk. It reinforces what many sourcing leaders already know: resilience beats price arbitrage in today’s environment.
Our role is to help brands transition smoothly without disruption into nearshore, CAFTA-compliant production models that are scalable, transparent, and aligned with long-term growth.
The brands that act decisively now will not only avoid future shocks; they will build supply chains that become a competitive advantage.