Guatemala Strengthens Its Case as a Preferred Nearshore Apparel Partner as Section 301 Pressure Mounts on Nicaragua
As U.S. trade policy continues to recalibrate supply chains toward transparency, compliance, and geopolitical alignment, recent developments around Nicaragua underscore a clear message for brands planning 2026–2028 sourcing strategies: diversification is no longer optional it is strategic risk management.
On December 11, 2025, the American Apparel & Footwear Association (AAFA) responded to the Office of the United States Trade Representative (USTR) announcement that additional Section 301 tariffs will be phased in on certain Nicaraguan goods beginning January 1, 2026.
What the Section 301 Decision Means in Practice
Under the USTR’s plan:
2026: 0% additional tariff
January 1, 2027: +10%
January 1, 2028: +15%
These increases will be stacked on top of:
The existing 18% Reciprocal Tariff Rate, and
Any applicable MFN tariffs
Critically, the tariffs apply to all U.S. imports from Nicaragua not qualifying under CAFTA-DR. Even CAFTA-DR–qualifying goods will still face the 18% reciprocal tariff already in place.
AAFA President and CEO Steve Lamar emphasized support for the USTR’s decision to preserve CAFTA-DR benefits, while acknowledging the broader intent to hold trading partners accountable for unfair practices.
The Strategic Reality for Brands Sourcing in Nicaragua
While Nicaragua has long been a core apparel hub under CAFTA-DR, the direction of policy is clear:
Tariff exposure is increasing
Political and compliance risk remains elevated
Cost predictability is deteriorating post-2026
For brands with multi year programs, development calendars extending into 2027–2028, or price sensitive categories like basics, fleece, and knits, Nicaragua now represents a concentration risk not a default solution.
Why Guatemala Is Exceptionally Well Positioned
In contrast, Guatemala stands out as one of the most stable, compliant, and strategically aligned apparel sourcing destinations in the Western Hemisphere.
Key advantages include:
1. Strong Preferential Trade Standing
Guatemala remains firmly anchored within CAFTA-DR, with:
Clear rules of origin
Consistent enforcement
Longstanding cooperation with U.S. Customs & Border Protection
This translates to predictable duty treatment and significantly lower trade-policy volatility.
2. Deep, Trusted U.S.–Guatemala Relationship
Guatemala maintains a close economic and diplomatic relationship with the United States, supported by:
Decades of apparel manufacturing integration
Transparent labor and compliance frameworks
A reputation for reliability in nearshore production
As U.S. policy increasingly favors aligned partners, Guatemala benefits from being viewed as part of the solution not part of the problem.
3. Nearshore Speed Without Compromising Compliance
Guatemala offers:
Short lead times to U.S. distribution centers
Fast replenishment and chase capability
Proven execution in knits, T-shirts, and fleece
For brands navigating uncertain tariffs, speed and agility are often the only way to protect margins.
MTAR: Purpose-Built for This Moment
At MTAR, we are seeing increased interest from brands actively diversifying away from Nicaragua or balancing exposure across Central America.
MTAR operates with:
CAFTA-DR compliant supply chains
Ethical, people first manufacturing practices
Quick turn nearshore production designed for volatility
Our customers are not waiting for tariffs to hit their P&L. They are acting now realigning programs into Guatemala to secure cost certainty, operational resilience, and long-term partnership stability.
The Takeaway for 2026–2028 Planning
The Section 301 action on Nicaragua is not an isolated event. It is part of a broader shift toward:
Trade accountability
Regional alignment
Supply chain transparency
Brands that proactively rebalance into Guatemala will be better positioned to:
Absorb policy changes without disruption
Maintain margin discipline
Respond quickly to demand signals
Guatemala is not just a safe alternative it is a strategic upgrade.
If your 2026–2028 sourcing roadmap includes Nicaragua, now is the right time to build a Guatemala counterbalance. MTAR is ready to help you do it thoughtfully, compliantly, and competitively.