Tariffs Shake Up U.S. Fashion: A Q2–H1 2025 Snapshot
1. A Climate of Uncertainty
According to a study from the U.S. Fashion Industry Association (USFIA), trade policy turbulence is the top concern keeping fashion executives up at night. Over half of respondents (52%) cited uncertainty about foreign policies—including potential retaliatory measures—as a key anxiety driver.
A broader analysis of earnings call transcripts from roughly 25 major publicly traded fashion companies (mid-May through June 2025) revealed that tariffs have not only driven up sourcing costs, shrinking profit margins, but also pushed companies to diversify away from China, favor flexibility in sourcing/shipping, and resist passing full costs onto consumers.
Further research highlights that tariffs are broadly reshaping operations—not just sourcing costs but also affecting product development, shipping logistics, and supply-chain management. Nearly 70% of respondents said they had delayed or canceled source orders due to tariff pressures.
2. Import Patterns and Sourcing Shifts
Tariffs have triggered a sharp downturn in apparel imports from China. In May 2025, U.S. apparel imports from China dropped to $556 million, marking a 22-year low (down from $796 million in April). Retailers have increasingly moved sourcing to countries like Vietnam, Bangladesh, India, and Mexico—data shows sourcing from China fell ~25% year-over-year in Q2, while Southeast Asia’s share rose 29%, and Mexico gained 12%.
3. Retailers Feeling the Pinch—and Reacting
Nike
Nike anticipates a $1 billion tariff hit and is executing “surgical” price hikes beginning fall 2025. The company is also actively diversifying supply chains—reducing reliance on China (from 16% to high single digits by fiscal 2026)—while working with partners to soften consumer impact and managing internal costs.
Gap Inc.
Gap flagged tariff-related costs of $250–300 million in gross terms, with a net hit of $100–150 million projected for 2025. They're skewing sourcing away from China—already below 10%, and expected to drop under 3% by year-end—and leaning harder on online sales, which now account for nearly 40% of revenue.
Macy’s
Tariffs have shaved 40–60 basis points off gross margins. In response, Macy’s is leveraging strategic price hikes, tightening purchasing, and enhancing store performance—leading to an 18% stock surge amid its first quarterly sales growth (excluding store openings/closures) in years.
Lululemon
Facing up to a $320 million tariff burden by 2026, Lululemon has seen its stock tumble 19% in response to a lowered outlook and weak U.S. demand. The brand plans to respond with more innovative product offerings and targeted pricing adjustments.
4. Broader Market Ripple Effects
Consumers and e-commerce, especially for low-cost imports previously protected by the “de minimis” rule, are seeing steep price hikes or lost access. Categories affected range from apparel and stationery to crafting supplies. Tariffs now stretch 10–50% on low-value goods, prompting some sellers and postal services to halt shipments to the U.S. entirely.
What This Means and Where It's Headed
Strategy: A dramatic shift away from China, with increased reliance on Vietnam, India, Bangladesh, and Mexico.
Supply chain operations: Companies prioritize agility, flexibility, and inventory adjustments amid disruption.
Cost management tactics: Strategic price hikes, internal cost reductions, and supply-chain diversification are being deployed.
Consumer impact: Shoppers face higher costs, potential shortages—especially for budget/luxury imports.
Industry outlook: Financial pressure mounts, yet optimistic outlooks persist, with long-term restructuring underway.
Final Thoughts
Tariffs launched in 2025 have fundamentally disrupted the fashion supply ecosystem—shaking global sourcing norms, hitting margins hard, and compelling retailers to rethink pricing, sourcing, and strategy. While short-term pressures are acute, many brands are betting strength and adaptability will yield long-term advantage.