Inside the race among brands to tariff-proof their supply chain 

Made In manufactures about one-third of its products in the U.S. and two-thirds of its products in Europe. The speed of Trump’s tariffs has been dizzying, Malt said, and Made In expects costs to eat into the company’s profitability. To cope, Made In is enacting a hiring freeze and will most likely raise prices. It’s also bringing on tariff lawyers — a first for the company — and putting off investments in technology.

Made In has to figure everything out “as soon as possible,” Malt said. “Every day we don’t, we’re just bleeding a lot of money that we weren’t two days ago,” he added.

Made In is one of millions of businesses racing to tariff-proof their supply chain at a time when the U.S., Mexico, China, and the European Union are slapping duties on everything from baseball bats to bourbon. While many companies adjusted their supply chains to deal with tariffs during President Trump’s first term, the tariffs during his second term are more wide-ranging and affect more industries. They’re also changing at breakneck speed, with President Trump updating timetables based on his conversations with world leaders.

Five years after the onset of Covid-19, companies are used to navigating all types of headwinds, from shipping delays to shifting consumer tastes to inflation. But the new tit-for-tat tariffs — some of which are retaliatory in nature — are tanking stock markets and giving companies whiplash.

Planning is near-impossible because tariffs “keep changing every day,” said NiK Kacy, who owns a gender-neutral footwear brand of the same name. “It’s like, ‘We’re going to charge tariffs.’ ‘Now, we’re going to postpone it.’ ‘Now, we’re going to retaliate,'” they told Modern Retail. “Every day, it’s a different story. … The stress of running a business already is so hard, let alone having to add on all of this uncertainty.”

Act now or act later

Brands affected by tariffs are, in many ways, stuck between a rock and a hard place. They can reroute production to different countries without duties, but tariffs may eventually hit those markets, too. They can raise prices to offset costs, but customers may not want to spend more for the same products. They can try to use different materials, but doing so may affect the quality of their goods.

“Tariffs are on again, off again,” Matt Pavich, senior director of strategy and innovation at price optimization software company Revionics, told Modern Retail. “Nobody knows how permanent this is. In four years [at the end of Trump’s second term], will they go away? Will the business community step in and slow some of this down? It’s very disruptive, … and people don’t know whether to fundamentally change their business models.”

Some brands are holding off on making changes amid the tariffs. American Eagle Outfitters, for example, is adopting a wait-and-see approach to the matter, CEO Jay Schottenstein said in an earnings call on March 13. “You have to remember that, eight years ago, we went through this before, and everything settled down,” he said. “So, we just have to be calm. … We’re not going to be jumping all over the place until we know exactly what the story is.”

However, not all businesses can afford to use this tactic, sources told Modern Retail. Kacy, who manufactures their company’s shoes in Mexico, is already having trouble sustaining sales because of mounting business expenses and the rising costs of production. In fact, earlier this month, Kacy warned their customers that they could go out of business if conditions don’t change. They launched a final clearance sale to move inventory and increase cash flow.

Costs are tight, and a 25% tariff on goods from Mexico only makes things worse, Kacy said. “I’m going to end up losing money,” they explained. “And because I promised this to my client, I have to deliver. I can’t just be like, ‘Sorry, tariffs!’ And the same with my suppliers — if I’m going to order them to make something, I have to pay them in advance. … It just screws all of us.”

It took Kacy years to find folks willing to make gender-neutral shoes, which use the same mold for all shoes and come in one set of numerical sizes. Kacy could move production to the U.S., but “a factory that has that capability is probably going to be very expensive,” they acknowledged. “So my costs will go up, regardless.” As a result, for now, Kacy is keeping production in Mexico and trying to boost their portion of shoes that are made to order. Made-to-order shoes take longer to produce, but customers have been understanding, Kacy said.

Made In, on the other hand, has already been increasing production in the U.S. Its first manufacturing partner was U.S.-based, but the company moved production mostly into Europe during the pandemic. It’s been slowly building back up its American business. “We have half a million pieces in the U.S. now, from maybe 40,000 or so in earlier stages of 2020,” Malt said.

Still, Made In can’t immediately bring everything into the U.S. just because of tariffs. Made In submits its orders six to eight months out, so any changes it makes now won’t affect production until October or November. “It’s not like we can shift tomorrow,” Malt said. “It’s frustrating.”

The brand is now adjusting what it can control. Made In recently expanded to Canada and Australia, and it had been using the U.S. as a service hub to reroute items to other markets. But continuing on this path would mean paying tariffs to bring in items to the U.S., only to ship them back out again. As such, Made In is considering opening a distribution center in the U.K. to service nearby countries.

“It doesn’t make sense for the consumer to pay a 25% tariff for the U.S. when they live in the U.A.E.,” Malt explained. “It used to be very easy to consolidate within the U.S., … but now, it’s a super big headache … to break up the supply chain by territory.”

Made In also expects to increase prices, although it is still settling on a timeline. Pavich of Revionics said he’s been speaking with many brands about how much it would take to either absorb costs themselves or pass them along to the consumer. “Modeling out those two high-level numbers is a really good starting place,” Pavich said. “There’s not a CFO in North America who isn’t doing those two things.”

If retailers or brands do decide to raise prices, the challenge is figuring out how to communicate that to the consumer, Pavich explained. “I think retailers did a really poor job during inflation of communicating why prices went up,” he said. “Let consumers know this is due to tariffs.” Even adding a sticker with a “T” on it to products affected by tariffs could help, Pavich advised.

Pricing changes, when done well, can be a quick fix to tariffs, Pavich said. “You can’t fix your supply chain overnight,” he explained. “You can’t build a new factory in Wisconsin to replace the one in China at the same cost. Pricing is the best lever to pull to immediately change demand.”

Plans already in the works

Because of tariffs enacted during Trump’s first term, as well as disruptions from the pandemic, a number of retail players have already made changes to their supply chains abroad. In particular, many have tried to reduce their reliance on China, which accounted for 28% of the global manufacturing output in 2018, according to the World Economic Forum.

For instance, in November, Steve Madden’s CEO told analysts the brand had upped its sourcing in Cambodia, Vietnam, Mexico and Brazil. Meanwhile, Nike made 23% of its Nike brand apparel in China in fiscal 2020 but lowered that to 16% by fiscal 2024. Today, the majority of Nike brand apparel and footwear comes from Vietnam. Other companies are finding alternatives in markets like Bangladesh and the Philippines.

Macy’s also diversified its manufacturing during Trump’s first term in light of tariffs. At this year’s NRF Big Show, Macy’s CEO Tony Spring said that the company adjusted production of its private brands in 2016 and 2017. Also at NRF, Abir Thakurta, vp of supply chain at the furniture company Havertys, said his industry “has always had to think of a diversified sourcing strategy.”

Birdy Grey, the DTC bridesmaid dress brand that reached $100 million in sales last year, has been at work shifting its supply chain in the last couple years, it confirmed to Modern Retail. It recently added a new manufacturing country, India, to its existing markets of China, Vietnam and the Philippines.

“We’re making sure that [the supply chain] is robust and diversified enough and can weather the storms … so that we are not beholden to either one country or one way of manufacturing,” Birdy Grey co-founder Monica Ashauer said. “That’s an ancillary goal that all retailers like us are dealing with.”

Maesa, a beauty brand incubator whose portfolio includes the perfume brand Fine’ry and Kristin Ess Haircare, launched in 1997. It’s made recent changes to its supply chain as it’s continued to grow. “Our sourcing strategy has been focused on localizing and driving scale with strategic partners,” Maesa COO Carlos Lagravere told Modern Retail via email.

Maesa has made most of these changes in the last two years. Before it changed its sourcing strategy, 75% of Maesa’s product components came from outside of North America, Lagravere said. That is now down to 15%, with the remaining 85% localized. Maesa has also consolidated 80% of its manufacturing into four big scalable contract manufacturers, Lagravere said, which has helped the company “reduce tariff exposure.”

What’s more, for more than half of its portfolio, Maesa can produce products via two different vendors, Lagravere added. “Having global suppliers with multiple sites and locations allows us to move production around to ensure the most seamless and cost-efficient operations,” he said.

Ultimately, the changes Maesa has made to its supply chain — and the ones it has planned — are helping the brand be “well-poised to face the world of tariffs and material shortages,” Lagravere said. “[We are] improving profitable growth by 50% in three years and service by 35%, while reducing inventory by 40%.”