Tariff whiplash throws a wrench in brands’ supply chain diversification plans

Then came the tariff news. With little warning, the Trump administration doubled duties on Indian imports to 50%, up from 25%, as part of a push to curtail the country’s purchase of Russian oil. The new rate is scheduled to go into effect on Aug. 27.

The higher rate, combined with manufacturing timelines in India that were five times longer than those offered by Joe & Bella’s existing partners in China, quickly erased any potential savings. 

The company scrapped its India tests. Although Joe & Bella previously manufactured some goods in Vietnam, the company has now consolidated all manufacturing back to China — for simplicity’s sake, according to Zollo. “Anyone could get hit at any time for any reason,” he said. “Sometimes the safest move is just to stay put.”

Costly tariffs have become an unavoidable part of doing business in the U.S., with the overall average tariff rate now at its highest level since the Great Depression. The looming threat of further hikes means any new production base could be targeted next, disrupting companies’ attempts to diversify sourcing and making long-term planning nearly impossible. 

‘Hidden tariff’

To Zolllo, Trump’s tariffs disproportionately impact smaller brands like his because they can’t absorb the costs of supply-chain pivots as easily as larger players can, especially once budgets are set and orders placed. 

“We can’t diversify if we don’t know which country will be hit next,” Zollo said. “The uncertainty is like a hidden tariff.”

But major companies aren’t immune to Trump’s erratic trade policy, either. Steve Madden’s plan to shift some production to Brazil is now on hold after Trump announced a 40% tariff on the South American country. Meanwhile, garment maker Pearl Global, which produces items for major retailers, including Gap and Kohl’s, told Reuters that clients are asking it to move production to countries like Bangladesh and Guatemala to avoid higher tariffs on Indian imports.

Brands that once thought they were largely insulated from the damage of Trump’s tariffs are now scrambling to recalibrate. That’s the case for Monil Kothari, founder of the New York City-based fine jewelry brand Haus of Brilliance, which sources most of its goods from India. If Trump follows through on his threat, duties on Indian goods will rival some of the highest tariffs in the world. 

“That really came out of nowhere,” he said. “A lot of the sentiment and messaging we were getting from the administration was that India was still to be a preferred trading partner.”

But moving production to the U.S. still isn’t economical for the kind of low-price-point, fashion-forward jewelry Kothari sells. “Even at a 50% increase, it’s still cheaper to do it in India than it is to do it here,” he said.

For Kothari, diversifying beyond India would mean starting from scratch: traveling to new countries, vetting factories, testing product quality, and working out raw material sourcing and logistics. “I’m not sure if the effort right now is worth it,” he said. “I could do all that effort and the next week find out everyone’s friends again and tariffs have come back down to 15%.”

Shifting production is still worthwhile but far less cost-effective than expected, said Chuck Gregorich, who runs the outdoor goods brand Net Health Shops. Gregorich has shifted his sourcing mix dramatically over the past year, from 75% of products made in China to a near-even split between India and Vietnam. Despite the new duties on Indian goods, “it still makes sense for us to go to India. It’s just not as good as it was before,” Gregorich said. 

He’s already raised prices across his product portfolio by as much as 15% to absorb costs. But he expects he’ll hike prices by another 5% in the coming months because of India tariffs. 

Alternative destinations like Vietnam or Cambodia have offered partial relief to some brands like orthopedic-shoe seller Kuru Footwear. After years of sourcing from China, Kuru CEO Bret Rasmussen said the company expects the vast majority of its goods will be made in factories outside of the country. Still, Rasmussen estimated that Kuru will have incurred roughly $2 million in tariff-related costs by year-end. 

Kuru’s diversification plans have been complicated by the end of the de minimis trade rule, which let shipments worth $800 or less enter the U.S. duty-free. Earlier in the month, the Trump administration said it was suspending the de minimis provision, starting Aug. 29 — much sooner than the July 2027 deadline mentioned in Trump’s so-called “big, beautiful bill.” The White House had already halted the practice for Chinese goods in May.

Since 2022, Salt Lake City-based Kuru has used de minimis to ship orders out of warehouses located just across the border in Canada, allowing the company to bypass tariffs. The company thought it would have more time to rethink its reliance on de minimis ahead of the 2027 deadline. But the sudden announcement that the trade provision would be over by the end of the month came as a shock. 

“The alternative is we just bring the product into the U.S., which means we now have to pay whatever the tariffs end up being,” Rasmussen said. But that’s easier said than done when duties on some countries are not “fully baked,” he added. Indeed, the recent 90-day extension of the U.S.-China tariff truce, announced Monday, has done little to reassure companies that the rules won’t change again before orders arrive. 

“Long-term investments and committing to long-term strategies, from a sourcing standpoint, has been really, really challenging,” Rasmussen said. “You don’t want to commit too much to one strategy when some administrative action or decision gets announced that changes it all.”