How apparel & footwear brands are preparing for possible Trump tariffs on China
Apparel and footwear brands, many of which rely on China for manufacturing, are scrambling to reduce their reliance on Chinese imports in anticipation of higher tariffs under the second Donald Trump administration.
Two days after the election, Steve Madden revealed plans to slash imports from China to the U.S. by 40% to 50% over the next year. Steve Madden had already been preparing to scale back in China and had proactively upped its sourcing in Cambodia, Vietnam, Mexico and Brazil, its CEO Edward Rosenfeld told analysts on a call. Meanwhile, Ralph Lauren, which sourced 15% of its products from China in fiscal 2024, according to its 10-K, has increased manufacturing in other markets and will “continue to proactively develop and scale new global supply chain opportunities to mitigate any potential risks and disruptions,” its CFO Justin Picicci said on a call on Nov. 7.
On the campaign trail, Trump vowed to slap a 10% to 20% tax on most foreign products, as well as a 60% tariff on goods from China. The idea, his campaign said, was to increase manufacturing at home in the U.S. But the tariffs — which the U.S. companies, not foreign countries, will have to pay — present a huge challenge to American-based fashion companies that rely on materials and labor from abroad. Tariffs increase costs, and fashion companies worry that to offset these, they’ll be forced to raise prices. Doing so could possibly scare off their customers and lower sales volume. Alternatively, if they keep prices the same, that could affect their margins and profitability.
Apparel and footwear executives are already sounding the alarm about how tariffs could impact their businesses. On Nov. 7, Under Armour CFO David Bergman said that Trump’s tariffs “could impact [the company’s] cost of goods sold and gross margin.” Earlier this month, Brooks Running CEO Dan Sheridan told Yahoo Finance that the tariffs would be a “huge headwind.” And Walmart, which carries apparel and footwear in addition to its other goods, warned that it may have to raise prices if the tariffs go into effect.
Industry groups are warning that tariffs will have a negative effect on consumer spending, too. The National Retail Federation estimated that tariffs on six product categories will reduce American consumers’ spending power by $46 billion to $78 billion each year that the tariffs remain in place. The group also estimated that under the new tariffs, U.S. consumers will end up paying $13.9 billion to $24 billion more for apparel and $6.4 billion to $10.7 billion more for footwear. Tariffs that Trump implemented during his first administration likewise increased the costs of goods and services.
If apparel and footwear brands want to avoid the steepest tariffs, they will benefit the most by moving some manufacturing out of China, sources say. But a lot of these companies already have relationships with factories there, and starting over could prove costly. What’s more, businesses fear the quality of their products could suffer. Chris Gentile, the owner of Brooklyn-based clothing company Pilgrim Surf + Supply, told The New York Times that China’s cut-and-sew capabilities are unmatched. “China is so advanced in that space that there’s really no place to go and pick up that slack from,” he explained.
Because China is a huge player in manufacturing, it’s not easy for businesses to pull out of the country completely. The U.S. started manufacturing more items in China about 40 years ago, and by 2018, China accounted for 28% of the global manufacturing output, according to the World Economic Forum.
“China’s had a long run of being the dominant source of production,” Dylan Carden, research analyst at William Blair, told Modern Retail. “If you talk to apparel companies, a lot of them will admit that you can quit China, but it’s really difficult in some categories to quit China altogether, particularly for higher-skillset knits. People have done it, but it’s not a foregone conclusion.”
Because of tariffs enacted during Trump’s first term, as well as disruptions from the pandemic, many retail players do have some practice shifting manufacturing out of China. Carden explained that textile and apparel imports from China have dropped “significantly” in the last six years, going from 32.6% in 2018 to 22.5% in 2023.
In fact, 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, the Philippines, India and Mexico. U.S. Commerce Department figures released earlier this year revealed that, for the first time in more than 20 years, the value of goods imported from Mexico to the U.S. exceeded that of goods from China to the U.S. in 2023.
Neil Saunders, managing director for GlobalData Retail, told Modern Retail that the tariffs, both on goods from China and other foreign nations, stand to be “very damaging to apparel.” But, he said, “With apparel, it might be easier — but not easy — to mitigate this.” In terms of manufacturing, the apparel industry operates on a season-by-season basis, he said, which grants companies some flexibility with scheduling. “If you’re making furniture or electronics, it’s more difficult to move production capacity, but with apparel, it’s more nimble than other sectors,” he explained.
If a company wanted to avoid tariffs entirely, it would have to move all manufacturing to the U.S. But that’s an unlikely scenario, Saunders pointed out. “If everyone wanted to do it, I don’t think it’s possible because I don’t think we have the manufacturing base and capability to cope with that volume,” he said.
It also costs more to manufacture in the U.S. due to factors like the minimum wage and regulations. As a result, companies might be driven to raise prices, which would affect the consumer. “You have to, therefore, take a view of what is more economical,” Saunders said. “Is it more economical to just pay the tariffs, or is it more economical to bring it back to the U.S.?”
There are many companies that do manufacture in the U.S., including Red Wing Shoes and Allen Edmonds, Carden pointed out. But many apparel and footwear companies, like those in other sectors, are holding out hope that Trump’s actual tariffs might be less than he promised. Either way, they are planning to deal with higher rates of some kind.
“I think the industry is just waiting to see what happens,” Saunders said.