Trump’s Tariffs Rattle Fashion’s Global Supply Chain

The US fashion industry is once again grappling with US President Donald Trump’s tariff policy.

After shifting sourcing from China to countries like Vietnam and Cambodia during Trump’s first term, brands now face another spike in costs as President Trump introduces new tariffs on the latter countries, sending shockwaves through the global fashion supply chain.

Trump has introduced a 10% baseline tariff on all imported goods, but the fashion industry is far from dealing with just that.

For about two dozen countries where the US runs a trade deficit, those tariffs are much steeper. Vietnam, a cornerstone of the global athletic footwear supply chain, is among the hardest hit. A new 46% tariff now applies to Vietnamese goods headed to the US, compounding the 20% duties already in place for textile-topped athletic shoes.

That’s a serious issue for the likes of Nike, which makes 50% of its footwear in Vietnam, and On, a Swiss sportswear company which manufactures a staggering 90% of its shoes there.

Vietnam is the world’s second-largest apparel exporter to the US after China, which itself is now subject to a 54% tariff, including earlier duties. Cambodia faces a 49% tariff, Bangladesh 37% and the European Union 20%.

The impact is already visible. In after-hours trading, shares of Lululemon fell more than 10%, Nike and Ralph Lauren dropped 7% and Tapestry, Capri and PVH Corp saw a dip of around 5%. 

Fashion companies have little room to manoeuvre. Moving manufacturing out of Vietnam is no quick fix.

Production relocation: Easier said than done

Trump wants to bring production back to the US, but the fashion industry says it’s not feasible.

American factories lack the specialised equipment and skilled labour needed to make running shoes at scale. Nike, which first started manufacturing in Vietnam in 1995, now works with 130 supplier factories in the country. Adidas makes 39% of its footwear there too.

This week's tariff hike hits brands hard. Nike shares have dropped to their lowest in nearly eight years, weighed down by rising costs and competitive pressure from brands like On and Hoka.

While Nike hasn't commented directly, its latest quarterly report mentions "several external factors that create uncertainty and volatility in the operating environment, including, but not limited to, geopolitical dynamics, new tariffs, tax regulation and fluctuating foreign exchange rates."

Supply chain ripple effects will be wide

The strain goes beyond big-name brands. The US Fashion Industry Association put it bluntly: “We are deeply disappointed by the Trump Administration’s decision to impose new tariffs on all imports. This action will particularly affect American fashion brands and retailers.”

From suppliers in Vietnam to textile makers and farmers worldwide, the entire chain will feel the pressure. Walmart, among others, has said it will negotiate with suppliers to lower costs, but many factories already operate on tight margins. The squeeze is set to intensify.

Retailers face a dilemma: absorb the higher costs or pass them onto shoppers already hit by inflation. With consumer confidence in the US already at its lowest since the pandemic, fashion brands are treading carefully.

And if costs are passed to consumers, expect more selective shopping habits and fewer impulse buys, which could dent profits further. 

In short the global fashion supply chain, from factories in Asia to shelves in America, is bracing for disruption.

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