Navigating Tariffs: What It Means for Fashion Brands

As new tariffs loom on the horizon, with 25% on Mexico and Canada and 10% on China scheduled to take effect on February 1, the fashion industry is bracing for significant disruption. At AJG Fashion Consulting, we’ve supported over 150 brands in navigating global sourcing and production challenges, and we’ve seen firsthand how such shifts can reshape supply chains and sourcing strategies.

Let’s break down how these tariffs could impact brands, their pricing strategies, and their supply chain resilience.

The Immediate Impact on Supply Chains

The sudden implementation of steep tariffs can upend sourcing strategies overnight. Many fashion brands, regardless of size, rely on importing materials or manufacturing from countries like China, Mexico, and Canada. Adding a 10% or 25% tariff to the cost of goods sourced from these regions forces brands to rethink their strategies quickly.

Smaller brands, in particular, face barriers to accessing nearshore manufacturing solutions due to higher minimum order quantities (MOQs) required by factories in regions like Mexico and South America. Larger corporations often dominate these resources, leaving smaller players to rely heavily on China or India, where production is more accommodating to lower-volume needs. However, with the new tariffs, even these longstanding relationships come under pressure.

Shifts in Sourcing Strategies

Reshoring to Domestic Manufacturing and nearshoring to Latin and South America have been on the radar for years, but recent geopolitical tensions and supply chain disruptions have accelerated these discussions. While larger brands can secure production capacity nearshore by acquiring factories or long-term contracts, smaller brands often struggle to find local resources at scale. The high costs of domestic production or limited capabilities to produce specialized items (such as technical or athletic apparel) add further challenges.

At AJG, we’ve been helping our clients diversify their supply chains beyond Asia, by developing strong partnerships with South American factories and expanding our domestic network. Over the years, we have created a nimble, multi-country supply chain network that can withstand shifts in global trade policy shifts.

Sustainability and Ethical Production Under Pressure

Sustainability has become non-negotiable for many brands and consumers alike. However, tariffs on imported recycled or organic materials—which are already significantly more expensive than their conventional counterparts—can challenge a brand’s ability to deliver on its sustainability commitments. On the flip side, tariffs may spur domestic factories and mills to innovate, investing in new equipment and materials to meet these demands locally. This could lead to long-term benefits, such as reduced reliance on international shipping and its associated environmental impact.

Changes in Consumer Behavior and Industry Trends

Adding a 10% tariff to the cost of goods is no small matter. Many brands will need to decide whether to absorb these additional costs or pass them on to consumers. For smaller brands, absorbing these increases may not be feasible, especially given the rising costs of materials and shipping since the pandemic. Transparency will be imperative in communicating pricing changes to customers. Brands that can share their commitment to quality, sustainability, and ethical manufacturing—even in the face of rising costs—are more likely to maintain customer loyalty.

Economic stress and rising prices often lead to shifts in consumer behavior. While premium and luxury consumers may continue to prioritize quality over cost, many shoppers will likely reduce the frequency of their purchases or seek lower-cost alternatives. For brands, this presents an opportunity to emphasize value—not just in terms of price, but in durability, ethical practices, and craftsmanship.

Industry-wide, the fragmented global trade landscape could accelerate the shrinking of the mid-tier market. Larger retailers with established nearshore supply chains will dominate the value segment, while smaller brands may find themselves pivoting toward higher price points and luxury markets to stay competitive.

Building Resilience as a Growing Brand

At AJG Fashion Consulting, we’ve long advocated for diversified supply chains as a way to mitigate risk. The recent tariffs underscore just how critical this strategy has become. Brands that invest in multi-country sourcing, build strong relationships with suppliers, and stay agile in the face of geopolitical instability will be best positioned to navigate these challenges.

While the immediate outlook may seem daunting, the current landscape also presents opportunities—for innovation, for strengthening local manufacturing capabilities, and for deepening the connection between brands and their customers. By staying transparent, focusing on sustainability, and adapting to the evolving trade environment, brands can overcome these challenges and emerge stronger.

For support in navigating these complexities, AJG Fashion Consulting offers tailored solutions to help brands optimize their supply chains and adapt to the changing global trade landscape. Get in touch to learn more.