President Donald Trump may have instituted a 90-day-pause on tariffs, but retailers are nevertheless spiraling. However, few industries have felt the tremor as acutely as fashion retail, as the exorbitant tariffs (up to 60%)—levied on major production hubs such as China, Vietnam, and Bangladesh—practically spelled the end of low-cost manufacturing, forcing brands to either eat into their margins or raise retail prices.
But does it have to be the end? Experts advise not to wave the white flag just yet.
“Brands and retailers are navigating a complex and fluid situation, which will require a thoughtful game plan and nimble approach,” Brittany Steiger, principal analyst of retail and e-commerce at Mintel, told Retail Brew via email. “Companies should be focusing on operational flexibility—from adjusting sourcing strategies and aligning new manufacturing partners to optimizing inventory management.”
Speaking of new manufacturing partners, a key justification for the tariffs is the goal of bringing manufacturing back to the US and, by extension, creating jobs.
Oh, shore: But Steiger, among other analysts, believes it’s unlikely to have that domino effect simply because it won’t be feasible for most retailers to reshore to the US.
“While reshoring manufacturing to the US or relocating to Europe sounds appealing, the feasibility is limited for most brands and retailers due to the high costs associated with labor and infrastructure,” she said, adding that US-based production would “drastically increase operational expenses, cutting into already tight margins.”
Joanna Rangarajan, partner and managing director in the consumer and retail group of Alvarez & Marsal, highlighted key challenges that would make it unreasonable for most companies to completely shift manufacturing to the US.
“Chief among them are the lack of scaled finished goods manufacturing tailored to domestic markets, and the absence of a robust, end-to-end supply chain for raw materials and components,” Rangarajan said via email. “Without both, reshoring entire assortments is not yet a viable solution at scale.”
It should be noted, however, that these challenges are primarily an issue for fast fashion or retailers with a relatively affordable range of products as opposed to luxury or high-end brands, Steiger said.
Still, recent reports about Louis Vuitton’s 6-year-old facility in Texas coming up as the worst performing after failing to be able to train local workers don’t exactly instill confidence.