The Impact of Trump's Tariffs on Fashion Manufacturing

The US fashion industry is once again wrestling with President Donald Trump’s tariff strategy. After moving sourcing away from China to nations such as Vietnam and Cambodia during Trump’s first term, brands are now facing yet another surge in costs as the former president rolls out fresh tariffs on those same countries—sending shockwaves through the global fashion supply chain.

While Trump has imposed a baseline 10% tariff on all imported goods, the fashion sector is contending with far more than that. For around two dozen nations where the US records a trade deficit, the tariffs are significantly higher. Vietnam—an essential hub in the global production of athletic footwear—is among those hardest hit. Vietnamese goods bound for the US are now subject to a new 46% tariff, adding to the existing 20% duties already levied on textile-topped trainers.

This development spells major trouble for companies like Nike, which manufactures half of its footwear in Vietnam, and On, the Swiss sportswear firm that produces an astonishing 90% of its shoes there.

The US fashion industry is once again wrestling with President Donald Trump’s tariff strategy. After shifting sourcing from China to countries like Vietnam and Cambodia during Trump’s first term, brands are now facing another surge in costs as the former president rolls out fresh tariffs on those very nations—sending shockwaves through the global fashion supply chain.

While Trump has imposed a baseline 10% tariff on all imported goods, the fashion sector is grappling with far steeper rates for around two dozen countries where the US runs a trade deficit. Vietnam—an essential hub in the global production of athletic footwear—is among the hardest hit. Vietnamese exports to the US are now subject to a new 46% tariff, on top of the existing 20% duties on textile-topped trainers.

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

The impact is already being felt. In after-hours trading, shares in Lululemon dropped by more than 10%, with Nike and Ralph Lauren falling 7%, and Tapestry, Capri and PVH Corp each slipping around 5%.

Fashion companies have little room to manoeuvre. Shifting production out of Vietnam is no quick fix.

The challenges of production relocation

Trump aims to bring manufacturing back to US soil, but the fashion industry insists it’s not a realistic option.

American factories simply do not have the specialised equipment or skilled workforce required to mass-produce running shoes. Nike, which began manufacturing in Vietnam in 1995, now relies on 130 supplier factories there. Adidas produces 39% of its footwear in the country as well.

This week’s tariff hike has hit brands hard. Nike shares have fallen to their lowest point in nearly eight years, weighed down by rising costs and competitive pressure from brands like On and Hoka.

Though Nike has not responded directly to the tariffs, its most recent quarterly report cited "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."

Wider industry impact

The strain extends well beyond household names. 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 across the globe, the entire chain is set to feel the pressure. Walmart, among others, has said it plans to negotiate with suppliers to reduce costs, but many factories already run on razor-thin margins. The squeeze is likely to deepen.

Retailers now face a tough choice: absorb the higher costs or pass them on to shoppers already grappling with inflation. With consumer confidence in the US at its lowest since the pandemic, fashion brands are proceeding with caution.

If the added costs are passed on, expect more cautious consumer behaviour and a drop in impulse purchases—putting further pressure on profits.

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

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