In December 2024, a piece of news sent shockwaves through the apparel and footwear industry:
As Trump returns to the presidency, rumors are swirling that he plans to impose steep tariffs on Chinese imports, making the industry, which has long relied on Chinese manufacturing, nervous because the new tariffs are likely to completely reshape their supply chains.
On the other hand, US retailers take advantage of US consumers' fear of "paying" for rising prices, seizing the gap before the new policy is implemented to vigorously marketing, lobbying consumers to "buy buy buy".
Big boost before tax
The US "Wall Street Journal" reported on the 29th that retailers in the US furniture, outdoor, beauty, stationery and other industries have opened "pre-tariff promotion".
Retailers use pre-tariff promotions to stimulate consumption and maximize sales; Consumers, in the context of expected price increases, decided to buy as early as possible to seize the last preferential opportunity.
"Buy now, we don't have much time left to maintain the current prices, and this may be the last time you see a promotion like this," they wrote. Some merchants said that in just a few days, the promotion has brought 170 orders.
People pass a "Black Friday" promotional billboard at a mall in Manhattan, New York, the United States, Nov. 29, 2019.
The Wall Street Journal said it was unclear which goods would be subject to higher tariffs after Trump took office and how the tariff increases would affect prices. At a time of increased economic uncertainty in the United States, consumption is showing signs of weakness. Kohl's and Target both saw clothing sales decline last quarter. In a Facebook post earlier this month, Final Furniture said: "When the tariffs hit, the price of the same item will double."
Most large companies have yet to incorporate potential new tariffs into their marketing activities and may not explicitly do so. But some companies acknowledge they may need to pass on higher costs. According to the latest data released by the National Retail Federation, the new tariffs could cost consumers as much as $78 billion a year in lost purchasing power.
Some small business owners worry that rising prices could lead consumers to spend less and be more selective about what they buy.
In threatening to impose high tariffs, Trump did not say what would make him abandon it. The threat "creates a sense of uncertainty" as businesses and other countries wait for details to be released to judge the likely impact of the new policy.
Why are tariffs causing panic?
During his campaign, Mr. Trump called for tariffs of 10 to 20 percent on most foreign goods, and as much as 60 percent on Chinese goods. On the surface, this may seem like a strong move to promote American manufacturing, but in reality, the bulk of the cost of the tariffs is borne by companies, not foreign governments.
For well-known brands such as Nike and Ralph Lauren, the increase in tariffs is likely to directly lead to a sharp rise in production costs. This puts them in a dilemma: if they raise prices, they are likely to discourage consumers; If the original price is maintained, the profit margin will be severely compressed. This difficult situation also makes Wal-Mart, Under Armour and other retail giants feel great pressure.
Brands are quietly taking action
In order to reduce their dependence on China, many brands have taken precautions.
Madden plans to cut its imports from China by 40 to 50 percent over the next year and shift production to Vietnam, Cambodia and Mexico.
Nike has also reduced the proportion of its imports from China from 23% in fiscal 2020 to 16% in 2024, and most of its products now come from Vietnam.
Ralph Lauren is also actively looking for alternative markets and is currently reducing policy risk by expanding its global supply chain.
However, these actions are difficult to implement.
According to the data, 32.6% of U.S. textile and apparel imports in 2018 came from China, which has dropped to 22.5% by 2023, but China remains an indispensable production base for many brands.
At present, the industry generally expects that Trump's tariff policy can be more "moderate" than expected. But in any case, facing higher costs has become a high probability event. For the apparel and footwear industry, this is not only a serious test of the supply chain, but also an important opportunity to drive innovation. How to respond to policy changes more flexibly and how to maintain the balance between cost and quality has become a key issue that every brand must think deeply about. No matter what the future holds, the globalized supply chain is facing a reshuffle that could also fundamentally change our perception of "fashion manufacturing."
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