Fashion Braces for Impact as Trump Tariffs Returns

Summary

Summary of "Fashion Braces for Impact as Trump Tariffs Returns" - The Business of Fashion Podcast

Release Date: July 16, 2025

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Introduction

In this episode of The Business of Fashion Podcast, host Brian Baskin and senior correspondent Sheena Butler Young delve into the resurgence of Trump-era tariffs and their profound impact on the global fashion industry. Joined by in-house tariff experts Joan Kennedy and Mark Bain, the discussion navigates the complexities of escalating trade tensions, supply chain disruptions, and the evolving strategies brands are employing to mitigate these challenges.

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Current State of Tariffs

Brian Baskin opens the conversation by outlining the renewed focus on tariffs following President Donald Trump's threats to impose new duties on major trade partners, including the EU, South Korea, and others, with a looming deadline of August 1 for reciprocal tariffs to take effect.

Mark Bain provides a detailed breakdown:

"The total effective tariff rate in the US was about 2.5% at the start of the year, and now it's up to about 16.6%. If all the tariffs go into effect on August 1st, that rate would jump to 20.6%, marking the highest since 1910." (03:57)

He further explains the specific tariffs affecting the fashion industry, such as the 20% tariff on goods from Vietnam, which can escalate to 40% if goods originate from another country, targeting trans-shipped items from China. Additionally, 25% tariffs on Japan and South Korea, a 50% tariff on Brazil, and a 30% tariff threatened on the EU and Mexico are highlighted as significant concerns.

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Impact on Apparel Prices

Joan Kennedy discusses the tangible effects of these tariffs on consumer prices:

"Apparel prices in particular were up 0.4% percent, which is interesting because it really bucked a trend of declines and price hikes that had begun around 2022 following massive post-pandemic price hikes." (04:53)

Initially, tariffs led to a temporary decrease in apparel prices as brands pulled forward merchandise to delay the impact. However, as these goods began hitting the shelves, the expected price hikes due to tariffs started to manifest, reversing the earlier trend.

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Brand Responses and Supply Chain Diversification

The conversation shifts to how fashion brands are adapting to the unpredictable tariff landscape.

Mark Bain notes a shift in brand behavior from panic to strategic adaptation:

"The initial shock of the April 2 tariffs has kind of worn off... Companies have made contingency plans. We've seen companies talking about how they're shifting production." (06:49-07:19)

Joan Kennedy adds that brands are struggling with supply chain diversification due to the "whack-a-mole" nature of shifting tariffs:

"One of the countries that was expected to benefit from all of this tariff confusion was Brazil... with a new 50% tariff threatened on Brazil, it is really unpredictable." (10:00-11:21)

Despite these challenges, diversification remains a critical strategy. Mark Bain emphasizes building redundancy into supply chains:

"It's about having some layer of redundancy built in, in part because you never know what's going to happen." (11:21)

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Simplifying Product Assortments

To mitigate the increased costs from tariffs, brands are streamlining their product lines. Mark Bain explains:

"The wider an assortment you have, the more complexity you have... Focusing on stuff that is more of a sure thing helps reduce some of the complexity in the assortment." (12:26)

For instance, Levi's has announced the discontinuation of certain less popular styles during the holiday season to reduce tariff exposure. Similarly, brands like Revolve are selectively raising prices on special occasion wear while maintaining stable prices on staple items.

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Consumer Sentiment and Pricing Strategies

Joan Kennedy addresses the uncertainty surrounding consumer behavior amidst rising prices:

"Consumer confidence has dropped, reached its lowest point in April, made some gains in May, and then dropped again in June." (13:32)

Brands face the dilemma of balancing price hikes with consumer resilience. While some surveys indicate that consumers prefer brands to absorb the bulk of tariff costs, the reality of escalating tariffs challenges this expectation. Brands are employing strategic price increases, often targeting higher-end or less frequently purchased items to minimize consumer pushback.

Joan Kennedy notes:

"Brands are getting smart about where exactly they make these price hikes... keeping prices on basics stable so consumers don't notice as much." (15:29-15:56)

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Collaborative Cost Management

Beyond adjusting consumer prices, brands are collaborating with manufacturers and retail partners to distribute the financial burden of tariffs. Mark Bain cites an example from Nike:

"Nike's strategy was basically spread the costs across like a third to the consumer, a third to the manufacturer and a third to the rest of the supply chain, including JD Sports and retail partners." (16:15-16:39)

This collaborative approach helps mitigate the overall impact on any single party within the supply chain.

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Indicators to Watch

As the situation evolves, both Joan Kennedy and Mark Bain highlight key indicators to monitor:

• Consumer Sentiment: Tracking fluctuations in consumer confidence and spending behavior to gauge demand.

  "How much are shoppers noticing it? What sort of impact is it having on their spending?" (17:42)

• Trade Agreements: Observing the outcomes of negotiations, particularly with China, to understand future tariff trajectories.

  "What ultimately comes to pass with China and whether that agreement is something substantial that actually reduces tariffs." (17:42-18:44)

• Company Responses: Evaluating how brands innovate and pivot in response to ongoing challenges, which may indicate their long-term resilience and strategic direction.

  "How brands get creative around pricing strategies and product innovation right now is going to be important... in terms of where they're positioned five years from now." (18:44-19:21)

Brian Baskin adds his focus on the upcoming back-to-school shopping season as a potential indicator of consumer behavior trends.

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Conclusion

The episode underscores the precarious situation the fashion industry faces amid escalating tariffs initiated by the Trump administration. While brands are actively seeking to diversify supply chains and adjust product assortments to manage costs, the uncertainty of ongoing trade negotiations and shifting tariffs poses significant challenges. Consumer sentiment remains a critical factor, with brands needing to balance price adjustments against potential declines in demand. Moving forward, the industry's ability to innovate and strategically navigate these trade tensions will be pivotal in shaping its resilience and growth trajectory.

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This summary provides a comprehensive overview of the key discussions and insights from the "Fashion Braces for Impact as Trump Tariffs Returns" episode. For deeper analysis and additional stories, listeners are encouraged to subscribe to BOF Professional.

Transcript

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[Brian Baskin]

Hello and welcome to the Debrief from the Business of Fashion, where each week we delve into Our most popular BoF professional stories with the correspondents who created them. I'm executive editor Brian Baskin.

[Sheena Butler Young]

And I'm senior correspondent Sheena Butler Young.

[Brian Baskin]

For the last few weeks, the focus in Washington has been on passing the big beautiful bill and the conflict with Iran. But we're definitely back to all tariffs all the time now. President Donald Trump has threatened punishing new duties on the eu, South Korea and other trade partners and has set a deadline of August 1 for reciprocal tariffs to kick in on many other countries.

[Sheena Butler Young]

For an industry built on long lead times in global supply chains, unpredictability at this level isn't just frustrating, it's costly. Fashion companies are already reporting losses and rewriting expectations for the rest of the year. And as brands look to diversify production away from Asia, the costs and complexities of those shifts are starting to add up.

[Brian Baskin]

Things are definitely getting interesting out there. And to check in on the state of play, we've brought in our in house tariff experts Joan Kennedy and Mark Bain. Joan and Mark, welcome back to the Debrief podcast.

[Joan Kennedy]

Hi Brian, thanks for having me.

[Mark Bain]

Hey, always nice to be back.

[Sheena Butler Young]

So, Mark, can you just catch us up on the latest in terms of the state of play of tariffs? It sort of feels like I heard someone use this analogy like a spinning wheel. Like you go on a game show and you spin the wheel and this week the tariff is against is on this country and is at this percent. Can you sort of fill us in? Maybe that's not the best analogy, but I'd love to hear what you're seeing out there.

[Mark Bain]

I mean, that's not the worst analogy either. That is kind of how it feels. So recently, Trump threatened about two dozen trading partners with with new tariffs that are now set to kick in on August 1st of varying degrees. We still have this 10% universal tariff. We have seen some additional tariffs announced. Relevant to the fashion industry is the 20% tariff on goods from Vietnam, or that actually goes to 40% if those goods originated in another country. So that's clearly directed at a practice called trans shipping of goods being routed through Vietnam from China. We have a 25% tariff on Japan and South Korea. There's a new 50% tariff on Brazil. And we've just had this 30% tariff threatened on the EU and Mexico. Whether all of this will kick in on August 1, how these things will shift like we are all waiting to see. We know a lot of things get said and it doesn't mean that that's what ends up happening. What that means is the total effective tariff rate in the US it was about 2.5% at the start of the year, and now it's up to about 16.6%. This is according to the Budget Lab at Yale University. And now if all the tariffs that Trump is threatening go into effect on August 1st, that tariff rate would go up to 20.6%, which would actually mark the highest rate since 1910.

[Brian Baskin]

And that plays into the story I assigned you this morning, actually, Joan, which is we're starting to see these tariffs playing out in the price of clothing in the U.S. right?

[Joan Kennedy]

We are, yeah. Today we got the first bit of evidence that tariffs are actually having an impact on prices. The Bureau of Labor Statistics released its latest version of the Consumer Price Index, which is a monthly measure of the average price increases in the US and it showed that inflation picked up in June, rising 2.7% year over year. And that's compared to a 2.4% overall rise in May. And apparel prices in particular were up 0.4% percent, which is interesting because it really bucked a trend of declines and price hikes that had begun around 2022 following massive post pandemic price hikes. And then more recently, as we saw a fall in prices earlier this year.

[Brian Baskin]

I think that's worth emphasizing. Even in April and May, when tariffs were first starting to kick in, apparel prices actually fell. So why are they suddenly now actually starting to rise?

[Joan Kennedy]

They're suddenly now starting to rise because we're seeing inventory start to trickle onto shelves that is affected by these new duties. When this news first hit of tariffs in April and then the pause in May, a lot of Brands and retailers started pulling forward merchandise to try to delay the pain. And they may have announced price hikes, but they hadn't yet gone into play. So, yeah, a lot of the tariff pain hadn't been felt yet, and we're kind of seeing that trickle in now.

[Sheena Butler Young]

Mark, can you talk about why, if there is a why Trump is escalating these trade tensions again, like, and obviously brands are reacting differently than they did on Liberation Day in April, which we can get into a little bit later. But is there a sense of why, like, why now and why again?

[Mark Bain]

I think because, you know, he announced those April 2nd tariffs, then there was the 90 day pause, and then that expired and then he was pushing it back further. So it's all still part of that same, I don't know, onslaught of tariffs. You know, these pauses expire, he creates an extension. But at some point you have to say that something has changed, something is happening. And we still don't have real clarity on what's happened. So why now? Because we still don't actually have an answer.

[Sheena Butler Young]

And how are brands reacting this time versus in April when there was like mass hysteria across, I mean, not just fashion industry, but where we're focused is fashion? It seems like there's a quieter response now. To what extent are people just fatigued at all of the tariff whiplash or have companies formed a contingency plan they're just waiting to activate? Is that why they're quieter?

[Mark Bain]

I think it's kind of all of the above. I think the initial shock of the April 2 tariffs has kind of worn off. And there I. There's some expectation that the tariffs won't actually be as bad as Trump has said, that they'll strike deals and, you know, the rates will come down. But then also, like, companies have made contingency plans. We've seen companies talking about how they're shifting production. You know, everyone is reacting to this. So there's, there's a lot less of that feeling of shock when there's a new announcement these days.

[Joan Kennedy]

We've taken to calling July 9th Liberation Day Part 2 and Liberation Day Part 1. You really saw like this visceral, stunned reaction from fashion. And Liberation Day Part 2, July 9, you just feel the exhaustion. Even the markets didn't react as strongly, which experts say is a mix of things. People getting used to this, like, stop and go and kind of pricing in uncertainty. And then, as Mark said, bullishness on the idea that like Trump will reach.

[Brian Baskin]

Agreements with trading partners or alternatively the taco. Trump always chickens out Philosophy, which I think is just that, you know, he'll find some way to avoid actually implementing these very high tariffs that he's threatened. Speaking of trade deals, though, Mark, we've seen a couple, and one in particular that came as a huge relief to fashion. Where do we stand when it comes to negotiations between major fashion producers and.

[Mark Bain]

The U.S. so Vietnam was one of the big ones because on April 2, it was hit with one of the highest potential tariff rates. If I remember right, it was 46%. And the announcement recently was that it'll be only 20%. That's also, again, like 20% in addition to the usual duties that fashion products incur when they come into the US So it's not nothing, but it's a lot better than it could have been. And I think that's sort of the reaction, especially like sports brands. The sportswear industry produces a lot in Vietnam. A lot of sneakers and athletic wear is made there. And so I think that's kind of been the reaction is like, well, it's not great, but it's better than it could have been. We're also keeping an eye on some other places. I think Bangladesh is one of the countries that has a tariff rate set to kick in on August 1st that is fairly high. We'll see how that progresses. I think it's 35%, if I remember. But then another big topic of concern, Trump has now threatened these new tariffs on the EU, which is obviously a big luxury producer, a 30% tariff. So that would impact luxury companies.

[Sheena Butler Young]

So on the supply chain diversification point, it was one of those things that, like, was a go to strategy for brands. When tariffs are introduced, you diversify your supply chain. Outside of the region that is being highly tariffed, that's not as reliable of a tactic anymore. It's sort of like whack a mole. Like, you move one place and then the tariffs go there next. So, Joan, talk to us about where supply chain diversification sits in terms of a tactic that brands employ.

[Joan Kennedy]

Right now, it's definitely still important, but the challenge is that, yeah, as you said, it is kind of like a game of whack a mole. One of the countries that was expected to, after the early announcements, maybe benefit from all of this tariff confusion was Brazil. Initially, they were hit with, like a way lower. I think it was like a 10% rate. They have manufacturing prowess, particularly in shipping shoes. But with these new threats, particularly on BRICS nations, it kind of erased that advantage. And then we've also seen more recently, as of last Friday, a new 50% tariff threatened on Brazil. So it is really unpredictable, and it's hard to predict what's next. And that leaves brands in this state of reacting. And I think that's what's become most important is, like, how can you react to this, though? That being said, even before tariffs and all of this uncertainty, it's not easy to up and find a new manufacturer. And I mean, just beyond the logistical challenges of doing that, you also think about the downstream impact. Like, all of these new sources add complexity to the business. It's costly to find them, and of course, still the risk and instability and that sort of thing.

[Mark Bain]

One thing that I've heard companies talking about, well, more experts advising companies, is with diversification, it's not just about finding another source for things. It's having some layer of redundancy built in, in part because you never know what's going to happen. And this is something companies have been doing since. Since COVID and really trying to, like, shore up their supply chains in a way so that they are diversified not just across different countries, but they can also turn to different factories to produce the same product if they need to as things get really chaotic and crazy. So I think for that reason also, diversification continues to be a pretty important part of a strategy.

[Brian Baskin]

The other tactic that we're seeing companies use is to simplify their assortment. We saw Levi's announce this week that they're going to discontinue certain less popular styles during the holiday shopping season, and this would be a way to reduce their exposure to tariffs. Explain the link there, Mark. Why does offering fewer, simpler products help shield a brand from the tariffs?

[Mark Bain]

So when you're looking at how companies are producing stuff, the wider an assortment you have, the more complexity you have, you might be sourcing from different places. They're essentially focusing on stuff that is more of a sure thing that helps reduce some of the complexity in the assortment. You know, in terms of, like, you're not buying as many different fabrics and that kind of thing. But also if you know that these are more sure bets, you're less likely to have to discount them later. That, you know, obviously helps with margins and that kind of thing. So as you're trying to offset the cost going up from tariffs, you can try to reduce your costs in other places, too.

[Sheena Butler Young]

Speaking of costs going up, Joan, you wrote a little bit about inflation, or you write a lot about it, actually. But how much can the consumer take on at this point? The US Consumer has been very resilient, like, surprisingly so for the last five to 10 years. And we started to see some cracks in that in the start of this year because of the long tail of inflation coming into 2025. Should brands, as we've already seen, raising their prices? Will the consumer continue to buy? Like, where do they come into this equation? Now?

[Joan Kennedy]

That is a big unknown. You know, we have seen consumer sentiment, consumer confidence kind of drop as of late. I think it reached its lowest point in April and then made some gains in May and then dropped again in June. And people are watching really closely to see how that holds up because there are a lot of unknowns. A lot of this merchandise that's more expensive have. It hasn't yet filtered onto the market.

[Sheena Butler Young]

Market.

[Joan Kennedy]

We don't know how that will affect demand. And so it really is just another wait and see. Brands and experts are really watching end of year sales and holiday for kind of a clue as to where demand will fall. One maybe shred of positivity is that some have said that given this most recent news, maybe it'll help with the blow for holiday merchandise as extra duties won't apply until a little bit later. But it really is a wait.

[Sheena Butler Young]

It's a tough equation. The last study I saw said that consumers expect brands to pick up most of those duties and to pass off no more than 10%. So as more and more announcements come and those percentages get higher, brands are gonna have to do a lot of calculation to figure out how much they can in fact pass off.

[Brian Baskin]

Although honestly, I mean, how does the average consumer know what percent a brand is picking up of the tariff charges?

[Sheena Butler Young]

They say a lot of things in these surveys, Brian. All we can do is report on it.

[Joan Kennedy]

Although one reason that that brands had started kind of lowering prices is that they were seeing shoppers maybe start to pull back. They had raised their prices significantly a lot post pandemic. So there are kind of some signs there to watch.

[Brian Baskin]

Yeah, it's definitely about managing perceptions. It's. It's why you see these brands putting out, you know, Instagram posts about tariffs and why they're raising prices. I think it helps soften the blow and answer the concerns of all the consumers and surveys saying they don't want to be picking up the tab for Trump's tariffs.

[Joan Kennedy]

Well, one thing that we've seen brands do is, or say that they're going to do is get smart about where exactly they make these price hikes. Perhaps, you know, upping the price on a more fashion item, but keeping the prices on these staples, these basics that people are like Returning to buy over and over again stable, so that consumers don't really see as much fluctuation or like kind of is in places that they wouldn't notice it.

[Sheena Butler Young]

That's a good point. I think I've seen that. I've heard that from brands like Revolve and in my recent case study that talked about they're able to raise the price if it's special, like if it's an occasion wear or if it's something that people are willing to invest in, like, you know, to wear to a wedding or to a festival or to prom. They have a little more wiggle room there versus, you know, the foundational pieces.

[Mark Bain]

And companies aren't just asking consumers to absorb the price hikes either. They're asking their manufacturers to take on some of the costs. The retail partners like the. The CEO of JD Sports, in an interview with the Times UK said that Nike's strategy was basically spread the costs across like a third to the consumer, a third to the manufacturer and a third to the rest of the supply chain, including like JD Sports and retail partners.

[Brian Baskin]

All right, and just to wrap things up here, what is a signal you all are looking for? You know, whether it's an economic indicator or something that a brand does that will point the way for you about where this all might be headed?

[Joan Kennedy]

I definitely will be keeping an eye on all things consumer sentiment. I think that's a really important piece here. Sometimes it's hard to tell the connection between consumer sentiment and how consumers are shopping, but it feels like on this issue they're really connected just because we don't know what demand will look like. And there are a lot of concerns around demand, both as like this geopolitical situation, economic situation evolves, and just the mood of shoppers. But also as those price hikes really start to trickle in, how much are shoppers noticing it? What sort of impact is it having on their spending? And then how are brands and retailers reacting to that? Will there be empty shelves or will we see shelves completely full and then a lot of discounting afterwards?

[Mark Bain]

One of the things I'll be keeping an eye out for is, I mean, pretty obviously if we actually get any trade agreements and what they end up looking like for a few reasons. One, because obviously we'll have a sense of how prices are going to go up, but also the uncertainty of not having these agreements, of having this constant pushing things off, puts everyone in a state of limbo. And while that's going on, it's uncertain what's going to happen next. And so at least if we know they're going to be really bad, we have some idea of what to expect. And one of the obvious places we'll be looking out for is what ultimately comes to pass with China and whether that agreement is something substantial that actually reduces tariffs or if Trump does actually intend to go ahead and put some really extraordinarily high tariff on Chinese goods that would essentially just halt US Trade, I don't see that happening. That would be a lot. But so yeah, those are things I'll be watching.

[Sheena Butler Young]

Yeah, I think it's all very, very scary and uncertainty is the name of the game. What I think is interesting, and maybe it's not the outright indicator that Brian asked for is, but is how companies respond. Like one of my favorite things that are one of our analysts we speak to, Simeon Siegel, always says is like the best companies are made in the famine, not the feast. So like, how brands get creative around pricing strategies and product innovation right now I think is going to be important not for the short term, but the long term in terms of where they're positioned five years from now. So I think that's the most interesting thing to me right now. How brands respond and pivot and get innovative.

[Brian Baskin]

I think all those are great. I think for my indicator, I will piggyback off what Joan said and pick how the back to school shopping season plays out because Amazon typically kicks that off with Prime Day and it seemed like that was maybe a little shaky last week and that might be an Amazon thing. It might be a sign consumers really are starting to pull back. And I'm very curious what happens in the next few weeks as we get closer to the new school year. Mark, Joan, thank you so much for joining us today.

[Joan Kennedy]

Thanks for having me.

[Mark Bain]

Thanks, Brian and Sheena, please be sure.

[Sheena Butler Young]

To check out our coverage of the tariff changes and how they're affecting the [e-mail] these and other stories are available to BOF Professional subscribers only and you can find the links in the episode notes. You've been listening to the debrief, produced and edited by Olivia Davies and Eric Brea. I'm Sheena Butler Young.

[Brian Baskin]

And I'm Brian Baskin. We'll be back next week with a new episode. Thanks so much for joining us and be sure to follow us wherever you get your podcasts.

[Joan Kennedy]

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