Fashion

Fashion Briefing: How fashion is preparing for Trump’s proposed tariffs

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1 month ago

November 14, 2024

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Fashion Briefing: How fashion is preparing for Trump’s proposed tariffs

This week, we take a look at the impacts of president-elect Donald Trump’s proposed tariffs, which are already prompting brands to move production and rethink their overseas strategies.

Donald Trump’s first presidential term was marked by uncertainty and unpredictability. This second time around, the Trump administration is prepared with detailed proposals, many of which likely won’t be felt for many months to come.

But one proposal could have a more immediate impact: tariffs. Trump has spoken at length about his plans to enact trade tariffs on all imported goods in an effort to stifle Americans’ reliance on foreign goods and, ostensibly, encourage businesses to move production back to the U.S. Whether any of those outcomes will be the result is uncertain, but what’s clear is that these plans would have a clear and immediate impact on fashion brands that often import goods and materials from other nations.

Specifically, Trump has floated the idea of a flat 20% tariff on all goods imported into the U.S. and a particularly harsh 60% tariff on goods imported from China. Even before Trump won the election, retail experts were analyzing what these policies would do to retail businesses and their customers. In a report released on November 4 by the National Retail Federation, the organization estimated that the tariffs would reduce American consumers’ spending power by $46 billion to $78 billion every year the tariffs are in effect.

The NRF has been outspoken that Trump’s protectionist policy, and others like it across the world, would harm the American economy, rather than help it.

“We are witnessing elections around the world where discontent is leading to inward-looking policies that threaten trade, with the almost certain potential for increasing tariffs,” said Ben Hackett, founder of Hackett Associates, a consulting firm that collaborates with the NRF to compile data around global trade. “In the United States, this is particularly true with the election of Donald Trump, but it is not much different in Europe, with the E.U. calling for tariffs to be applied to a growing number of products from China.”

The incoming Trump administration has said that the tariffs would encourage companies to move their business back to the U.S. But it’s more likely that they will simply raise prices to cover the difference. Another alternative would be to lobby the government for an exception, something that companies are already starting to do.

Luxury brands, with their high prices and often imported goods, are likely to be hit hard by the tariffs, according to Markus Kraus, affiliate manager of Europe for Trive Financial Services.

“A Trump presidency will mean more trade uncertainty, increased defense spending in Europe, possible tax cuts in the U.S. and higher market volatility,” Kraus said. “Overall, luxury brands face mixed prospects. Economic optimism could help, but trade policies pose risks.”

“For brands heavily focused on quality, limited onshore production for premium product lines could also be explored,” said Bunmi Jenfa, founder of the London-based fashion consultancy The Fashion Law Edit. “These strategies would not only mitigate tariff risks but also support the growing consumer demand for transparency and ethical production in the fashion industry.”

Some brands that are heavily invested in China are moving their production and sourcing to other countries, but not back to the U.S. Steve Madden, for example, imports two-thirds of its goods to the U.S., and about 70% of those imports come from China. That means over half of the company’s business would be affected by the harsh tariffs on Chinese goods.

“We have been planning for a potential scenario in which we would have to move goods out of China more quickly,” said Edward Rosenfeld, Steve Madden’s CEO, during the company’s third-quarter earnings call last week. “We’ve worked hard over a multi-year period to develop our factory base and our sourcing capability in alternative countries like Cambodia, Vietnam, Mexico, Brazil, et cetera. As of [November 6], we are putting that plan into motion, and you should expect to see the percentage of goods that we source from China begin to come down more rapidly going forward.”

But not every company is up in arms over the tariffs. James Reinhart, CEO of the resale company ThredUp, said a silver lining of the tariffs is that it may be a good thing for the resale industry.

“What you may see, depending on how they’re levied, is the cost of imported fast fashion goes up,” Reinhart said. “If things go the way [Trump] indicates they’ll go, fashion costs will for sure go up, but because we don’t have exposure to that, ThredUp should seem cheaper. It is a tailwind to our business.”

ThredUp sold off its European business in April and now operates predominately in the U.S. Resale companies have long presented themselves as an alternative to the harmful effects of ultra-cheap fast fashion brands like Shein.

“I hope the tariffs will tamp down on that type of clothing,” Reinhart said. “It might just put the kibosh on super cheap fashion.”

Executive moves

Two fashion brands lost their creative directors this week. On Wednesday, Peter Do announced his departure from his role leading Helmut Lang at the end of this month. He has been with the brand since 2023. Helmut Lang is owned by Fast Retailing, the same parent company as Uniqlo, and was previously led by a collaborative design team.

Meanwhile, Phillip Lim is stepping down from his role as creative director of his namesake brand 3.1 Phillip Lim. He founded the company over 20 years ago but is now leaving to pursue “other ventures,” according to a statement.