How Tariffs are Affecting Procurement in the Fashion Sector
The US fashion industry is navigating fresh challenges as President Donald Trump's tariff policy evolves.
After previously adjusting sourcing strategies from China to Vietnam and Cambodia, brands must now tackle increasing costs driven by Trump's introduction of new tariffs on these nations, profoundly affecting global procurement strategies in the fashion supply chain.
With a 10% baseline tariff already impacting all imported goods, the fashion sector is particularly burdened. In about two dozen countries where the US holds a trade deficit, tariffs are significantly higher. Vietnam, crucial to the athletic footwear supply chain, is especially impacted with a new 46% tariff imposed on its goods entering the US, in addition to a pre-existing 20% duty on textile-topped athletic shoes.
For procurement leaders at companies like Nike, which sources half of its footwear from Vietnam, and On, a Swiss sportswear brand manufacturing 90% of its shoes there, these tariffs present considerable sourcing challenges.
The Tough Task of Production Relocation
Trump's objective is to return production to the US. However, industry experts have voiced scepticism about this. A lack of specialised equipment and skilled labour means American factories cannot yet satisfy the demand for mass production of running shoes.
Nike, which began its manufacturing relationship with Vietnam in 1995 and now collaborates with 130 supplier factories there, finds the tariff hikes challenging. With Adidas producing 39% of its footwear in Vietnam, these tariff adjustments emphasise the procurement complications that major brands endure in response to shifting geopolitical landscapes.
Amid these rising costs, Nike's stock has dropped to its lowest level in nearly eight years, suggesting procurement executives need to closely monitor and potentially adapt their strategies in the wake of tariff adjustments and increased competitive pressure from brands like On and Hoka.
Widespread Supply Chain Consequences
The ripple effects of these tariffs extend far beyond individual companies. The US Fashion Industry Association has openly criticised the administration's decision, highlighting the adverse effects on American fashion brands and retailers. From suppliers in Vietnam to textile makers globally, the entire fashion supply chain is facing challenges.
Walmart and others plan to negotiate for lower supplier costs, yet many factories are already financially squeezed. This pressure magnifies procurement challenges as retailers decide whether to absorb higher costs or shift them onto consumers, who are themselves coping with inflation. This dilemma underlines the imperatives for procurement leaders to reassess strategies under fiscal uncertainties.
If higher costs are transferred to consumers, cautious spending could result, potentially dampening company profits further. From Asian factories to American retail shelves, the global fashion supply chain is feeling the weight of these tariffs and their resulting disruption.
Explore the latest edition of Procurement Magazine and be part of the conversation at our global conference series, Procurement & Supply Chain LIVE.
Discover all our upcoming events and secure your tickets today.
Procurement Magazine is a BizClik brand
