On February 1, President Donald Trump enacted sweeping tariffs on imports from Canada, Mexico and China, marking one of the most aggressive trade moves in recent history.
The tariffs, which take effect on February 4, impose a 10% tax on Chinese goods entering the U.S. On February 3, planned Mexican and Canadian tariffs of 25% were halted for a month after conversations with the president of Mexico and Canadian Prime Minister Justin Trudeau. Positioned as a move to protect American jobs and curb illegal trade, the decision to impose these tariffs has sent shockwaves through the fashion industry, where global supply chains and razor-thin margins leave brands particularly exposed.
For fashion companies — ranging from luxury houses sourcing fabrics in Italy to direct-to-consumer brands manufacturing in China — the question is no longer whether the tariffs will have an impact but rather how severe the fallout will be.
“It feels like every day is a moving jigsaw piece,” said Emma McGrory, a senior associate at Lewis Silkin, a U.K. law firm that advises brands on trade law. “Brands are wondering: Do we suffer the increase in tariffs or do we relocate manufacturing to a third country? But moving operations is a very costly thing to do.”
With little time to react, brands are assessing their options. Some are considering price hikes, others are looking at margin compression and a select few are turning to tariff engineering, a legal, strategic method of altering how a product is classified to reduce tariff exposure — a workaround that may be their best hope.
The impact of these tariffs will be felt immediately. As soon as the new rates take effect, brands importing goods from affected countries will face sharp cost increases. Some are already calculating an 8-10% contraction in margins per SKU, depending on how much of their sourcing is tied to these regions.
While the tariffs for Chinese goods are lower, the tariffs come on top of existing tariffs from the Biden administration.
“The newly imposed International Emergency Economic Powers Act duties apply on top of existing tariffs, meaning some Chinese imports could now face a combined duty of over 45%,” said Antonia Tzinova, partner at Florida-based law firm Holland and Knight. “For example, a product with a 10% general duty rate that was already subject to an additional 25% tariff under Section 301 will now incur an extra 10% duty under IEEPA, bringing the total to 45%. The executive order also removes the de minimis exemption for low-value e-commerce shipments from China, meaning all such imports will now face at least a 10% duty, regardless of their value.”
For many brands, that means passing costs onto consumers. But in an industry where shoppers are highly price-sensitive and brands are already battling inflation-driven spending slowdowns, that’s a risky move.
Industry lawyers have been working with fashion clients since November 2024 to game out the possible scenarios. One such expert, speaking on background, emphasized that every brand will have to approach the tariffs differently. “You have to ask: What’s your exposure? What’s your commitment to the U.S. market? And how do you diversify risk? Some brands are contracting their margins. Some are trying to absorb the costs through vertical integration. It depends on the structure of the company, but there’s no one-size-fits-all solution.”
That complexity is why brands are considering tariff engineering.
“Tariff engineering can mean changing a product’s structure,” the industry lawyer told Glossy. “Breaking down the product into smaller parts — your zipper from one country, your buttons from another, fabric from a third — then assembling it strategically could result in a reclassification.”
For brands with the resources to rework production, this could be a lifeline. But smaller companies, particularly independent designers and emerging labels, will likely struggle to make such quick pivots.
The closest parallel to Trump’s tariffs is Brexit, said McGrory. When the U.K. officially left the E.U. in January 2021, brands that had relied on seamless trade between Britain and Europe suddenly faced tariffs, customs duties and a slew of administrative red tape.
“With Brexit, the U.K. used to be a major distribution hub for Europe,” McGrory said. “Brands had to start rerouting supply chains to avoid costly customs duties, and it took years to get systems in place. Now, with these U.S. tariffs, brands face similar uncertainties.”
Unlike Brexit, however, which unfolded over a multi-year negotiation process, these U.S. tariffs are hitting immediately. Brands have little time to prepare, and many are now scrambling to assess whether shifting production to countries like Vietnam or India makes sense, or whether they should wait to see of a new trade deal emerges.
Perhaps the biggest unknown is whether this is just the beginning of a larger trade conflict. The U.S. tariffs have already triggered retaliation from Canada and Mexico, with both countries imposing countermeasures on American goods. That raises concerns about a tit-for-tat escalation that could spill over into Europe, Latin America and other key markets.
“Tariffs aren’t just about the direct cost,” McGrory said. “It’s also the knock-on effect. If countries start retaliating with their own tariffs, U.S. brands could face additional trade barriers, administrative hassles and new compliance costs.”
That could make life particularly difficult for smaller brands. Unlike multinational corporations with built-in compliance teams and extensive global sourcing networks, independent labels may find themselves caught in a tangle of customs duties, supply chain delays and unpredictable pricing pressures.
“I wouldn’t want to be the CFO of a publicly traded fashion company right now,” the industry lawyer said. “It’s just too many unknowns.”
But they expect that brands with a strong product will adjust their pricing mechanisms to deal with tariffs and keep their customer base, they said.
For now, fashion brands are bracing for a complex, high-stakes trade environment with no clear resolution in sight. Whether this is just another chapter in the ongoing cycle of trade disputes or the start of a prolonged battle remains to be seen.