Written By: Austin La
On April 2, President Donald Trump announced the highest tariffs in a century, with rates varying by country. This has created a shift leaning towards a protective trade policy. However, one week later, on April 9, he delayed the implementation of an extra increase in tariffs for 90 days in most affected countries, leaving a baseline 10% tariff. This abrupt policy reversal has caused widespread concern and uncertainty across global markets, potential retaliation from other nations, and disruptions to global supply chains. U.S. businesses that depend on imports, are struggling with the unpredictability of the administration’s trade agenda, while economists warn of possible incoming inflation and slowed economic growth. The lack of certainty surrounding the long-term strategy behind these tariffs has raised anxiety about the overall stability of the U.S. economy.
The Impact of Tariffs on Fashion
The tariffs introduced by President Trump will have a baseline of 10% on all imported goods. However, after 90 days, higher rates will apply to countries with which the United States maintains a trade deficit. A trade deficit occurs when a country’s imports exceed its exports. This method currently illustrates the U.S. relationship with several major countries. Notably, the United States imports over 98% of its clothing and approximately 99% of its footwear, with the majority sourced from countries such as China, Vietnam, and Cambodia. Under the tariffs, imports from China would be subject to a 125% tariff, while Vietnam and Cambodia would face rates of 46% and 49%, respectively. In addition, luxury goods imported from Europe would incur a 20% tariff, and luxury watches from Switzerland would be taxed at 31%. When implemented, these tariffs are expected to significantly raise the cost of manufactured apparel and luxury goods, potentially driving substantial price increases for U.S. consumers.
What are Tariffs?
A tariff is a tax imposed by one country on goods imported from another. The goal of tariffs is typically to regulate trade flows, generate government revenue, or protect domestic industries from foreign competition. Tariffs increase the cost of imported goods for businesses since companies are required to pay the government at the border upon import. As a result, increased costs are often passed on to consumers through higher prices. To mitigate these expenses, companies may be incentivized to reduce the number of foreign suppliers and instead source goods domestically, thereby decreasing import traffic. Tariffs are often used to address trade imbalances and stimulate the domestic economy by increasing national revenue and promoting local production.
However, tariffs can also carry significant drawbacks. While they aim to encourage domestic sourcing, many companies may still choose to import goods. This happens particularly when domestic alternatives are limited or cost prohibitive. In such cases, the increased cost of imports leads to higher costs to produce products, which are again passed on to consumers in the form of increased prices, potentially hurting the economy.
Tariffs can also escalate tensions between countries. When one country imposes tariffs, the targeted country may retaliate by enacting tariffs of its own, leading to trade disputes or even trade wars. An example is the ongoing tariff exchange between the United States and China, where each country has responded to the other’s tariffs with reciprocal measures. While tariffs may aim to protect national economic interests, they can strain relationships between nations.
Will the Tariffs substantially change the price of fashion items?
The fashion industry now faces a critical decision in response to the newly announced tariffs. Whether to absorb the cost of higher import duties or pivot to domestic sourcing to avoid them. While the fashion industry is not the only industry affected, the volume of goods impacted by tariffs makes it vulnerable. Despite the incoming tariffs, many major fashion houses have yet to publicly comment. LVMH, the world’s largest luxury conglomerate, has declined to address the issue, even though its European-sourced goods are highly popular in the U.S. market. Similarly, brands such as Burberry, Hermès, Kering, and Coach have maintained silence. While these larger, high-end labels may be better positioned to withstand the financial impact, given their affluent customer base, smaller, niche fashion brands are expressing significant concern. Legal representatives for some of these brands report that their clients are “biting their nails and pulling their hair out” over the uncertainty and financial strain.
The pressure extends beyond fashion apparel to luxury watches. Companies like Rolex will be subject to a 31% import tariff, prompting a reassessment of pricing strategies and cost structures. Although Rolex has not issued a formal response, several smaller watchmakers have opted to pass the full cost of the tariff on to U.S. consumers by incorporating it into their pricing. While both industries, fashion and luxury watches, have avoided making public statements about how they intend to manage the rising costs, it is increasingly evident that action will be required. Whether through price increases, supply chain restructuring, or strategic communication, companies must soon determine how to adapt to maintain profits and keep consumers happy in the face of these substantial economic shifts.
Potential Solutions
While no decisions have been announced by major fashion companies regarding how they will respond to the tariffs, several potential solutions have emerged. One proposed solution is to establish manufacturing facilities within the United States, avoiding import duties altogether. However, many brands are reluctant to pursue this option due to the high costs associated with building and operating domestic factories. Another reason has been a desire to preserve their brand heritage and maintain long-standing overseas production traditions. Brands such as Brunello Cucinelli have declined from opening factories in the U.S. to preserve their heritage of being an Italian brand. As a result, another common approach under consideration is to ship and stockpile inventory in the U.S. before the tariffs take effect. In cases where that is not feasible, companies may choose to absorb the cost of the tariffs themselves, or, more likely, share the financial burden with consumers.
A suggested cost-sharing example would involve companies covering part of the tariff increase, with the remaining portion passed on to the consumer. For example, if a luxury watches previously priced at $10,000 becomes subject to a 31% tariff, the total cost will rise to $13,100. Under a shared-cost model, the company would absorb half of the tariff, $1,550, resulting in a retail price of $11,550 for the consumer. While this may soften the impact, it still reflects a significant price increase.
Although the tariffs have been announced, no major fashion brands have confirmed pricing adjustments. Still, consumers should be aware that depending on how companies choose to navigate these new economic conditions, the added costs from tariffs may ultimately fall on them, either partially or in full. As the industry continues to assess its options, shoppers should prepare for potential price hikes across a range of luxury and fashion goods.
Sources:
Bhanu Chopra, Tariffs Are Here: First Reactions From Watch Industry And End Consumers, Forbes (Apr. 9, 2025) https://www.forbes.com/sites/bhanuchopra/2025/04/09/tariffs-are-here-first-reactions-from-watch-industry-and-end-consumers/
Hilary Milnes, US Fashion Brands Face an Existential Threat as Tariff Reality Sets In, Vogue (Apr. 7, 2025) https://www.vogue.com/article/us-fashion-brands-face-an-existential-threat-as-tariff-reality-sets-in
Joan Kennedy, Explainer: How Trump’s Tariffs Threaten Luxury Fashion, Business of Fashion (Apr. 4, 2025) https://www.businessoffashion.com/articles/luxury/luxury-industry-trump-tariffs-impact/
Marc Bain, What Trump’s Tariffs Mean for Fashion,CNN (Apr. 3, 2025) https://www.cnn.com/2025/04/03/style/what-trumps-tariffs-mean-for-fashion-bof/index.html
Scott Nevil, What Is a Tariff and Why Are They Important?, Investopedia (Feb 13, 2025) https://www.investopedia.com/terms/t/tariff.asp
Swapna Ramaswamy, Yippy and Afraid: What to know as Trump reverses course on tariffs, USA Today (Apr. 10, 2025) https://www.usatoday.com/story/news/politics/2025/04/09/trump-90-day-pause-tariffs-what-to-know/83012628007/
Vanessa Friedman, What Will Happen to the Handbags?, The New York Times (Apr. 9, 2025) https://archive.is/20250409051953/https://www.nytimes.com/2025/04/09/style/tariffs-eu-luxury-fashion.html