The recent election is poised to significantly reshape U.S. international trade policy, with profound implications for the fashion and retail industries. President Trump’s victory and his protectionist trade policies have sparked uncertainty for U.S. companies, many of which rely heavily on international supply chains and production. We expect the incoming administration to favor protectionism and enforcement, encourage U.S. manufacturing and take an aggressive stance on China, while also taking unprecedented actions against traditional trading partners.
A central focus will be the use of tariffs as a strategic negotiation tool, with threats of significant tariffs against China, Mexico and Canada, as well as blanket tariffs on all U.S. imports. These trade policies will likely affect our global trade relationships and free trade agreements (FTAs) and almost certainly result in price increases for American consumers.
For the next four years, American fashion companies and retailers should be prepared to monitor non-traditional media, such as social media posts, for trade policy announcements, swiftly adapt to changes, and diversify supply chains — all of which is easier said than done in an industry that places orders more than half a year before goods are shipped. Companies that thrive during this uncertain trade landscape will be those that reassess supply chains and actively pursue strategies to mitigate potential tariff impacts.
Understanding Potential Tariff Changes Under President-elect Trump
As President-elect Donald Trump prepares to take office, his love for tariffs is a key focus for U.S. retailers, as any significant increases will impact sourcing and consumer pricing. Trump views tariffs as a mechanism to generate government revenue and a negotiating lever to force other countries to make concessions on trade and immigration. Although the scope and exact timing for the introduction of these tariffs remains uncertain, Trump may announce tariff increases as early as his first day in office on January 20, 2025, with implementation quickly thereafter.
Possible Tariff Increases
Trump’s tariff announcements have been fast and furious, often made though social media posts, at times inconsistent and with undetermined authority. Trump has suggested a 10% to 20% increase on all imports, affecting goods from every country. However, he also may focus on certain countries like China, Mexico, and Canada.
During his campaign, Trump mentioned the possibility of imposing additional tariffs ranging from 60% to 100% on Chinese goods, and post-election, an additional 10%. On the same day, Trump reaffirmed his campaign promise of imposing a 25% tariff on all Mexican imports, with potential incremental increases up to 100%. For the first time, Trump also threatened specific tariffs of 25% on Canada. Additionally, Trump has indicated the possibility of company-specific tariffs, particularly targeting businesses that move manufacturing outside the U.S. More recently, he threatened to impose 100% tariffs on “BRICS” nations, including countries such as Brazil, Russia, India, and the UAE, if they replace the U.S. dollar with a new or alternative currency. This could be significant as many fashion companies shift manufacturing from China to India.
It’s possible that some of the proposed tariff increases will never be implemented if countries agree to his terms, whatever they may be. The legal authority employed for the tariff increases has yet to be announced and will depend on many factors, but some would allow Trump to implement the tariffs very quickly.
For example, the International Economic Emergency Powers Act (IEEPA) allows the President to regulate imports during a “national emergency,” which would include tariff increases. Should Trump elect to impose product-specific tariffs on certain countries, he could invoke Section 232 of the Trade Expansion Act, which allows the President to adjust imports that threaten national security, and has historically been used on steel and aluminum imports. Some also believe that he will force Congress to pass tariff legislation, granting the President authority to impose tariffs.
There continues to be significant uncertainty regarding how these tariffs might be applied — whether they will be universal or targeted towards specific products, countries or companies. But it is evident that no single country is safe from the threat of tariffs — with the exception of U.S. production, which of course will still require imported raw materials.
How Will Tariffs Affect Retailers?
Retailers cannot absorb the full financial impact of tariff increases and will likely be forced to share costs through higher consumer prices. A study by the National Retail Federation examined six product categories and predicted that combined tariffs, which could exceed 50%, would result in hefty price increases, with some of the most significant hikes expected in apparel, toys, and footwear. The study predicts that apparel prices would rise by 12.5% to 20.6%, toys by 36% to 56%, and footwear by 18% to 29%. The rise of prices are generally commensurate with a drop in sales; problematic when retailers are facing exponential tariff-related cost increases.
Free Trade Agreements and Special Duty Programs
Retailers that take advantage of U.S. FTAs to import goods duty free into the U.S. are also understandably concerned. Many apparel companies have invested heavily in manufacturing plants to qualify for FTAs that may cease to exist in their current form within the next four years.
President Trump is expected to leverage FTAs as key negotiating tools, adopting a more proactive stance than the Biden administration. This approach likely includes a full renegotiation of the United States-Canada-Mexico Agreement (USMCA) — with an emphasis on Mexico and Canada incorporating stricter forced labor, immigration, and drug provisions. Additionally, the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) may undergo renegotiation with the possible exclusion of Nicaragua from membership. Agreements such as the African Growth and Opportunity Act (AGOA) and the Haiti FTAs are up for renewal but are sure to include more restrictive terms.
Many fashion companies and retailers are still awaiting the renewal of the Generalized System of Preferences (GSP) and the Miscellaneous Tariff Bill (MTB), which have been expired for years, and are hoping for significant corresponding refunds if the agreements are reinstated retroactively. If GSP and MTB are renewed, the programs also may look very different from the current proposals.
Companies should expect significant changes to these programs to align with the Trump administration’s priorities. They will need to be prepared to meet new eligibility rules which may require additional supply chain shifts.
Tough Stance on China and Scrutiny on Foreign Textile Imports
The current U.S. geopolitical climate is marked by an aggressive stance on China, prompting many to consider or actually divest their supply chains from the country, a trend accelerated by Section 301 tariffs (which appear to be here to stay) and forced labor laws. This is expected to continue in Trump’s next term, further exemplified by his nominations for Secretary of State, Senator Marco Rubio, and Representative Mike Waltz for National Security Advisor, two representatives who have been critical of China’s labor policies and growing global influence.
The Section 321 de minimis program, which allows for duty-free importation of shipments valued under $800, has faced increased bipartisan scrutiny. This program is largely used by large Chinese ecommerce sites and critics argue that it is a “loophole” that allows imports of contraband, including drugs, counterfeit goods, goods violating the UFLPA, and undervalued shipments into the U.S.
Under the Trump Administration, the de minimis program will likely be restricted, particularly for goods from China, with a Republican-controlled Congress potentially expediting related legislation. Although President Biden intends to introduce a Notice of Proposed Rulemaking before leaving office, the lengthy review and implementation process may prevent it from taking effect under the incoming administration.
The Trump Administration’s protective attitude toward U.S. industry is likely to follow the enforcement initiatives outlined in the Department of Homeland Security’s Textile Enforcement Plan, which highlights enforcement initiatives to maintain American textile jobs. Since the Enforcement Plan was published in April 2024, we have seen increased enforcement under the UFLPA, in Section 321 de minimis shipments, and through other enforcement mechanisms such as risk assessment reviews, requests for information and audits.
Recommendations for Companies
The Trump Administration’s international trade policies will fundamentally change fashion and retail company operations and global supply chains.
Companies should plan for the long-term impact of tariffs and Trump’s trade policies. Diversified supply chains will be key, as relying on a single country, even one that is not currently a target, poses significant risks. Additionally, companies may need to consider the practicality of U.S. production, particularly while the current Section 301 exclusion process for certain Chinese-made production machinery is available. Some companies may also benefit from advocacy efforts to address possible concerns regarding the administration’s policies.
To mitigate the impact of expected tariff increases, companies will need to explore duty mitigation and deferment strategies, including shifting operations to FTA countries, employing first sale and tariff engineering techniques, utilizing bonded warehouses and Foreign-Trade Zones (FTZs), and others.
Further, should universal tariffs be implemented on consumer goods, we predict that a tariff exclusion process will be available. Retailers should expect short exclusion request deadlines and be prepared with arguments regarding why the products can only be produced in the country of sourcing and the impact of increased tariffs on U.S. consumers.
It is clear that we are in unprecedented times. The companies that successfully navigate this uncertain landscape will implement a multifaceted approach to mitigating trade risks and closely monitor changes in the Trump administration’s trade policy.
Angela M. Santos is Partner and Customs Practice Leader at ArentFox Schiff. She counsels clients on compliance with federal regulations involving the importation of merchandise and forced labor and leads the firm’s Customs Practice and Forced Labor Task Force and co-leads the Fashion & Retail group. She helps companies identify business solutions and structure their transactions to facilitate the importation of merchandise, ensure regulatory compliance, minimize duties, and eliminate Customs penalty exposure. Mario A. Torrico is an Associate at ArentFox Schiff, focusing his practice on global supply chain counseling, advising U.S. and foreign manufacturers on various international trade regulatory matters, including imports and customs compliance, forced labor, and antidumping and countervailing duties. Lucas A. Rock is an Associate at ArentFox Schiff, focused on import compliance matters and international trade law. As a member of ArentFox Schiff’s Forced Labor Task Force, he has experience helping companies conduct due diligence on their supply chains and preparing submissions to Customs for the release of merchandise detained in connection with forced labor Withhold Release Orders.