The August 1st Tariff Shift: What Fashion Brands and Suppliers Need to Know

On August 1st, 2025, the United States will activate a wave of high “reciprocal” tariffs on select countries that could reshape sourcing strategies across the fashion industry. 

This comes at the end of a 90-day tariff suspension window initiated by the U.S., during which affected countries were expected to enter trade negotiations under tight and often asymmetrical conditions. 

As of August 1, those that have not secured new terms will be subject to sharply increased tariff rates (ranging from 25% to 70%) set by the U.S. government, with the final rates reflecting a mix of political alignment, trade history, and negotiation outcomes.

For brands and suppliers, this is not a marginal shift. With some of the most commonly used production countries –such as Cambodia, Bangladesh, Vietnam and Indonesia – on the affected list, the change could (and will) directly impact both cost structures and supply chain continuity. 

For example, the president of Footwear Distributors and Retailers of America said that Vietnam is "essential for the US footwear supply chain,"  and that any disruption would raise the cost of footwear for American consumers.

In fact, the ripple effects of trade volatility are already showing up at the consumer level. It took time for the impact to materialize at retail, but now it’s increasingly visible. 

As BoF correspondent Joan Kennedy noted in a recent interview, this marks the first clear wave of evidence that tariffs are actively influencing prices: “They’re starting to rise because we’re seeing inventory start to trickle onto shelves that are affected by these new duties.” 

As a result, shoppers are becoming more price-sensitive, and in some cases, more wary of inflation signals tied to global trade disruptions. 

Plus, what may have looked like a smart move just weeks ago – such as basic supply chain diversification–might no longer serve as a silver bullet strategy in isolation.

August 1 could usher in the highest U.S. import duties in generations, rocking fashion supply chains and prices worldwide. And the timing, on the cusp of fall and holiday production cycles, makes it all the more urgent.

It’s undeniable: fashion brands importing apparel, footwear, and accessories from affected countries must prepare for higher costs and operational complexity.

So, in view of the importance of this scenario, this article outlines what is changing, who is affected, how brands and suppliers should prepare, and where strategic opportunities still lie in the face of growing trade uncertainty.

Recap of New “Reciprocal” Tariff Rates (Aug 1, 2025)

Which countries are affected?

During July, the U.S. sent official letters to dozens of trading partners without new trade deals, informing them of imminent tariff hikes. 

Fourteen nations in particular – including Cambodia, Bangladesh, Indonesia, Malaysia, Thailand, Myanmar, Laos, South Korea, Japan, Serbia, South Africa, Tunisia, Kazakhstan, and Bosnia & Herzegovina – were warned their exports to the U.S. will face duty rates of roughly 25–40% as of August 1. 

For example, Japan and South Korea have been assigned 25% tariffs, while Cambodia’s apparel exports will be taxed ~36% and Bangladesh’s ~35%. Smaller economies like Laos and Myanmar face a steep 40% – the top end of this round of tariffs.

These rates represent enormous increases from the flat 10% “baseline” tariff that had been temporarily in place for most countries during the 90-day suspension.

Notably, the tariff letters indicate some countries’ rates were revised up or down compared to the initial April announcement: e.g. Serbia’s rate was trimmed to 35% from an originally higher 37%, while Brazil’s was raised to 50% from 20% after relations soured.

President Trump has emphasized that nations unwilling to lower their trade barriers will “face the consequences,” and he has signaled a willingness to impose even harsher tariffs (beyond 50%+) on countries deemed hostile to U.S. trade interests.

Who has made deals to avoid tariffs?

A few countries have scrambled to strike agreements and dodge the worst-case rates. 

The White House says new trade deals have been reached with five countries including the United Kingdom, Japan, Vietnam, and Indonesia, and the countries of the European Union. 

Because these deals do not include comprehensive details, and require additional negotiations, they are referred to as “framework agreements.”  A preliminary accord was reached with China, the only country for whom the extension was set at Aug. 12, not Aug.1

These framework agreements offer partners more lenient terms than the original proposals, but they don't surpass the pre-April 2 conditions or the 10% 'baseline' tariffs: 

• European Union – On July 28, the U.S. and EU announced a deal where tariffs for all 27 EU countries will be set at 15%, higher than most expected. This is the result after Trump’s initial level of 20% bounced to 50% then down to 30%. In addition, several types of U.S. goods will enter the EU duty free, most notably cars.

  
  

• Indonesia – Indonesia negotiated a significant reprieve. The U.S. had slated Indonesia for a 32% tariff, but a deal announced mid-July slashed that to 19%.

  
  

• Japan – Japan and the U.S. agreed last week to a 15% tariff rate on Japanese goods, including autos. Some credit Japan’s agreement to invest $550 billion in strategic sectors in the U.S. such as energy, pharma, critical minerals, etc. for the drop in the originally threatened 25% rate.

  
  

• Philippines - Goods from the Philippines will be charged a 19% tariff, higher than the original threat of 17%.

  
  

• United Kingdom – A “U.S.–UK Economic Prosperity” framework was finalized in June with most goods still subject to the 10% tariff rate agreed in May. The UK committed to cut agricultural barriers (e.g. allowing more American beef, ethanol, etc.), and the U.S. in turn carved out special terms: e.g. UK automakers can export up to 100,000 cars at a reduced 10% tariff (versus 25% standard). The deal also eliminated U.S. tariffs on UK engines and aircraft parts. However, some contentious issues (like U.S. steel/aluminum tariffs on UK metals and potential U.S. Section 232 tariffs on pharmaceuticals) remain unresolved.

  
  

• Vietnam: In a late June agreement, Vietnam committed to fully opening its market to U.S. goods, and in exchange, the U.S. will impose a 20% tariff on Vietnamese imports, down from the previously threatened 40–55% range.

  
  

• China – The U.S. and China reached a limited truce rather than a full deal. After a spiraling tariff war in spring (which saw U.S. tariffs on Chinese goods briefly skyrocket to 145%), both sides agreed in June to dial back. . They settled on a framework capping U.S. tariffs on Chinese imports at 55% and Chinese tariffs on U.S. goods at 10%. It’s important to note talks have since re-opened, as the two sides just re-entered negotiations.

  
  

In sum, during the tariff pause, most countries had been subject to a flat 10% import tariff. 

Absent new deals, country-specific rates now jump to 25–40% on August 1st (with a few outliers like Brazil at 50% or China at 55%). 

In cases where bilateral progress was made, the U.S. revised rates downward – e.g. Vietnam’s 20% is half of the 40+% initially threatened, and Indonesia’s 19% is a major reduction from 32%.

Conversely, countries in political disputes with U.S. saw harsher rates: the U.S. hiked Brazil’s announced rate to  50% amid unrelated quarrels, and Canada (despite being a USMCA ally) was threatened with a 35% general tariff due to U.S. concerns over digital taxes and fentanyl trafficking.

President Trump has also warned he might send additional tariff letters even after Aug. 1, targeting nations he perceives as aligned with “anti-American” economic blocs (for instance, a mooted extra 10% tariff on any country embracing certain BRICS policies).

Impact on Fashion Supply Chains

Tariffs on apparel and footwear are among the most immediately impactful, since fashion brands source heavily from many of the affected countries. 

For perspective, Cambodia and Bangladesh are major apparel exporters to the U.S., especially for budget and mid-market clothing lines.

Under the new policy, garments from Cambodia will face a 36% U.S. import duty, and those from Bangladesh 35%.

And Vietnam provides a large proportion of the footwear, especially athletic shoes, sold on the American market.

Neighboring low-cost producers like Myanmar and Laos face even higher 40% rates. 

It’s always important to note that such tariffs are on top of any existing duties – and many apparel items already carry high base tariffs (often 10–15% under normal MFN rates). 

This means total import taxes on some clothes and footwear could exceed 50% of their value. 

From a consumer standpoint, prices are likely to rise on a range of everyday goods, including apparel and shoes, as importers typically pass at least a portion of tariffs down to shoppers.

But from the standpoint of fashion stakeholders—brands, suppliers, and retailers—what could this really mean for fashion?

1. Rising Retail Prices

• Impact on Brands & Retailers:  A 30–40% tariff on key sourcing countries will likely push retail prices up, particularly during late 2025, after inventory imported before the tariffs are effective are drawdown, and the holiday season. Brands may choose to pass costs on to consumers and protect their margins.
  
  

• Impact on Suppliers: U.S. brands may pressure suppliers for discounts or cost-sharing to maintain competitiveness, squeezing already thin factory margins.
  
  

2. Margin Compression & Financial Strain

• Brands: Orders for Q3 and Q4 were placed months ago without accounting for these tariffs. Brands may face reduced profitability as they absorb unexpected costs.
  
  

• Suppliers: Factories may be forced to renegotiate contracts or take a hit on pricing, affecting cash flow and production planning.
  
  

3. Promotional Pressure & Cost Offsets

• Brands & Retailers: To manage consumer price sensitivity, companies might push heavy promotions in non-tariffed categories or accelerate automation and operational cost-cutting—potentially reducing reliance on certain suppliers.
  
  

4. Supply Chain Disruptions

• Sourcing Shifts: Moving production from higher-tariff regions (e.g., Bangladesh with 35%) to lower-tariff ones (e.g., Vietnam with 20%) could cause:

  
  

• Factory capacity bottlenecks.

  
  

• Quality control challenges due to rushed onboarding of new suppliers.

  
  

• Strain on logistics networks as demand concentrates in specific countries.
  
  

5. Customs Complexity & Compliance Risks

• Stakeholders: Import managers and customs brokers must navigate intricate Harmonized Tariff codes and origin rules.
  
  

• Risks: Incorrectly declaring origins or trans-shipping goods through third countries to avoid tariffs could trigger penalties and audits, with U.S. Customs intensifying tariff evasion crackdowns.
  
  

6. Delayed Deliveries & Operational Hurdles

• Brands & Retailers: Shipping delays and longer customs clearance times are likely due to increased scrutiny and documentation requirements.
  
  

• Suppliers: May need to invest in better compliance systems to ensure proper labeling and paperwork.
  
  

7. Strategic Realignments

• Brands: Proactive companies will model landed costs, diversify sourcing bases, and secure long-term partnerships in tariff-favored countries.
  
  

• Suppliers: Those that can adapt—by offering competitive pricing, compliance expertise, or capacity flexibility—will remain indispensable partners.
  
  

A historical moment for fashion

These tariff spikes are historic in scale. At nearly 18% average tariff, the U.S. import regime hasn’t been this protectionist since the post-Smoot-Hawley era of the 1930s.

That was a time when high tariffs contributed to global economic pain. Today, the fashion sector – which typically operates global supply chains with low margins and just-in-time inventory – is bracing for a massive disruption.

In short, fashion brands should prepare for higher landed costs, possible shipping delays, and complex customs procedures as of August 1. T

Companies that model out the impact and act quickly will be better positioned to weather the storm, as we discuss next.

Preparation Checklist for Brands & Suppliers

With the Aug. 1 tariff deadline approaching, fashion businesses need a clear strategy to manage costs and protect margins. Below is a streamlined checklist of key actions.

• Audit Your Sourcing Portfolio: Identify all countries in your supply chain that will face new tariffs, focusing on the 14 directly affected nations. Map your exposure by factory or supplier and review all purchase orders already in production or transit. Goods arriving after Aug. 1 will face higher duties, so understanding which SKUs are at risk is critical for planning mitigation measures.

• Re-Cost and Adjust Pricing: Model the tariff impact on landed cost and profit margins across product categories. For instance, a garment with a $10 FOB cost becomes $13.50 with a 35% tariff. Run scenarios at prior (10%), current, and new tariff rates to determine if you can absorb costs, adjust pricing, or re-engineer products for savings. Many brands are preemptively updating MSRP for new collections or exploring material/design simplifications, though this must be balanced against quality standards.

• Explore Duty Mitigation Options: Check whether your imports qualify for reduced rates under free trade agreements (e.g., CAFTA-DR, AGOA) or special tariff classifications. Countries like Vietnam and Indonesia have secured lower rates, making proper certificates of origin essential to benefit. Consider Foreign Trade Zones (FTZs) or bonded warehouses to delay duties until goods enter U.S. commerce—this can provide cash flow flexibility and buy time if tariff policies shift.

• Strategic Sourcing Shifts: Plan medium-term diversification to avoid tariff-heavy regions. Shifting orders from high-tariff markets (e.g., Cambodia at 36%) to lower-tariff countries (e.g., Vietnam at 20%) can yield meaningful savings. Nearshoring to Mexico or Central America under USMCA or CAFTA-DR may also make sense despite higher labor costs, especially for products needing faster turnaround. Longer-term strategies like partial reshoring or regionalizing critical SKUs can further reduce risk.

  
  

  

  
  

• Timing and Logistics Maneuvers: Expedite shipments to clear customs before Aug. 1 where feasible—often cheaper than paying higher duties. Work closely with freight forwarders and customs brokers to ensure accurate documentation and country-of-origin declarations. Misclassification could mean penalties or delays, particularly with updated HTSUS codes for tariffed goods. Prepare logistics teams to handle new entry requirements efficiently.

  
  

• Review Contracts and Terms: Examine supplier agreements for tariff-related clauses and negotiate cost-sharing where possible. Many brands are adding “tariff riders” to new contracts to allow price renegotiation or cancellation if duties spike. Vendors selling to U.S. retailers should clarify who bears these costs and consider legal counsel for options like invoking force majeure if tariffs make contracts commercially unviable.

  
  

• Manage Financial and Inventory Impact: Higher duties will tighten cash flow. Adjust working capital plans, import bonds, and financing arrangements. Explore extended supplier payment terms or inventory financing to spread costs. Where possible, import extra stock under pre-deadline rates to buffer initial tariff impacts, but avoid overstocking if price hikes may dampen demand.

  
  

• Transparent Communication: Proactively communicate price changes and explain tariff-related cost pressures to maintain customer trust. Internally, align teams on affected products and strategic shifts, and collaborate with suppliers and logistics partners to find creative workarounds.

Strategic Opportunities Amid Tariff Turbulence

While these tariffs pose headaches, they also force fashion companies to innovate and build resilience. Brands can seize this moment to rethink aspects of their supply chain and turn tariffs into an opportunity for positive change:

Leverage Countries with Trade Deals: 

As noted, not all countries are equal in this tariff landscape. Smart sourcing will exploit the pockets of stability created by new deals. 

For instance, Vietnam, with its 20% U.S. tariff cap, might become a relatively safe haven for sourcing (many competitors may rush there, so plan capacity accordingly). 

Indonesia too, at 19%, offers predictability and is a huge manufacturing base. 

Even the Philippines now has a 19% rate (it quietly got a similar deal), which could make it a more viable source for certain goods like footwear or specialty apparel. 

Brands might deepen ties in these “deal” countries – perhaps investing in vendor partnerships or even new joint ventures, since the tariff framework there is more favorable. 

Resilience through Circularity and Innovation:

High import costs might prompt a fundamental pivot in how fashion inventories are managed. Some forward-thinking brands see tariffs as a nudge to embrace the circular economy. 

If importing new products becomes prohibitively expensive, why not focus on making existing products last longer and generate revenue in new ways? 

For example, brands can invest in repair services, resale platforms, and upcycling programs. By encouraging customers to repair or refurbish garments (perhaps even offering it as a paid or loyalty service), companies can create a revenue stream that isn’t import-dependent and reinforces sustainability credentials. 

Similarly, launching a secondhand or recommerce line (where you take back and resell used items) can reduce the need to import as much new inventory each season while engaging eco-conscious consumers. 

Designing more durable, modular clothing that can be upgraded or modified could also gain traction – if a jacket can have its lining replaced or style tweaked rather than buying a whole new one, consumers might opt for that if new imports are pricier.

Supply Chain Digitization and Digital Ecosystems:

Facing this level of complexity, companies will need to lean harder on technology than ever before. 

This is the moment to implement or upgrade digital tools that improve visibility, speed, and scenario planning across the supply chain. 

From end-to-end shipment tracking to AI-powered cost modeling, smart infrastructure helps businesses respond to weekly tariff shifts with precision.

Some fashion brands are already using dynamic scenario planning matrices that simulate landed costs across tariff scenarios by country, product, and volume. 

These tools enable quick decisions like rerouting production or reallocating shipments in real time. 

Others are investing in just-in-case strategies – such as establishing buffer stock of core items or setting up small local finishing operations to dodge full tariffs on finished goods. Flexibility is becoming a sourcing superpower.

Solutions like World Collective are actively building this kind of resilience into the sourcing process. 

Through their Ecosystem, brands and suppliers gain access to verified, globally sourced textiles with streamlined logistics – and now, deeper digital integration through their partnership with Kinset, a leader in climate-forward data and compliance solutions. 

Together, we're embedding Digital Product Passport (DPP) infrastructure that connects product, supply chain, and environmental data in one secure, centralized place.

This means faster reporting, easier compliance with emerging regulations, and better-informed sourcing decisions—especially in moments like this, when geopolitical policy can shift overnight. In an era of volatile trade, traceability and data intelligence aren’t just nice to have—they’re foundational.

Outlook and Next Steps

As August 1 looms, uncertainty still clouds the horizon. Could there be more 11th-hour deals or extensions? 

It’s possible. U.S. officials have sent mixed signals – Commerce Secretary Howard Lutnick called Aug. 1 a “hard deadline,” yet Treasury Secretary Scott Bessent hinted that the President could extend leniency to countries making progress. 

Indeed, negotiations are reportedly ongoing with several major partners. India, for one, is deep in talks to avoid the 27% tariff slated for its exports; many expect a “mini-deal” with India to be finalized just before the deadline.

If that happens, India’s apparel and textile shipments (significant for certain brands) might escape the new duties entirely or face a much lower rate. 

Similarly, the European Union and the U.S. now operate under a framework that imposes a 15 % tariff on most EU goods, replacing the previously threatened 30 % blanket rate.

For fashion companies, this means the situation will remain fluid even after Aug. 1. We could see a flurry of tariff letters and tweets in early August adjusting rates for countries that ink deals at the 59th minute. 

In conclusion, fashion brands should brace for impact on August 1, but also remain nimble and alert in the aftermath. Use the high-tariff period as a stress test to build a stronger, more flexible supply chain. 

Written by Maria Eugênia Lima, Junior Digital Content & Social Media Producer at World Collective
Edited by Patricia Langan, Sustainable Supply Chain Advisor at World Collective
Research & Additional Editing by Taruna Anil, Policy Assistant at World Collective