By Patricia Langan, World Collective Advisory Board Member

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As reported by the New York Times, the US has in the past imposed lower trade barriers, including tariffs, than its trading partners impose on the US.

That changed on April 2, when the Trump administration upended this open trade regime with the announcement that—effective April 5—the US  will impose a 10% ad valorem baseline tariff on imports of all foreign-origin goods (full list by countries from The Guardian).

On top of this baseline tariff, new country-specific tariffs for almost 60 trading partners will be effective April 9, which will apply even if goods are imported under a free trade agreement. (If at least 20% of an imported item’s value is U.S. originating, the ad valorem reciprocal tariff will only apply to the non-U.S. content.)

The American Apparel & Footwear Association in a statement said “all major suppliers of apparel, footwear, and travel goods are now facing higher tariffs.” Textile and garment importers are expected to be impacted in multiple ways, especially through higher costs.

The upshot: the 8 countries from which the US imports the most were hit hard:

• Vietnam 46%

• China 34%

• Japan 24%

• South Korea 26%

• Taiwan 32%

• India 27%

• Europe 20%.

For all these the US is the top or second export market. Note that retaliatory tariffs are cumulative and charged on top of the regular previously established tariff rates. 

The National Council of Textile Organizations (NCTO), on the other hand, was sanguine about retaliatory tariffs because they protect its US-based members.

Why? By far the largest export market for US finished textiles are Mexico and Canada (53% of textile exports), and (so far) the import of finished products from Mexico and Canada (as long as they meet qualifying requirements such as the “yarn forward” rule and specific component requirements under USMCA) are exempt from retaliatory tariffs.

This is also significant since textiles employ more than 5 times as many workers as apparel manufacturing (471,000 v. under 90,000).

They also asked that the administration keep the retaliatory tariffs on finished textile and apparel products in place long-term for like China and Vietnam, but asked that it lift them for countries party to the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR).

Closing The Open Trade Regime

Tariffs are just one type of trade barrier. Countries also restrict trade through quotas, sanctions, levies, and embargoes—known as "non-tariff barriers"—which can significantly increase costs across the supply chain.

The US has traditionally espoused free trade to encourage better prices and variety for American consumers. Under the open trade regime, brands have moved production offshore to lower-cost manufacturing countries (“offshoring”), and the result today is at least 97% of all the clothes Americans buy are from overseas.

Evidence shows overall consumers and businesses in the US benefited from the open trade regime, despite the higher tariffs imposed by trading partners.

The Trump administration claims the new costs of its higher tariff strategy are short term. Economists are very uncertain about that.

Whether the costs are long term depends, says the New York Times, on whether businesses perceive Trump is consistent and committed to a trade strategy that forces other countries to unwind their higher tariffs and US businesses to invest in manufacturing in the US.

Tariffs are Hidden Tax on Consumers

Tariffs add up — mainly because they are cumulative.

For example: A 34% country-based retaliatory tariff (China) will be added to a previously established 20% tariff. If the product is primarily steel, another 25% applies—meaning a steel cookware item could face a total tariff of 79%. 

For textiles, new tariffs announced on April 2 are the country-based retaliatory tariffs. Product-based tariffs may follow. Also, CBP has not yet clarified if the 10% baseline tariff will be added to the retaliatory tariff rates.

The American Apparel & Footwear Association said that “The average tariff on clothes, shoes, and accessories, necessities every American must buy was already more than five times higher than on other U.S. imports.”

The US Fashion Industry Association said “Tariffs..disproportionately impact the fashion industry.” They also point out that tariffs are regressive taxes, “These tariffs also unfairly burden American families, particularly lower-income households, which spend a higher percentage of their income on apparel and footwear compared to wealthier Americans.”

US customers are highly price sensitive when purchasing clothing. Although they face higher production costs partially due to tariffs, manufacturers indicate they are reluctant to raise prices to consumers. Instead, they are cutting corners on quality.

According to NBC News, to limit price hikes, clothing brands are sourcing lower quality and cheaper garments.

Exporters may reduce costs to compensate for tariffs and thus maintain market share in the US, but their countries may impose retaliatory tariffs on US imports and risk American goods losing market share in those countries.

The countries that purchase the most overall from the US are Canada, Mexico and China, followed by Japan and the UK. For textiles and apparel top importers are Mexico, Canada, China, Honduras, and Vietnam.

How the US Government Sets and Regulates Trade Barriers

Tariffs

Tariffs are the responsibility of Congress, which has delegated authority to the Executive branch. This authority is managed by semi-independent agencies such as the International Trade Commission (USITC) and the Department of Homeland Security’s Customs and Border Protection (CBP).

Tariffs rates are published in the U.S. Harmonized Tariff Schedule (HTS or HTSUS) and administered by CBP.

Accompanying the past open US trade regime were programs paid for by the federal government to ensure a level playing field in two main ways: protecting US industries from other countries’ unfair trade practices, like intellectual property theft, and protecting US workers.

Regarding workers, the American Apparel & Footwear Association reports that the Trump administration eliminated a key U.S. Department of Labor (DOL) program targeting labor abuses in countries exporting textiles to the U.S., such as Bangladesh, Vietnam, Cambodia, Indonesia, Colombia, Guatemala, and Jordan.

The program educated workers on their rights and rooted out forced labor, and “eliminated opportunities for less scrupulous foreign businesses to profit from labor abuses while American businesses and workers play by the rules.”

Without these safeguards, American manufacturers are at yet another disadvantage.

Non-Tariff Barriers

The Office of the U.S. Trade Representative negotiates free trade agreements. FTAs can provide U.S. exporters with greater market access through reduced or eliminated tariffs, intellectual property protection, and the elimination of non-tariff barriers.

In nearly all cases, FTAs include reduction or elimination of at least 80% of tariffs on industrial (non-agricultural) products and non-tariff barriers.

The U.S. Department of Commerce maintains a free trade agreement tariff tool that allows exporters to determine the applicable tariff of goods covered by a U.S. free trade agreement.

The U.S. currently has FTAs with 20 countries:

• Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Singapore, and South Korea.

The FTA for Canada and Mexico are contained in one agreement, the United States-Mexico-Canada Agreement (USMCA).

However, Trump’s announcement imposes tariffs despite the existence of FTAs listed above.

None of the world’s largest textile producers (China, Bangladesh, Vietnam, Turkey, and India) have FTAs with the US. (Reuters reports US progress on negotiating an FTA with India.)

Neither does the U.S. have FTAs with the second-tier textile manufacturers Italy, Germany, Pakistan, or Cambodia. 

Strategies for Mitigating Tariffs

Policy Level

• FTAs → U.S. free trade agreements (FTAs) reduce or eliminate tariffs on goods traded between participating countries.
  Reminder: Trump’s announcement imposes retaliatory tariffs despite the existence of FTAs listed above. However, with an FTA, the country may have more negotiating room for exclusions or re-classifications, etc.
  
  

• Exclusions and Re-classifications → As reported by the Robin Report, “tariff engineering” is used by big businesses with deep pockets to get around tariffs. A key strategy for product-based tariffs is lobbying—either directly or through trade associations—to exclude certain product types or reclassify products under lower-duty categories.

  However, a formal exclusion process, e.g. based on claims that the component can’t be sourced in the U.S. or in any other country but China, no longer exists. The existing handful of exclusions are scheduled to expire May 31, and experts believe they will not be extended.
  
  

Business Level

1️⃣ Country of Origin

Rules of origin determine from which country a good originates and thus whether it qualifies for preferential tariff treatment under an FTA. The rules are primarily determined by U.S. Customs and Border Protection (CBP).

To repeat again: Trump’s tariffs ignore FTAs, though.

As an example, below is a list of the top cotton textile importers to the US and the new retaliatory tariffs that importers of these goods will face:

• China 34%

• Vietnam 46%

• India 26%

• Bangladesh 37%

• Indonesia 32%

OBS.: Note these rates are for the new retaliatory tariffs and may not equal the total applicable tariffs.

Strategies to avoid/mitigate tariffs using country of origin:

• Move all manufacturing back to the U.S. (“reshoring”). However, often this is an option available only to deeper pocket businesses.

• Multi-country production. There are several options if you have diversified to more than one country.

  
  

  • Shift to lower tariff countries, as the apparel industry did during the first Trump administration – out of China into Vietnam, Cambodia, and Bangladesh. Shifting out of China carried its own risks. China’s piece failure rate (share of textile and apparel products with too many defects for market) increased from 12.7 to 13.7% last year, according to NBC News. But apparel brands gravitated toward countries with even higher failure rates than China: India’s is 21.2%, Cambodia’s is 16.6%, and Indonesia’s is 14.2%. In this case, the consumer pays in terms of lower quality clothes.

    
    

  • Change country of origin for the dutiable component. The customs classification process, where the importer assigns a tariff code from HTS,  is based on the characteristics of the components of the product, e.g. fabric content for textiles and apparel and how the merchandise is used.

    
    

    These characteristics determine the product category and country of origin, and determine which tariffs apply to the product.

    
    

    Take sunglasses, for example. It is the country in which the lenses are manufactured and fitted that is the “country of origin” and that determine the tariff rate, not the country in which the frames are manufactured. For example, if the frames are made in the U.S. and then sent to China to fit the lenses and re-imported to the U.S. for sale, the China country specific tariff applies. If it was reversed - China made the frames and sent to U.S. for lens fitting, then sold in the U.S., there would be zero tariff.

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2️⃣ Valuation. Tariffs are paid on the transaction value of the goods, based on the invoice from the foreign seller. 

Below are strategies to adjust the dutiable cost. (This doesn’t change the price paid to the vendor but it can change tariffs owed.)

• First Sale rule allows importers to use the price of the first sale of goods for export to the U.S. as the basis for valuation, instead of the price of the last sale before the goods enter the US. For example, if your brand uses a trading company for subcontracted manufacturing, the first sale price is from the trading company to the subcontracted factory. The second sale price is from the trading company to you. You use the first sale price as the valuation.

• Unbundling. Within the sale price you pay are overhead components such as quality control, logistics, insurance, which are not dutiable. You can back out those costs to determine valuation.  

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3️⃣ Domestic Manufacturing/Assembly

Today the US employs less than 90,000 garment workers, according to the Bureau of Labor Statistics. The largest garment employers are in California, New York, Texas, North Carolina and Tennessee, according to Remake.

Between 36% and 42% of garment workers in the U.S. are immigrants, and Pew Research Center estimates that almost 40% are illegal immigrants. Immigrants account for 55% of all sewing machine operators and 50% of all tailors, dressmakers and sewers.

These immigrants are at risk of deportation under Trump’s deportation actions through the Department of Homeland Security.

It remains legal to pay garment workers less than minimum wage, under the Federal Fair labor standards Act, and thus existing jobs are less attractive to non-immigrants.

In principle, reshoring production can increase jobs—but there are major caveats:

• The combined lack of workforce willing and able to do factory jobs and supply chain infrastructure that is efficient enough to compete even in a high trade barrier context, according to the Robin Report.

• The lead time to ramp up garment production is long and investment required high, and Trump has not announced programs to incentivize this. There is legislation that could be reintroduced such as FABRIC Act and Americas Act, from last session, but so far, no action we know of.

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4️⃣ Product Category

The U.S. Harmonized Tariff Schedule (HTS) is organized by 22 broad categories. Within each are products with 10 digit codes. The tariff rate that applies depends on the

• For product-based tariffs, there are several tariff engineering strategies to avoid or mitigate tariffs, including re-designing the product in order to re-classify it or producing a lower quality version to make it cheaper to produce.

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5️⃣ Other Methods 

• Bonded Warehouse. If your bet is rates will fall after US-country negotiations, you may defer paying tariffs by using bonded warehouse to store your goods before sale.  Note that Foreign trade zones (FTZ) work like boned warehouses but Trump announced goods there are not exempt from tariffs. The tariff determined by what the duty was when the product went into the FTZ. There are private and public bonded warehouses. You can use your own facility as a bonded warehouse, but you must apply and follow strict rules.

• Drawbacks. Under CBP’s duty drawback program, you may qualify for tariff reimbursement on imports into the U.S. if you subsequently use them in products made in the U.S. that are exported. 

  
  

  It also applies if you export a commercially interchangeable product. For example, if you manufacture the same type of shirt with both imported textiles and with domestic textiles, when you export the foreign textile shirt, you can claim reimbursement you paid on the imported textile.

NOTE: Although Trump’s announcement did not change the drawback program, experts question whether this was intentional or an oversight. Stay tuned.

How Tariffs Will Affect Your Business Operations

There are 4 main potential impacts:

• Sourcing imported components → Increased tariffs could hit retail wholesale disproportionately, reports Retail Brew. Specifically, tariffs on China will hit import of final products hard. Although Mexico and Canada were exempt from the 10% baseline and country-specific tariffs, under the US Mexico Canada FTA, if Trump rescinds the exemption or if product-based tariffs are imposed on cotton and leather, this could affect Mexico and Canada as well. Note that Trump had already imposed product specific tariffs on aluminum, steel and autos in March.

  
  

• Relative production costs → With the elimination of US funded programs to ensure a more level playing field, especially regarding compliance with international labor laws, countries may pay even lower wages and further reduce costs to compensate for tariffs, as a way to maintain market share in the US.

  
  

• Supply Chain disruptions → The threat of tariffs, or the implementation of new ones, can cause businesses to re-evaluate their supply chains, potentially leading to delays, instability, and difficulties in finding alternative suppliers. Whether or not you change sourcing, supply chain disruptions can affect you.

  
  

• Retaliatory tariffs → According to the USITC, Mexico and Canada are the top two export markets for US-manufactured apparel, with China ranking fourth. If these countries respond with countermeasures, American apparel exports could take a hard hit.

Strategies to Minimize Costs and Risks

1. Supply Chain & Sourcing Adjustments

• Re-evaluate sourcing strategy:

  • Re-examine country of origin, valuation, and optimize supply chain.

  • Shift production/sourcing away from high-tariff countries (e.g., China).

  • Verify if manufacturing facilities are registered in targeted countries (e.g., China), increasing risk exposure.

• Diversify sourcing:

  • Expand to multiple countries (e.g., dual sourcing from China + other regions).

  • Reshore some production to the U.S. to spread risk.

2. Legal & Contractual Review

• Assess existing contracts to determine tariff cost responsibility.

• Consult legal experts on:

  • Force majeure or termination clauses triggered by new tariffs.

  • Surcharges to offset unexpected expenses.

More on tariffs: https://www.tradecomplianceresourcehub.com/2025/04/02/u-s-imposes-10-baseline-tariffs-higher-reciprocal-tariffs-for-targeted-countries/

3. Sales & Pricing Strategies

• Align sales destinations with sourcing strategy:

  • For e.g.: U.S.-made products sold domestically. China-made products diverted to non-U.S. markets.

• Reduce production costs by exploring cost-effective material alternatives that balance affordability with quality

• Study customer tolerance for price increases.

4. Sustainability as a Value Driver

• Reinforce sustainability efforts (especially in Europe):

  • Communicate long-term benefits to shift customer preferences toward higher quality.

  • Justify price hikes via intrinsic product value (not external factors like tariffs).

    
    

• Advocate for industry-wide improvements:

  • Push for recycling incentives, material innovation, eco-design, and worker rights.

    
    

• Brand positioning:

  • Emphasize quality and how sustainability enhances it.

5. Proactive Monitoring

Although experts expect the 10% baseline rate to stick, they do expect a lot of movement on other tariff rules and rates. The most politically influential players will come up with negotiated agreements, such as China. Israel has already dropped all tariffs in bid to reduce their rates. Unfortunately, there is not yet a comprehensive list of total tariffs by country available, and thus you need expert advice to “best guess” what you’ll be charged. 

• Expect changes. Consistently track developments in key markets for:

  a) further exemptions;

  b) new product-based tariffs;

  c) counter-tariffs by exporting countries;

  d) removal of trade barriers by exporting countries to reduce their country specific tariff rate

  
  

  Seek out professional assistance. Do not only rely on answers from your customs broker.

Strategic Solutions for Fashion Brands with World Collective

As tariff regimes evolve, fashion businesses must move from reactive adjustments to proactive planning.

There are practical measures that brands can implement to better navigate this time of uncertainty-and technology plays a pivotal role in streamlining these measures.

Platforms like the World Collective Marketplace use advanced tools to improve sourcing efficiency, boost transparency, and simplify decision-making.

With it, you gain access to:

🔹 Global Supplier Network—Empowering brands with access to a wide range of alternative sourcing options, beyond regions with high tariffs, to ensure flexibility and cost-efficiency in their supply chains.

🔹 Verified, Transparent Sourcing—Providing a reliable, fully traceable platform that guarantees compliance with international standards, fostering trust and delivering clear, consistent pricing information.

🔹 Diverse Material Choices—Offering a broad selection of sustainable materials, including certified organic cotton, recycled fibers, and cutting-edge alternatives, to help brands meet sustainability goals while maintaining quality.

🔹 Data-Driven Insights—Equipping brands with powerful tools to track supplier performance, verify certifications, and monitor cost fluctuations, enabling smarter, more informed sourcing decisions.

World Collective is here to help you stay competitive by optimizing sourcing, diversifying supply chains, and reinforcing your sustainability efforts in a challenging environment.

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It's important to remember that tariffs are constantly changing, and the situation is continually evolving. The impact of new regulations and shifts in trade policies can affect your sourcing strategy in real-time.

Stay connected with our socials and blog for ongoing updates—we’ll be sharing a series of in-depth insights on trade, tariffs, and their impact on global supply chains.

We’ll also be attempting to provide a clear overview of total applicable tariffs for major textile-importing countries.

Our updates will feature expert perspectives from Patricia, Sustainable Supply Chain Advisor at World Collective, to keep you informed and prepared for whatever comes next.

Instagram → https://www.instagram.com/worldcollective.official/

Linkedin → https://www.linkedin.com/company/world-collective/?viewAsMember=true

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📌 This article is enriched with invaluable insights from the Accessories Council, offering essential business expertise. Learn more about their work at Accessories Council.

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Written by Patricia E. Langan | Sustainable Supply Chain Advisor, World Collective

Edited by Maria Eugênia Lima | Content & Marketing Intern