Editor: Patricia E. Langan

On 13 November 2025, the White House announced new framework trade agreements with Guatemala and El Salvador that will restore duty-free access for qualifying textile and apparel exports under CAFTA-DR and remove “reciprocal tariffs” that had been in place since April 2025.

For sourcing teams, it is not just a line on an import paperwork. It is a reset of the rules for yarn-forward supply chains in Central America, wrapped inside a dense package of labor, digital, and environmental commitments that will shape how brands work in the region for the rest of the decade.

The American Apparel & Footwear Association (AAFA) has already framed the move as a boost to integrated “U.S.- Central America” supply chains that rely on U.S. cotton and regional mills, and urged Washington to extend similar terms to the rest of the CAFTA-DR countries.

This piece walks through what changes on tariffs, what sits behind the headlines in the non-tariff annexes, and what smart brands and suppliers should be doing now to position for 2026–2028.

1. What Exactly Changes on Tariffs?

First, the basics.

In April 2025, the U.S. “Liberation Day” tariff order added a 10 percent reciprocal duty on most imports from countries not otherwise exempt, including Guatemala and El Salvador. Textiles and apparel that already met CAFTA-DR rules of origin were suddenly hit with an extra charge on top of the underlying CAFTA schedule.

For a wider view of how recent U.S. tariff shifts are reshaping sourcing decisions, see our earlier breakdown of the latest U.S. tariff court ruling on fashion.

The November frameworks reverse that (for a defined set of products) and restore something closer to the pre-April status quo:

• Reciprocal tariffs are removed on certain Guatemalan and El Salvador an exports that either
  a) qualify as textile and apparel products under CAFTA-DR, or
  b) fall into the bucket of goods “that cannot be grown, mined, or naturally produced in the United States in sufficient quantities,” such as coffee and cocoa.

• For textiles and apparel, the relief is explicitly tied to CAFTA-DR qualification. In other words, the U.S. will remove reciprocal tariffs and provide preferential treatment only when the goods meet the established rules of origin under the agreement.
  
  

A Quick Yarn-Forward Refresher

CAFTA-DR’s textile rule of origin is “yarn-forward.” That means spinning of the yarn, knitting or weaving of the fabric, and final assembly must all take place in the U.S. and/or CAFTA-DR region for the good to qualify for duty-free treatment, with limited exceptions.

For brands used to Asian sourcing where fabric origin is often diversified (or opaque), this has two direct consequences:

• Your fabric and yarn decisions are as strategic as your cut-and-sew location.

• To capture the new tariff benefit, your documentation must prove that yarn-forward story clearly.
  
  

Which Products Actually Regain Duty-Free?

The fine print still needs to be finalized in implementing texts, but the direction is clear:

• Knit and woven apparel that already meets CAFTA-DR’s yarn-forward rules regains duty-free treatment (removal of the 10 percent reciprocal tariff) when shipped from Guatemala or El Salvador to the U.S.

• Selected non-textile exports from those countries also see relief if they fall into “not produced in sufficient quantity in the U.S.” categories, with coffee and cocoa repeatedly cited in public briefings.
  
  

This combination restores a cost and lead-time edge for compliant Central American supply chains on basics, uniforms, and replenishment programs, especially where U.S. yarn and regional mills are already embedded.

2. The Non-Tariff Wish List

The frameworks are not just about customs lines and tariff codes. The real long-term value sits in the long lists of non-tariff commitments Guatemala and El Salvador have signed up to.

Taken together, they map quite closely to what brands have been asking for in due-diligence and supply-chain conversations:

1. Streamlined approvals and certificates

Both countries commit to:

• Faster, more predictable approvals for U.S. exports in sectors like pharmaceuticals, medical devices, and autos;

• Acceptance of electronic certificates and recognition of U.S. standards in several areas, including auto safety and certain food categories.

For apparel, this matters less because of the sectors themselves and more because it signals a push toward digital documentation and fewer paper bottlenecks at the border.

2. Digital trade and data flows

Guatemala and El Salvador pledge to:

• Refrain from discriminatory digital services taxes on U.S. firms;

• Facilitate cross-border data flows and support a permanent moratorium on customs duties on electronic transmissions

If you are trying to scale product passports, e-certificates of origin, or shared traceability platforms with regional suppliers, this direction of travel matters.

3. Labor, environment, and forced-labor bans

Both frameworks include language that:

• Reaffirms protection of internationally recognized labor rights;

• Commits the countries to prohibit the importation of goods made with forced or compulsory labor and to strengthen labor-law enforcement.
  
  

This sits directly alongside a tightening web of forced-labor rules in key buying markets:

• The U.S. Uyghur Forced Labor Prevention Act (UFLPA), where the 2025 enforcement strategy expands sectors and raises expectations on traceability and supplier due diligence.

• The EU’s Forced Labour Regulation, in force since late 2024 and gearing up for full application towards the end of this decade.

In other words: tariff relief is being explicitly coupled with labor and environmental scrutiny, not traded against it.

3. What This Could Unlock for Apparel and Footwear Sourcing

If you are running sourcing for a North American brand today, you are balancing three forces:

• Cost and tariff exposure;

• Lead times and logistics risk;

• Compliance with forced-labor and environmental rules.

The Guatemala and El Salvador frameworks do not magically solve that equation. They do tilt it.

Where Central America Can Compete

Categories where a yarn-forward, CAFTA-compliant set-up is already viable are obvious early winners:

• Knit basics and fleece: T-shirts, sweats, joggers, and light fleece programs where U.S. yarn and regional knitting / dyeing capacity is established.

• Uniforms and workwear: Stable programs with predictable specs and replenishment volumes, where cost predictability and tariff savings can be modeled over several years.

• Performance and athleisure: Where mills in the region already supply technical knits and blends aligned with CAFTA exceptions or within yarn-forward rules.
  
  

With the 10 percent reciprocal tariff gone for qualifying goods, Central America regains meaningful ground against Asia on total landed cost, especially when you factor in shorter transit times and lower inventory risk.

How it Fits the Broader Nearshoring Story

Over the past three years, brands have explored Western Hemisphere “nearshoring” to hedge against:

• Port congestion and freight volatility in trans-Pacific routes;

• Political risk and forced-labor exposure in parts of Asia;

• Consumer demand for shorter lead times and more responsive replenishment.

The new frameworks give sourcing teams permission to dust off those CAFTA modeling spreadsheets and re-run scenarios with restored duty-free status and a clearer governance signal.

A Quiet Contrast with Other Regions

While Central America is being pulled into tighter alignment with U.S. labor and environmental expectations, other sourcing hubs face:

• Escalating forced-labor enforcement risk under UFLPA, including more textile and apparel entities on the entity list.

• New legal exposure in Europe as the Forced Labour Regulation and broader due-diligence rules converge on apparel and footwear.
  
  

Central America is not automatically “safer,” but the combination of alignment + proximity + tariff advantage makes it easier to build a compliant, auditable story if brands and suppliers do the work.

4. Risks and Unresolved Questions

Before anyone redraws their sourcing maps, a few warnings. 

• These are frameworks, not final trade agreements.

The texts lay out key terms; they still need to be translated into binding agreements, signed, and implemented. White House and USTR statements signal that both sides expect this within “the coming weeks,” but domestic politics in the U.S. and ratification processes could stretch timelines or narrow product coverage.

• Regional governance remains uneven.

Nicaragua, for example, is explicitly being handled on a separate track, with U.S. textile industry groups highlighting human-rights concerns and calling for continued scrutiny.

Buyers cannot treat “CAFTA-DR” as a single governance block. Factory-level conditions will still make or break risk assessments.

• Data and documentation will be tested.

For apparel, the value of the new tariff preferences depends on the ability to prove:

• Yarn-forward origin (or relevant exception);

• Labor and environmental compliance at each key tier;

• Absence of forced labor in cotton and other key raw materials
  
  

In practice, that means brands asking for much more granular data than many mills and factories in the region currently share by default.

5. What’s Next

The winners in this next chapter will treat tariffs as one part of a wider sourcing and compliance reset.

For Brands: Integrate Trade, Compliance, and Sourcing

1. Audit your current CAFTA-eligible styles.
   Identify products already close to yarn-forward compliance or easily realigned. Model the impact of removing the 10 percent reciprocal tariff on margin, landed cost, and cashflow over 2026–2028.
   
   

2. Revisit yarn-forward strategies with mills.
   Talk with regional yarn spinners and knitters about what it would take to shift more volume into qualifying inputs: MOQs, lead times, and fiber choices that still meet your design brief.
   
   

3. Align legal, sourcing, and ESG teams.
   The same frameworks that restore duty-free treatment also hard-wire forced-labor and environmental language. Make sure your trade, legal, and sustainability leads are reading the same documents and setting one coherent ask for suppliers.
   
   

4. Scenario plan across Western Hemisphere options.
   Monitor whether similar frameworks emerge for Costa Rica, the Dominican Republic, and Honduras, as AAFA and the National Cotton Council have urged.

Build “with” and “without” scenarios so you are ready if the circle widens.

For Suppliers: It’s Time to Build Proof

1. Upgrade your documentation muscle.
   Be ready to provide detailed bills of material, origin documentation for yarn and fabric, and verifiable labor and environmental records. If you cannot prove it, buyers may not be able to claim the benefit.
   
   

2. Invest in digital readiness.
   The direction of travel in these agreements favors e-certificates, digital customs processes, and data sharing. Start with basics: reliable product data, digitized certificates, and the ability to share them securely with buyers.
   
   

3. Position where the new equation is strongest.
   If you are in Guatemala or El Salvador, look hard at segments where duty-free + proximity + compliance can beat Asian suppliers on total cost: replenishment programs, uniforms, and core knits are a logical starting point.
   
   

4. Stay close to policy.
   Local industry associations and export promotion agencies will have more granular updates as tariff schedules and implementing rules are finalized. Treat that as core business intelligence, not background noise.
   
   

World Collective’s Angle: How We Can Help

At World Collective, we see these frameworks as part of a bigger shift: fashion moving from “cheap and far” sourcing to integrated regional ecosystems where tariffs, labor standards, and digital traceability are negotiated together.

Our ecosystem already connects brands to vetted suppliers who are:

• Building the traceability and documentation capacities that forced-labor regimes now demand;

• Looking to compete on reliability, transparency, and speed, not only on price
  
  

If you are re-evaluating your Western Hemisphere strategy, you do not need another one-off supplier spreadsheet. You need a system that links product data, certifications, and sourcing decisions in one place.

Explore World Collective’s resources on regulatory shifts, and supplier discovery, and subscribe to our Newsletter for ongoing trade and policy analysis tailored to sourcing and production teams.