fFirst I was a steel producer. Then the car. Now, the fashion industry has been caught up in Wednesday’s announcement by Donald Trump that it is leviing tariffs on more than 180 countries, including strict taxes targeting some of the biggest manufacturing regions of fashion.
Trump’s “liberation day” tariff included a 10% obligation on all imports into the United States, but “worst criminals” countries (where the US has a larger trade obstacle) face higher rates. Some of these are keys to the fashion supply chain. China, where everyone from Prada to Zara outsources production, faces a 54% obligation. Vietnam, where more than half of Nike’s footwear was produced last year, is subject to a 46% tariff. Pakistan, the leading manufacturer of denim items, is hit by a 29% obligation. Bangladesh, where clothing production accounts for up to 80% of total exports, is exposed to 37% collection, while the EU, which accounts for at least 70% of the global luxury market, suffers from tariffs of 20%.
Stefano Martinett, CEO of Tomorrow, a fashion brand development platform that led investments in Paris label Coperni and British designer Martin Rose, describes the situation as being extremely complicated and the brand is struggling to assess its impact. It is unclear what obligations apply to the finished product.
“The product is not made in one place,” says Martinetto. “You can have fabrics that come from Italy. Another element that comes from China. Something from Korea. And it could all be assembled in Turkey.
“We need to understand the manufacturing and transportation chains and at this time we don’t make clear what tariffs apply.”
The United States is one of the world’s largest clothing and footwear consumers, with over 98% of the country’s apparel imported. In January, the report suggested that the luxury fashion market could benefit from increased consumer confidence in the US. However, after already facing challenges like Brexit and Covid, the industry is now tackling even greater uncertainty.
In the market, fashion stocks plummeted after the announcement on Wednesday. Stocks in British brand Burberry fell 10% on Thursday and another 6% on Friday. Kering, the parent company of the brand, including Gucci and Saint Laurent, fell sharply, as did LVMH, which includes a portfolio that includes Dior and Louis Vuitton.
There are rumours that Prada, which was expected to approach Versace’s acquisition from Capri Holdings, could be suspended until the market settles.
After tariffs were implemented in China during Trump’s first term in 2019, sports-centric brands whose production shifted to Vietnam and Cambodia were also attacked. Stocks of Lululemon, Nike, Adidas and Puma all fell over.
While some brands appear to be blinded by the announcement of tariffs, LVMH has been publicly known for several years with the Trump administration. It operates two plants in California and one in Texas, accounting for 50% of the US product volume. Trump visited Rochambaw Ranch in 2019, and the second inauguration ceremony this January was attended by LVMH CEO Bernard Arnaud, along with his daughter Delphine and son Alexandre.
Nevertheless, without clear guidelines and threats of retaliation, no one in fashion is exempt from the current waiting game. Helen Brockbank, CEO of Walpole, representing the UK’s luxury market, says it’s about “booking your judgment until you get more details on how it actually works.”
North America accounts for 22% of all UK luxury exports. Brocklebank explains that the UK government has taken a “measured response” so far.
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Tariffs are expected to cause fluctuations across the fashion supply chain, affecting everyone from farmers to craft workers. Insiders say it’s inevitable that prices for fashion products will rise, leaving consumers feeling in a pinch. This follows existing price increases. The average price for luxury items has risen 52% since 2019.
It is unlikely to discourage the ultra-rich people, but ambitious shopper prices are expected to be sold. They also fear that cheaper counterfeit products (fuels of human trafficking and labour exploitation) will appear more attractive to some consumers.
According to Martinetto, tariffs could bring the industry back to 50 years. “European designers could be sold primarily in Europe,” he says. “American designers were able to sell mostly in the US.”
The luxurious giant may be able to overcome another earthquake change, but there is a fear that a small independent designer will not survive.
