US fashion companies are facing severe operational and strategic disruption in 2025 due to a sharp escalation in tariffs and policy unpredictability. The sector is experiencing margin compression, reduced sales, and weakened supplier confidence. In response, brands are diversifying sourcing and offloading risk, yet most remain locked into costlier offshore models, as reshoring efforts remain marginal despite protectionist pressure.
- Around 70% of companies report delaying or cancelling sourcing orders due to tariff-related uncertainty and cost volatility in 2025.
- About 22% of fashion firms have laid off employees to offset financial strain caused by tariff-related margin pressure.
- Nearly 40% reduced investments in sustainability and innovation to redirect resources toward tariff mitigation and operational survival.
- Despite political pressure to reshore, companies report offshore models remain more viable given infrastructure, flexibility, and cost factors.
- The article is based on the 2025 Fashion Industry Benchmarking Study published Thursday by the United States Fashion Industry Association (USFIA).
THE STUDY: The 2025 Benchmarking Study was authored by Dr Sheng Lu of the University of Delaware. Now in its 12th edition, the report is based on confidential surveys of executives from leading US fashion brands, retailers, importers and wholesalers. It captures sourcing trends, cost factors, and trade impacts shaping industry strategy in 2025.
HOW THINGS STAND: Fashion companies are caught in a dicey trade environment with few reliable levers. Large-scale reshoring remains commercially unviable, while Asian sourcing remains cost-effective but geopolitically risky. Smaller brands lacking deep reserves face existential threats, while larger firms juggle diversification and margin compression. The entire sector faces rising compliance burdens, reduced agility, and growing reliance on secondary sourcing bases.
- Only 17% of firms plan to increase sourcing from the US, undermining the narrative that tariffs are prompting domestic revival.
- Over 70% say they plan to increase sourcing from FTA regions to reduce duty costs, while 80% plan broader geographic diversification.
- Nearly 60% of large firms now source from 10 or more countries, up from under 55% two years ago.
DATA POINTS: The report presents stark data points: sourcing costs are rising, tariffs are cited as the primary driver, and no other factor comes close. Apparel imports from Asia now dominate, with diversification favouring Vietnam, Bangladesh and Cambodia. US and Western Hemisphere sourcing has declined, hindered by limited textile capacity and tariff-induced caution among buyers.
- Tariffs are the number-one cost driver in 2025, with 100% of respondents expecting tariff-related increases, 78% calling them substantial.
- Sourcing from Mexico and Canada fell to 50%, while CAFTA-DR countries were used by 64% of respondents in 2025.
- Asia accounted for nearly 73% of US apparel imports in early 2025, with non-China suppliers capturing significant gains.
