Margins Collapsing, Orders Cancelled, Staff Laid Off: US Fashion Staggers Under Trump Trade Blitz

US fashion companies are restructuring sourcing strategies as 2025 tariffs trigger cost spikes, disrupted supply chains and declining margins. The latest USFIA Benchmarking Study has tracked these shifts, revealing a turbulent sourcing landscape and limited reshoring despite government pressure. Companies are bracing up for sustained uncertainty by expanding supplier networks, scaling back investment, and reassessing risk exposure across global operations.

Staff Writer

1 August 2025

Long Story, Cut Short

Escalating US tariffs in 2025 have sharply raised sourcing costs, delayed orders and forced fashion companies to lay off workers.
Despite rising costs, most companies have not reshored production but have expanded sourcing from Asia and other emerging hubs.
US fashion brands face increasing compliance burdens and are diverting funds away from sustainability and innovation to manage tariffs.

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.

STRATEGIC SUBTEXT: Rather than prompting reshoring, the Trump administration’s tariff policies are pushing companies toward more agile, cost-efficient Asian suppliers. The policy’s unintended consequence has been to strengthen sourcing ties with countries like Vietnam and Bangladesh. At the same time, US-based suppliers and regional hubs in the Western Hemisphere lack the infrastructure and policy clarity needed to attract sustained investment.

Vietnam now services 100% of surveyed companies, while Cambodia’s use rose from 75% to 94% year-on-year.
Sourcing from Peru and Colombia increased modestly but is seen as complementary, not central, to diversification.
US companies view domestic manufacturing as costly, inflexible and vulnerable to additional tariff or compliance exposure.

CURRENT LANDSCAPE: China remains a dominant player in textiles, but its role in finished apparel sourcing is eroding. Companies are systematically reducing China exposure—not due to cost, but due to geopolitical and compliance risk. China’s vertical integration and pricing remain unmatched, but its trade friction with the US has made even efficient sourcing politically hazardous.

Over 80% of companies plan to reduce apparel sourcing from China by 2027, even after a US-China trade deal in May 2025.
Around 70% of respondents no longer rank China as their top apparel supplier, up from 60% in 2024.
Many large companies aim to cut China sourcing to “low single-digit” levels by 2026 or earlier.

WORTH NOTING: Compliance and sustainability remain priorities, but companies are rebalancing commitments. Supply chain mapping, fibre traceability, and forced labour safeguards are advancing, though budget reallocations have slowed training and innovation. Recycled textiles are an area of growth, but concerns persist over regulatory clarity and supplier readiness, especially outside core sourcing hubs.

53% of respondents plan to invest in technology to enhance supply chain traceability.
80% of companies plan to ask vendors for more detailed social compliance information as part of enhanced due diligence.
50% plan sustainability training for staff and suppliers, though budget pressures have affected investment levels and programme expansion.

COMING UP: The expiration of African Growth and Opportunity Act, or AGOA in September 2025 could weaken Sub-Saharan Africa’s already fragile apparel export position. The report shows waning use of African suppliers, as companies await policy clarity. Nearly 80% of firms call for a 10-year extension to stabilise investment and prevent further contraction in African sourcing engagement.

Only six AGOA member countries were used in 2025, down from seven last year, and none by over 20% of firms.
30% of respondents have already cut sourcing from AGOA countries due to renewal uncertainty.
60% say long-term renewal is essential for enabling future investments in African supply chains.

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