Trump's tariffs will make fashion more expensive than ever before

On April 2, the United States concluded with "Liberation Day": a title assigned by President Trump to the day he would impose tariffs against nations around the world, rewriting global trade rules, ushering in a new era of protectionism, and delivering a profound shock to markets worldwide. The turmoil has now extended to financial markets, and in the past 24 hours, the value of the dollar has slipped along with the confidence of numerous investors. In an ongoing series of twists and turns, the issue of U.S. trade tariffs has taken on increasingly complex and unpredictable dimensions. For days, White House officials' attention was diverted from the trade crisis due to the case involving the director of The Atlantic, who was unexpectedly added to a private Signal chat discussing Washington's attack on Yemen. Now that the matter seems to have subsided, the government has quickly resumed its economic battle, accelerating new tariff measures. The global fashion sector, already on shaky ground, now faces new uncertainties. The United States is one of the world's largest consumers of clothing and footwear (in 2023, the U.S. spent $175 billion on apparel and accessories, according to ExportUSA), making it a crucial market for the entire industry, especially with the sharp slowdown in Chinese sales. With the vast majority of fashion products being imported (according to BoF, the U.S. imports 98% of its clothing and 99% of its footwear), almost no garment or accessory sold on American soil will be spared from the new tariffs.

However, these tariffs will not affect everyone equally. For about two dozen countries with which the U.S. has a trade deficit, the tariffs will be significantly higher. Goods from Vietnam, the second-largest exporter of clothing to the U.S. after China, will face a 46% tariff, those from Cambodia 49%, and from Bangladesh 37%. China will see a further 34% increase on already announced tariffs, bringing the total to 54%, while the European Union will be hit with a 20% tariff. The luxury sector, despite the global slowdown, has so far demonstrated resilience in the U.S. economic landscape, but its structural fragility is now becoming more evident: local production is limited, and rising costs risk severely impacting an industry that has already experienced continuous price increases in recent years. Among the few brands with significant manufacturing presence in the U.S., LVMH is the only one that inaugurated its third factory on American soil in 2019. According to RBC Capital Markets analyst Piral Dadhania, cited by BoF, these facilities represent about 50% of the group's production volume in the U.S.. This means that, among all luxury groups, LVMH could be the least affected by these tariffs, provided its U.S. production arm can minimize imports as much as possible. The impact of the new tariffs, however, will not be limited to luxury. Sportswear brands are among the most exposed, having already diversified their production away from China during Trump's first presidency. However, many had relocated to Vietnam and Cambodia, now facing another surge in costs. Nike, for example, produced 50% of its footwear in Vietnam in 2024, while On manufactured 90% of its shoes there.

The consequences of the trade war are already being felt. Following the announcement of the new tariffs, the stocks of American brands and major groups have plummeted: Lululemon lost over 10%, Nike and Ralph Lauren 7%, while Tapestry, Capri, and PVH Corp. fell by about 5%, with declines exceeding the 4% drop in S&P 500 futures. Supply chains will also be hit hard. After Trump's previous tariff announcements, companies like Walmart had already begun negotiating with suppliers to cut costs, but with margins already reduced to a minimum, the pressure on factories will be unsustainable. The crisis will ripple through the entire supply chain, from textile producers to farmers, as companies will have to completely rethink how to redistribute prices and costs. In response to this situation, brands and retailers will have to decide whether to absorb the increases to keep prices unchanged or simply raise prices, further undermining consumer confidence, which in March fell to its lowest level since the pandemic. “More tariffs mean more anxiety and uncertainty for American businesses and consumers,” said David French, Executive Vice President of the National Retail Federation. The ongoing trade war is leading the United States toward unprecedented economic isolation. During a press conference in the White House gardens, Trump declared, “Today is Liberation Day, the day we made America rich again.”

The impact will be devastating for several markets. Italy, according to Repubblica, will suffer losses exceeding 2 billion euros in exports, while China will face an overall 54% increase in tariffs on goods destined for the United States. The CEO of H&M, Daniel Ervér, has already stated, as reported by Reuters, that the fast fashion giant might relocate production to bypass the tariffs, but the White House's decisions seem to turn every strategy into a mere illusion: changing everything to change nothing. And while markets try to adapt, another countdown is inexorably advancing. On April 5, the extension granted for the use of TikTok in the United States will expire, paving the way for a possible ban or a forced sale of the platform. Last year, Congress passed the "Protecting Americans from Foreign Adversary Controlled Applications Act," a regulation requiring ByteDance’s Chinese owners to sell TikTok to U.S. entities. Although the app was temporarily removed during a dramatic weekend in January, Trump granted a 90-day extension until April 5 to facilitate the sale, which now hangs in the balance. With the deadline approaching, the risk of an escalation in geopolitical tensions and economic repercussions is more real than ever.

In the context of the rivalry between Washington and Beijing, the core issue is data management and control over TikTok's algorithm. The platform currently has around 170 million American users, or half of the U.S. population, and lawmakers fear that ByteDance, subject to China’s national security laws, could share sensitive information with Beijing. For years, the U.S. has tried to mitigate these risks: in 2022, TikTok launched a $2 billion initiative to store U.S. user data on Oracle Corp.'s cloud servers, but the measures taken have not eased the American government's concerns. With just days remaining before the deadline, the White House appears close to approving a deal to transfer TikTok to American investors. Among the potential buyers, as reported by Financial Times, are Andreessen Horowitz, Blackstone, and other major private equity funds, which would acquire about half of TikTok’s U.S. operations. Another 30% would go to existing ByteDance investors, such as General Atlantic, Susquehanna, KKR, and Coatue. The deal, which stipulates that ByteDance retains a stake of less than 20% to comply with U.S. regulations, is still in its preliminary stages and will require months of negotiations and financial structuring before it can be finalized. A key point of contention remains control over TikTok's algorithm, considered the app’s true strategic asset. China has consistently imposed strict restrictions on the export of advanced technologies, and according to some sources, one option under discussion would allow ByteDance to continue developing and managing the algorithm while licensing it to the new U.S. entity. However, many argue that to meet U.S. regulatory requirements, control would need to be fully transferred to American investors.

Meanwhile, interest in TikTok continues to grow. According to the New York Times, Jeff Bezos has made a last-minute bid to acquire TikTok's U.S. operations through Amazon, but for now, the group of investors already involved in the deal remains the frontrunner. The White House, with an unprecedented level of involvement, is playing an active role in the negotiations, effectively acting as a financial institution. If the deal goes through, TikTok would become part of the American Big Tech ecosystem, further strengthening the U.S.’s digital dominance. But beyond the trade war, the real issue remains control over data and algorithmic power: whoever owns TikTok will control a massive portion of the global digital future.