Forty-six percent of fashion executives anticipate worsening industry conditions in 2026, up from 39% in 2025, as tariff-driven cost pressures mount — with apparel sourcing prices projected to rise 35% and leather goods 37%. USMCA’s summer 2026 review, the September 2025 expiration of AGOA and Haiti HELP/HOPE, and the Supreme Court’s pending IEEPA ruling compound uncertainty. Forty percent of leaders rank U.S. trade policy among their top three risks — up from 25% last year — while Gap targets Q2 2026 for tariff strategy benefits.
According to www.supplychaindive.com, 46% of fashion executives expect industry conditions to worsen in 2026 — up from 39% the prior year — amid escalating trade policy volatility, tariff uncertainty, and supply chain cost pressures.
Trade agreement reviews fuel sourcing instability
Disruptive U.S. trade policy is now the top concern for fashion supply chain leaders, cited by 40% as one of their top three risks in 2026 — a sharp rise from 25% the previous year, per the BoF-McKinsey State of Fashion 2026 Executive Survey conducted in August and September.
The United States-Mexico-Canada Agreement (USMCA) is set to begin its mandatory six-year joint review this summer, triggering renewed uncertainty. Though enacted in 2020, the pact’s future hinges on political will — with Sheng Lu, professor and director of graduate studies at the University of Delaware’s department of fashion and apparel studies, warning that the Trump administration “might seek significant renegotiation or even replace the USMCA with separate bilateral trade deals.”
Two critical preferential trade programs — the African Growth and Opportunity Act (AGOA) and the Haiti HELP/HOPE program — both expired in September 2025. Their renewal status will directly shape sourcing decisions across Sub-Saharan Africa and Haiti. Meanwhile, the U.S. has reached framework agreements with Bangladesh and other partners, though final terms remain unresolved: under the U.S.-Bangladesh deal, a “to-be-specified” volume of textile and apparel imports would qualify for tariff exemptions.
Tariff uncertainty persists amid legal challenges
A majority — 76% — of fashion executives believe higher levies and trade disruptions will define 2026, according to McKinsey’s survey. Apparel exports from Vietnam and Cambodia often contain 20% to 30% value added in China, per the Organisation for Economic Co-operation and Development’s Trade in Value-Added database — complicating rules-of-origin enforcement if the Trump administration revisits definitions of “transshipment.”
Gap expects to begin reaping benefits of its tariff mitigation strategy starting in fiscal Q2 2026, illustrating how brands are adapting operationally. However, the Supreme Court’s pending ruling on the validity of tariffs imposed under the 1977 International Emergency Economic Powers Act (IEEPA) adds another layer of risk. A decision against the administration could force tariff refunds to U.S. importers — and invalidate trade deals built on those levies.
“They’re just finally able to start making decisions, placing orders, et cetera… [but] will be ‘starting over’ with a new set of tariff parameters if the Supreme Court rules against the IEEPA levies.” — Angela Santos, co-leader of ArentFox Schiff’s customs practice
Cost management becomes non-negotiable
Sourcing costs are now the most pressured element of fashion companies’ economic models, cited by 45% of executives — ahead of pricing and inventory management. McKinsey estimates tariffs will drive short-term sourcing price increases of 35% for apparel and 37% for leather goods in 2026.
These hikes compound existing consumer caution: higher duties translate directly into retail price increases, potentially discouraging purchases in a year when shoppers are already more restrained. To offset this, McKinsey advises suppliers to prioritize productivity gains via lean manufacturing and technology investments — not just cost-shifting.
Brands must also calibrate price adjustments based on real-time consumer reactions and competitor moves — a departure from static markup models. As Lu notes, “The industry’s main agenda in 2026 will be adapting to this new environment where trade, consumer behaviour and technology remain in rapid flux.”
Geographic concentration deepens supply chain exposure
Sixty-three percent of U.S. textile and apparel imports come from just five countries: Bangladesh, China, Vietnam, India, and Indonesia. This geographic concentration heightens vulnerability to regional disruptions — whether regulatory, logistical, or geopolitical.
For example, the expiration of AGOA and Haiti HELP/HOPE removes preferential access for key low-cost sourcing hubs, while ongoing negotiations over USMCA and U.S.-Bangladesh frameworks introduce new variables for nearshoring and diversification strategies. Companies are no longer optimizing solely for cost — they’re balancing speed, compliance, and resilience across overlapping regulatory regimes.
Source: Supply Chain Dive
Compiled from international media by the SCI.AI editorial team.
