The apparel industry has long relied on China as a quality manufacturing hub, but escalating tariffs on Chinese goods entering the United States have forced brands to rethink their supply chain strategies.
With apparel tariffs reaching as high as 25% under Section 301 trade measures, and Trump now adding a further 10% to Fast Fashion Chinese Apparel, brands and retailers must find innovative ways to mitigate costs and maintain profitability.
Here are five effective strategies to navigate China tariffs on apparel imports to the U.S.:
1. Diversify Manufacturing Locations
One of the most effective ways to mitigate tariff costs is by diversifying manufacturing locations. While China remains a dominant player, many brands are shifting production to other countries with lower tariffs and competitive labour costs.
Alternative Manufacturing Hubs:
- Vietnam: A popular choice due to its skilled workforce and participation in trade agreements like the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). Note that MOQ’s in Vietnam are usually tailored for mass bulk and so expect average MO’s to be 2 – 5,000 pieces per style.
- Bangladesh: Known for its low labour costs and established apparel sector. Service, ethics and quality can be an issue compared to China.
- India: Offers large-scale textile production capabilities and growing apparel manufacturing infrastructure. Great for low cost, simple to produce apparel. Not as service focussed as China and quality on technical products are not on par.
- Europe: An established territory of high-quality apparel factories. Focussed on quality, ethics and sustainability
Shifting production outside China requires planning, but the long-term savings on tariff costs might justify the transition depending on the scale of your production. Many brands adopt a “China Plus One” strategy—maintaining their bulk production with Chinese manufacturing while adding an additional location to supplement production.
2. Optimise Supply Chain and Logistics
Reevaluating your supply chain and logistics can help mitigate the impact of tariffs. Apparel brands can explore various options to reduce costs and increase efficiency.
Strategies for Supply Chain Optimisation:
- Nearshoring: Moving production closer to the U.S., such as Europe, Mexico or Central America, to reduce shipping costs and lead times.
- Reshoring: Bringing some manufacturing back to the U.S. to qualify for “Made in USA” benefits and avoid tariffs altogether.
- Free Trade Zones (FTZs): Utilising FTZs in the U.S. allows companies to defer, reduce, or even eliminate certain duties.
- Third-Party Logistics (3PL) Providers: Partnering with experienced logistics providers can optimise shipping routes, reduce customs delays, and improve cost efficiency.
At Blue Associates Sportswear, we work with factories in China, Vietnam and Europe. We always suggest brands produce their technical sportswear in the very best factory that specialises in that type of activewear, regardless of tariffs.
Never look to switch factory based on tariff saving if the product quality, factory service, ethics or costs suffer.
3. Reclassify Products Under Favourable HTS Codes
Harmonised Tariff Schedule (HTS) classification plays a crucial role in determining the tariff rate of imported apparel. Properly classifying products under a more favourable HTS code can result in lower duties.
How to Optimise HTS Classification:
- Review Product Materials: Some fabric compositions or blends may have lower tariff rates than others.
- Modify Product Designs: Slight adjustments to fabric percentages or garment construction may qualify for a different HTS code with lower duties.
- Work with Customs Experts: Collaborating with trade attorneys or customs brokers ensures compliance while exploring classification opportunities.
Misclassification can lead to penalties, so it’s essential to ensure accurate documentation while seeking classification advantages.
At Blue Associates Sportswear, we suggest technical sportswear might be subject to be classed as equipment under certain circumstances. These might be subject to lower HTS tariffs.
4. Leverage Trade Agreements and Tariff Exemptions
Trade agreements can provide significant relief from tariffs. Many countries enjoy preferential trade terms with the U.S., allowing apparel brands to benefit from reduced or zero tariffs.
Key Trade Agreements to Consider:
- USMCA (United States-Mexico-Canada Agreement): Apparel made in Mexico or Canada using regional materials may qualify for tariff-free entry.
- GSP (Generalised System of Preferences): Grants duty-free treatment to specific products from developing countries (though apparel has limited coverage under GSP).
- African Growth and Opportunity Act (AGOA): Apparel manufactured in eligible African countries can enter the U.S. tariff-free.
- CAFTA-DR (Central America-Dominican Republic Free Trade Agreement): Offers duty-free access for qualifying apparel from Central American nations.
Understanding and utilising these agreements can significantly reduce tariff burdens for apparel businesses.
Remember, we don’t recommend sourcing technical sportswear based on these cost savings alone. The factory quality, expertise, service and costs need to be paramount before you look to optimise and trade agreement.
5. Adjust Pricing, Sourcing, and Product Strategy
To remain competitive despite tariffs, sports apparel brands may need to adjust pricing, sourcing strategies, and product offerings.
Strategic Adjustments:
- Increase Pricing Strategically: While passing some costs to consumers is inevitable, brands must find the right balance to remain competitive.
- Negotiate with Suppliers: Working closely with Chinese manufacturers to share tariff burdens or negotiate better pricing can help offset additional costs.
- Focus on High-Value or Niche Products: Shifting towards premium, specialised, or high-margin products can absorb tariff expenses more effectively.
- Explore Direct-to-Consumer (DTC) Models: Reducing reliance on intermediaries can improve margins and offset tariff costs.
China tariffs on fast fashion apparel imports to the U.S. present significant challenges, but businesses can navigate these hurdles through diversification, supply chain optimisation, strategic classification, trade agreements, and pricing adjustments. By implementing these five strategies, sports apparel brands can remain resilient and competitive in an evolving trade environment.
If you are looking to produce performance sportswear and need to source the best factory for the job, then please get in touch to discuss your needs.
