The trade war is here and it’s coming for your fits.
After months of will-he-won’t-he speculation, Donald Trump unveiled a blistering raft of tariffs against friends, foes, and penguins alike on 2 April, which he dubbed “Liberation Day.” Tariffs, which Trump once called “the most beautiful word,” have been wielded by every administration as both an economic and political tool, but the current president uses them as a cudgel in his quest to redress trade deficits and reshore—a fancy way of saying “reestablish”—American manufacturing. In the days that followed, global markets convulsed, wiping nearly USD2.5 trillion off the S&P 500 and causing the Financial Times to label the announcement an “astonishing act of self-harm.” That may be why the White House has since paused most of the tariffs for 90 days—or maybe it was all part of the plan from the beginning.
If you’re wondering how all this will affect your closet, you’re not alone. Speculation about tariffs’ impact on the fashion industry’s bottom line, and what the trickle-down effect will be for consumers, has run rampant in both trade papers and on social media. Esquire reached out to economic experts and industry insiders to help you understand what’s happening, what you can expect at the register, and if the dream of American-made really could return.
“A tariff is essentially a tax that a country applies at the border,” says Kyle Meng, Associate Professor, the Department of Economics at the University of California, Santa Barbara. Professor Meng gave the example of Nike, who produces half of its footwear and nearly a third of its apparel in Vietnam. “When that shirt or pair of shoes arrive at the US border, Nike buys it from some producer. That transaction is taxed by the US government. So instead of paying a hundred dollars, if there’s a 10 per cent tariff. Nike now has to pay USD110.” That number could, in reality, be much higher as Vietnam is under the looming spectre of a 46 per cent tariff. But whatever the final tally, Professor Meng points out that the company then has to decide how to cover the additional cost. And this is where it’s helpful to understand retail margin.
Put simply, margin is calculated by taking the retail price of an item and subtracting the cost the business paid for it. Using Professor Meng’s example, if Nike retailed that USD110 item for USD150, its margin would be USD40. A brand with high margins has more ability to absorb the increased cost and avoid passing along a price hike to its customers. A brand with narrower margins does not. But either way, as Professor Meng points out, tariffs eat into profits and that has a ripple effect, from reduced R&D to a decrease in quality and, in the worst-case scenario, workforce layoffs.
“So [a tariff] is a tax that is paid for by US companies that will ultimately be faced by US consumers,” says Professor Meng.
A 10 per cent increase might not sound so bad, but unfortunately the math isn’t that straightforward. (Is it ever?) Andrew Chen, a co-owner of New York-based denim brand 3sixteen, knows this all too well. In a widely shared video, he broke down the impact of the tariffs on small fashion brands like his, including why raising costs even USD10 equates to a potential USD40 to USD50 price increase down the road for customers.
“So if our fabric costs go up we have to increase the price that we sell it to the wholesale account,” he told me. “If we increase our prices to our wholesale account by USD10, what they received at USD100 is now USD110. They're not gonna go and sell it for that; they need to make their profit too. And in fashion, [markup is] anywhere from 2.2 to 2.5 [times the cost].”
3sixteen cuts and sews its jeans in the US from Japanese fabric, which could face a 24 per cent tariff—and that’s a big part of the rub here. While tariffs are ostensibly about protecting US industry, those businesses are fed the raw materials they require by a vast and complicated global supply chain. By enacting tariffs on those raw materials, the cost increases reverberate all the way down to your favorite local retailer’s sales floor.
Whether you support President Trump and his policies or not, you probably can agree that more American manufacturing would be a net positive to workers, communities, and the economy as a whole.
“The United States created a nation of wealth and prosperity, turning raw materials into manufactured goods, and at some point, I don't know when it was, there was a bizarre decision to abandon that,” says Jacob Hurwitz. He’s the co-founder of Philadelphia’s American Trench, which manufactures all of its garments in the US.
American Trench is part of a new generation of US fashion brands and factories that aspire to reclaim some of the garment industry’s glory days. But as Hurwitz points out, they’re swimming upstream against a glut of cheap goods that Americans may be unwilling, or unable, to part with. (Hurwitz’s American Trench Coat retails for USD849; An Ogiraw trench coat at Walmart retails for USD28.88.)
So will tariffs bring back American manufacturing? “The answer that I understand from history and economists is that tariffs create winners and losers,” replies Hurwitz. “If someone were to say, ‘Well the tariffs should help you as a made in USA manufacturer,’ I could immediately say that I have received no benefit.”
There are also unintended consequences, like when tariffs on cotton yarn cause large retailers to buy up all the domestically produced supply, keeping it out of the hands of small businesses. “There's only a certain amount of capacity and it's not like a new cotton yarn spinner is gonna spring up overnight,” observed Hurwitz. “It could take many years to build a new spinning mill.”
With the on-and-off nature of the tariffs, taking them in stride is important to not get caught up in the news feed whiplash.
“I have been getting a couple of texts here and there from homies that are just like, ‘Yo, what do you guys make of all this?’” Chen says. “I lost some sleep during the last round…so to dedicate too much head space to it is just gonna be detrimental to our day-to-day business operations.”
It’s worth noting that tariffs are only applied to new goods that cross our borders, so shipments that are already in stores, or that have passed Customs, will remain at their current prices. If there's an investment piece, like a new winter jacket or suit, that you were thinking about picking up in the next year, now would be a good time to grab it. And if you’re not already a fan of vintage and resale, this is a great time to get acquainted, since you can’t tariff what’s already been in existence for years.
Maybe when the dust settles, the markets chill, and the politicking ends, tariffs will have opened up an honest dialogue about making things in America again, who benefits, and how our purchasing decisions can help accomplish that.
“We want to support opportunity and excellence,” says Hurwitz. “Support beautiful craft and the dignity of manufacturing.”
