Sunday, December 22, 2024

Will Trump’s Tariffs Make Shopping For Clothes More Expensive?

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Photo: Bryan Bedder/Variety via Getty Images

If you’re thinking about doom spending, you might want to do it now. In recent days, several CEOs of fashion and beauty brands have spoken publicly of their concerns about one of the central points of Donald Trump’s reelection campaign: steep, widespread tariffs that many economists say will push up the prices on everything from bikes to couches to, yes, fashion. What will these taxes mean for shoppers when we’ve already seen many clothing brands become more expensive, often while feeling disappointingly cheap? Here’s what we know so far.

A tariff is a tax on imported goods paid to the federal government by the company importing the goods. Trump loves tariffs (he calls himself “Tariff Man”), and during his first administration, he introduced many taxes on imported goods, especially from China, escalating a trade war.

But Trump’s first tariffs were tame in comparison to what he says he has planned now. In the run-up to the 2024 election, Trump promised to introduce a 60 to 100 percent tax on imports from China and a 10 to 20 percent tax on imports from all other countries.

About 98 percent of all clothing sold in the U.S. today is made abroad. And most of that clothing is made in Asia, specifically in China and Vietnam. Some brands, like American Eagle Outfitters and Crocs, make more than 20 percent of their wares in China.

Since 2016, many American retailers have tried to move away from Chinese factories, not just because of Trump’s tariffs but also because of rising wages in the country and other issues. The fashion business typically follows wherever labor costs are lowest, often exploiting workers in countries with low minimum wages and poor labor protections. Because despite the many technological advances in manufacturing today, like robot-making cars, clothing still relies heavily on manual human labor.

Trump says his tariffs encourage American businesses to manufacture in the U.S. But that hasn’t happened, nor does anyone expect it to: It’s still too expensive to manufacture a significant amount of clothing in the U.S. The countries that have most benefited from American brands shifting away from China are Bangladesh, India, and Pakistan, according to the U.S. International Trade Commission.

In 2020 and 2021, we saw the price of clothing in the U.S. spike for the first time in decades. It was the pandemic, and supply chains were in chaos. Shoppers also had more money to spend, and many retailers had cut back on their inventory, leading to product shortages. Trump’s tariffs were just one of a number of factors, and since most of his taxes focused on China, many retailers just moved to factories in other Asian countries.

“The tariffs definitely had an impact, but it is impossible to say exactly how much of an impact they had because there have been so many other factors pushing up costs,” said GlobalData analyst Neil Saunders in an email.

No one knows exactly what’s going to happen once Trump takes office. Some brands and industry watchers believe Trump is bluffing or at least exaggerating the extreme level of his proposed tariffs, as he has in the past. But he’s already proved he will follow through with at least some tariffs. “I think most retailers now expect there to be a much tougher and tighter tariff regime during his second term,” said Saunders.

Meanwhile, many economists are alarmed, warning about the heavy cost that will fall on the poorest Americans. They predict Trump’s tariffs, not seen in this country since the 1930s, will worsen inflation and push other countries to retaliate with painful tariffs.

Saunders said that if the tariffs go forward as Trump has proposed, “I don’t think there will be any choice but to pass on some of the cost increases to consumers.”

In a report released this week, the National Retail Federation, an industry trade group that is heavily opposed to Trump’s plans, estimated that his tariffs will drive up the cost of fashion by as much as 20 percent. That translates to an $80 pair of jeans costing $10 to $16 more, while a $100 coat could cost $12 to $21 more.

But we’re not talking about milk and eggs. No one needs another pair of $80 jeans, especially if one day those jeans suddenly cost $100. “The idea that tariffs drive up prices is a very classroom thing to say,” said Simeon Siegel, BMO’s senior retail analyst. If no one wants those $80 jeans for $100, they’ll just go on sale. Siegel said brands that “don’t have the permission” to raise prices — meaning if they do, shoppers will just stop shopping — probably won’t even try.

Instead, industry watchers say brands will try other tactics, like using cheaper fabrics or pressuring their factories to charge them less.

Trump’s tariffs could take a year to go into effect after he’s sworn into office, but many brands are starting to prepare now. Some might begin slowly raising prices in anticipation of the tariffs. Others are buying in bulk now before the tariffs can set in, as many did before Trump’s first round of Chinese tariffs in 2018.

The CEO of Columbia, Tim Boyle, recently said the outdoor clothing brand will have no other choice but to raise prices in the years ahead. “It’s going to be very, very difficult to keep products affordable for Americans,” he said in an interview with the Washington Post. The CEO of E.l.f. Beauty, Tarang Amin, also recently said that, depending on how big the tariffs end up being, the brand is prepared to raise the prices of its $8 lip oils and $6 eye shadows.

Other fashion companies are hoping that by manufacturing fewer products in China, they can avoid the most painful of Trump’s tariffs. On Thursday, Edward Rosenfeld, the CEO of Steve Madden, said the company is cutting back on its business with Chinese factories, which currently make 70 percent of its shoes. Instead, it plans to manufacture more in — surprise, not the U.S. — countries like Cambodia, Vietnam, Brazil, and Mexico.

Luxury brands like The Row and Chanel can basically charge shoppers whatever they want. That’s why the price of Chanel’s classic flap bag has more than doubled since 2016.

While Trump’s main tariff target is China, he proved during his first administration that he was willing to go after Europe, too. At one point in 2019, he threatened to introduce steep tariffs on French luxury goods, like handbags and wines, to punish the country for its taxes on various American companies. LVMH, the owner of Dior and Louis Vuitton, saw its stock price temporarily tumble in response. In the end, the conglomerate managed to escape the bulk of the tariffs when they actually went into effect later that year.

Around the same time, Trump flew to Texas with Ivanka Trump to mark the opening of a small new LVMH factory outside Dallas, where he posed for pictures with CEO and chairman Bernard Arnault. The Trumps and the Arnaults have had a close relationship in the past — Melania Trump is a fan of Dior, wearing the LVMH brand twice on Election Day. And Puck reported that Arnault’s New York–based son Alexandre Arnault attended Trump’s preelection rally at Madison Square Garden, perhaps an indication of more family-friendly ribbon cuttings to come.

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