Mario Cordero is the CEO of the Port of Long Beach and has issued a warning: U.S. tariffs on imported goods, especially from China, are going to create potential shortages in products.
Tariffs are as high as 145% on some goods imported from China, which will lead to a drastic decline in shipments of different products, including popular fashion items.
There are real-time declines in container traffic and mounting evidence that retailers may be pausing or cancelling shipments entirely. Fashion items are in massive demand in the U.S. market and rely on complex supply chains.
Disrupting Supply
If we can learn anything from previous tariffs, it is that they disrupt the supply of products and prevent them from reaching consumer markets. The 2018-2019 trade war between the U.S. and China showcased these disruptions clearly, especially with fashion and clothing items.
Although retailers try to get around tariffs by rerouting supply chains, higher costs could lead to empty shelves and higher prices for imported fashion items.
With more aggressive tariffs imposed, the disruptions could be at an even greater magnitude than the tariffs from 5 years ago. Tariffs this time around are focusing on more than just fashion products, but on the raw materials that are essential in their production.
A Unique Vulnerability
Fashion is especially vulnerable to changes in supply chains. Electronics and automotive products have more longevity compared to fashion products, which temporarily trend and change depending on consumer tastes. Many American brands create their products in factories in Asia because of their efficiency and cost.
More than 40% of apparel sold in the United States comes from China. Tariffs have huge implications for this industry, which means that brands may have to quickly pivot their business model. Missed shipments could have ramifications, such as missing two seasons in unsold clothing, which doesn’t hold its value over time.
Zara and H&M are fashion giants, but even a two-week delay can cost them both millions of dollars in lost revenue and lowered brand loyalty.
A Domino Effect
Tariffs can cause a domino effect. When imports are slowed, then entire supply chains are disrupted. The Port of Long Beach supports 575,000 jobs in Southern California. The supply chain extends from longshoremen to truckers to warehouse workers.
With less cargo coming in, these jobs could be put into jeopardy as there becomes a lower demand for importation. Fewer imports also mean less work for logistics firms and reduced tax revenue for municipalities.
Many retailers stock their shelves with imported fashion brands and rely on them to turn a profit. Fewer of these products could lead to employees being laid off or stores being closed entirely.
A Dilemma
Multinational retailers may lose a lot of revenue, but they have the capital to weather out short-term shocks such as these. The businesses hit hardest are small and local importers who lack the overhead to suddenly have to absorb higher costs or reroute supply chains on short notice.
Over 30% of smaller importers are already seeing the effects of these tariffs through inventory shortages and cash flow crises, according to the National Retail Federation.
Fashion retailers have a dilemma on their hands: pay higher duties on their inventories, factor the price into what the consumer pays, or potentially weather the storm, which many smaller companies wouldn’t survive.
Adapting
The retail sector is scrambling for solutions amid this crisis, but in surprising ways that may not benefit consumers. Inventories are running low, and prices are being raised, forcing many consumers to look to other options, such as secondhand markets or to stop spending their money on fashion items altogether.
Many consumers say that if the prices of fashion apparel rise by even 10%, they would start buying fewer apparel. Retailers may know this and could cancel orders and only continue to import essential goods, or branch out into other categories.
The fashion landscape will be altered as retailers adapt and consumers start to spend less time looking at fashion luxuries that are no longer affordable.
Other Views
There are different views on this issue, with some policymakers saying that the tariffs could spur a renaissance in United States fashion apparel manufacturing. Just forty years ago, the domestic manufacturing of garments was much higher than it is today.
Now, factories account for less than 3% of apparel sales in the United States. However, even if the demand for fashion surged and retailers looked to domestic means of production, rebuilding lost capacity would take years and be a massive undertaking, and an investment in infrastructure and equity.
Before there was domestic independence in fashion production, consumers faced higher costs and less variety.
A Counterfeit Surge
While the legitimate importation of branded fashion items slows down and their prices skyrocket, there is an opportunity for gray markets to open up.
If official supply chains slow down, then consumer demand can shift to alternative sources. The global trade in counterfeit fashion goods is more than half a billion dollars per year, and the United States is the biggest target.
Tariffs could exacerbate this issue by making genuine products scarcer and less affordable. Consumers may look for other sources for products online, unwittingly knowing that they are counterfeits of reputable brands.
Eroding Progress
Tariffs are undermining several aspects of the fashion industry, including sustainability and ethical sourcing.
Many brands in the United States have spent substantial time and financial investment in building relationships with foreign suppliers to make sure that fair labor practices and eco-friendly methods are used in the process of manufacturing their products.
Brands may face difficult choices, as progress could be eroded by cutting corners and regressing back to previous manufacturing methods. Brands will prioritize their survival over ethics, and it is a silent consequence of the tariffs introduced.
An Unavoidable Reality
The product shortages that Mario Cordero has warned us about are an unavoidable reality and are a data-driven assessment predicting the future consequences of the steep tariffs, which affect already fragile supply chains in a world where the fashion industry demands efficiency, speed, and variety.
The ones taking the brunt of this blow will be the consumers, who will either face a shortage of items or much steeper costs before domestic manufacturing can be put in place.
Discover more DIY hacks and style inspo- Follow us to keep the glow-up coming to your feed!
Love content like this? Tap Follow at the top of the page to stay in the loop with the latest beauty trends, DIY tips, and style inspo. Don’t forget to share your thoughts in the comments — we love hearing from you!