The US fashion industry is faced with a challenging situation: tariffs are now generally being raised on imported clothing, which eliminates previous options for reducing costs by diversification of the production locations. This development requires a re-evaluation of the procurement strategies and price models for fashion brands that work on the US market. Does domestic production offer a way out to increase clothing prices for end users: inside?
A theoretical exception of these tariffs is domestic production. However, the current production capacity of the US clothing industry is estimated to be only two percent of the total consumption, which is unavailable for a significant short-term increase in production. In addition, domestic production costs are considerably higher due to the higher wage level and a comparatively less experienced workforce.
Industry expert: Inside, it is assumed that even with a rapid expansion of US production, the resulting price increases for consumers: inside would be less important if the customs costs were at least partially absorbed in the existing supply chain. To illustrate this: a piece of clothing with a free on board (FOB) price of $ 18 (euro) could be occupied with an average customs rate of 38 percent, which increases its costs by about $ 6.84. This would lead to a potential price increase of $ 7 for a retail product that is sold for around $ 90.
While the view of fully automatic, domestic shift in production offers a possible long-term solution for competitive US production, this remains a future perspective that requires considerable capital investments and technological advances. Immediately modem brands have to move on a US market, on which cost pressure is inevitable, which requires strategic price adjustments and a thorough evaluation of the efficiency of the supply chain.