U.S. Fashion Industry Howls as Tariffs Eat Into Bottom Lines

The global fashion industry is bracing for 2026, navigating a market defined by geopolitical instability, macroeconomic uncertainty, and, above all, unprecedented US tariffs.

Even with a structural advantage, companies like Levi's are forced to take strategic action to cushion the impact of tariffs.

As leaders pivot from focusing on “uncertainty” to acknowledging the environment is simply “challenging,” tariffs have emerged as the worst hurdle facing executives, Nick Lichtenberg reported for Fortune.

The severity of the trade landscape cannot be overstated, executives told McKinsey and the Business of Fashion for the 2026 edition of The State of Fashion report. US tariffs on apparel and footwear imports, which had been around 13% earlier in 2025, dramatically spiked to 54% following initial government announcements in April.

Although rates later eased, the weighted average tariff rate for apparel and footwear from the top 10 importers stood at 36% as of mid-October — well above historical norms.

This sudden surge places the apparel and footwear industry among those most exposed to the tariffs’ profound impacts.

Levi’s CEO Michelle Gass said her company entered the fray with a structural advantage.

At least 60% of its business is international, reducing the tariff burden compared to many domestic competitors. Yet even with this advantage, the tariff increases demanded strategic action.

Gass described the overall environment as “very complex,” encompassing macroeconomic forces, geopolitical issues, and massive disruption in technology and AI, and she articulated the unavoidable reality of passing some costs on to the consumer, stating plainly: “There’s only so much you can absorb from the tariffs, because they’re just very high.”