Emergency tariffs are out, a global 15% levy is in, and fashion is still paying the price

The Supreme Court’s decision to strike down President Trump’s emergency tariffs has evoked reactions of both surprise and confusion. More so, since in response the White House created a new global tariff—using a different legal authority—initially set at 10%, then quickly raised to 15% on imports from pretty much all countries for up to 150 days without Congressional approval.

Meanwhile, Democrats in Congress are pushing legislation that could refund as much as ~$175 billion in tariff revenue collected under Trump’s “illegal tax scheme,” in the words of Senate Finance Committee Ranking Member Ron Wyden, though whether retailers would actually see that money any time soon remains unclear. Like we said…confusing.

So where does this leave fashion and luxury retailers that have been doing the tariff dance for a while?

Now and when: Per Kelly Pedersen, partner and global retail leader at PwC, relief may be coming—just not yet.

“Do I think there’s going to be a Q2 impact? Probably not, because a lot of the goods were already brought in for Q2 and they’re paying those previous rates,” he told Retail Brew. “The one thing that’s really important here is that the refund, if there is a process…that process to get that money back that was already paid for the higher tariffs is just not defined.”

Comparing the process to when the tariffs were first announced and the months of back and forth that followed as it worked its “way through the system,” he said it took a while before retailers actually saw an impact to their margins since they were buying retail inventory far in advance.

“I think a lot of consumers say there’s a bit of a roadblock in the tariffs,” he said. “It’s going to mean things are going to be cheaper right away, and I just don’t think that’s the reality, especially with fashion apparel, which has longer life cycles.”

Hold on, now: Joanna Rangarajan, managing director in the consumer and retail group of Alvarez & Marsal, however, differed with Pederson’s point of view in regard to seeing no impact in Q2, noting that retailers had already built higher tariff costs into their Q2 plans. If rates come in lower than expected, margins could see a slight lift versus forecast, though they’re still likely to trail last year’s levels given the lingering impact of reciprocal tariffs.

She explained via email that the uniform global tariffs announced at 15% meant that “tariffs are still in place and just slightly lower, standard rates than what non-China countries were subject to under the reciprocals.”

(Supply)-chain reaction: But perhaps any drop in tariff rates, especially for countries such as China, India, Bangladesh, and Vietnam, which serve as manufacturing hubs for major fashion retailers, ultimately raises questions about supply chain diversification.

In the aftermath of the initial tariffs, many fashion retailers scrambled to at least partially move their manufacturing facilities away from China (which was hit the hardest) to countries like Vietnam and Bangladesh to minimize the impact.

Today, Pedersen said, most brands will take a “wait and see” approach.

“There was a big movement away from China, and then you had all the political arrests that were happening in Hong Kong,” he explained. “They started putting sourcing offices in Thailand and Vietnam, Singapore, all these places, and then building more capabilities in regional and Southeast Asia. A lot of companies came back to China and to Hong Kong, and now they’re sort of like, ‘We’ve had all this movement. It’s pretty hard for us to constantly have this really quick reaction because it costs a lot of money to switch.’”

Not only is switching expensive, but also extremely inconvenient. So while apparel brands are likely to continue to diversify, Pederson said, “they just hesitate on knee-jerk reactions.”