Trade war uncertainties and unpredictable tariffs will challenge apparel companies and retailers in 2026, impacting sourcing management, operational costs and end-to-end supply chain strategies, experts suggest.
Given the expected turbulence, many fashion leaders are feeling pessimistic about the year ahead, according to the BoF-McKinsey State of Fashion 2026 Executive Survey, which queried fashion chain leaders in August and September. Forty-six percent of respondents said they expect industry conditions to worsen in 2026, up from 39% the year prior.
However, the future looks promising for some. According to the survey, 25% of fashion leaders believe that industry conditions will improve, up from 20% a year earlier.
“The industry’s main agenda in 2026 will be adapting to this new environment where trade, consumer behaviour and technology remain in rapid flux,” per the report, which was published in November. “Agile brands that can adapt quickly are likely to emerge as the winners.”
Here are four supply chain trends and risks apparel brands and retailers will contend with in 2026.
1. Trade agreement talks may spur more uncertainty
Disruptive U.S. trade policy will continue to weigh heavily on fashion executives in 2026 — more so than in previous years, according to McKinsey’s outlook. Forty percent of leaders in the survey named this as one of their top three risks — up from 25% the year prior — as tariffs continue to disrupt supply chains and raise costs.
Negotiations are on the horizon for several trade agreements, the outcomes of which could spur new uncertainties for apparel brands and retailers sourcing from specific regions, Sheng Lu, a professor and director of graduate studies at the University of Delaware’s department of fashion and apparel studies, told Supply Chain Dive.
For instance, the United States-Mexico-Canada Agreement is set to begin its review process this summer. The pact, enacted in 2020, includes a clause that calls for a “joint review” every six years.
“Despite broad industry support for upholding the existing agreement and calls to ‘do no harm,’ we cannot rule out the possibility that the Trump administration might seek significant renegotiation or even replace the USMCA with separate bilateral trade deals,” Lu said.
Likewise, the outlook for the African Growth and Opportunity Act and the Haiti HELP/HOPE program — both of which expired in September 2025 — are also causing industry uncertainty.
“Because both programs play a critical role in supporting U.S. apparel sourcing from Sub-Saharan Africa and Haiti, whether and under which conditions they are renewed will directly influence fashion companies’ sourcing decisions and the long-term competitiveness and investment prospects of these regions,” Lu said.
Meanwhile, the U.S. has reached framework agreements with a host of trading partners, but implementation and finalization of term specifics will be crucial to helping brands make sourcing decisions, Lu noted.
For instance, under a reciprocal trade agreement with Bangladesh, the U.S. said a “to-be-specified” volume of textile and apparel imports would be eligible for tariff exemptions.
Further, U.S. President Donald Trump’s use of the term “transshipment” in some framework deals is still unclear, Lu said. That determination could be significant for apparel sourcing if the Trump administration revisits or sets new rules of origin to reduce “China content,” he added.
Apparel exports from several countries in Asia, such as Vietnam and Cambodia, often contain 20% to 30% of value created in China, Lu said, citing the Organisation for Economic Co-operation and Development’s “Trade in value-added” database.
2. Tariff hurdles may persist
Even as trade negotiations continue, the U.S.’ tariff policies, a major driver of global trade uncertainty, will continue to weigh on the fashion industry. Per McKinsey’s survey, 76% of fashion executives believe higher levies and trade disruptions will shape 2026.
Retailers and brand manufacturers have implemented various strategies to shield against tariff exposure over the past year, with some network adjustments stretching back to the first Trump administration.
Some of the efforts have already started to pay off. For example, Gap reported in December that it expects to begin reaping the benefits of its tariff strategy starting in fiscal Q2 2026.
Adding further uncertainty to the tariff equation in 2026 is the Supreme Court’s pending decision about Trump’s broad interpretation of the 1977 International Emergency Economic Powers Act as a way to impose tariffs. A ruling against Trump could force the administration to deliver tariff refunds to U.S. importers, with the legitimacy of trade deals based on the IEEPA levies up in the air.
If the tariffs are invalidated, however, Trump has several other mechanisms at his disposal to impose duties which would introduce a new level of uncertainty, according to Angela Santos, co-leader of ArentFox Schiff’s customs practice.
Fashion companies have generally adjusted their strategies to the current tariff regime, whether by absorbing tariffs or hiking prices, Santos said.
“They’re just finally able to start making decisions, placing orders, et cetera,” Santos said, adding that companies will be “starting over” with a new set of tariff parameters if the Supreme Court rules against the IEEPA levies.
Outside of the supply chain impact, higher duties also pressure consumers by way of tariff-driven price increases, according to Lu. Such hikes could discourage buyers — who are already more cautious about shopping — from purchasing new clothing in 2026.
To handle tariff turbulence, suppliers should prioritize productivity gains through lean manufacturing and technology investments, per McKinsey.
3. Brands will prioritize cost management
Fashion brands will be forced to control their sourcing costs and protect profit margins even more aggressively in 2026, Lu said.
According to McKinsey, 45% of fashion executives say sourcing costs are pressured the most under their economic model, followed by pricing and inventory management. Further, McKinsey estimates that tariffs will drive short-term sourcing price increases by 35% for apparel and 37% for leather goods.
In turn, the report also says brands should base price adjustments on consumer reactions and competitor moves while fostering strategic partnerships to create diversified customer and supplier bases.
“In particular, almost all U.S. apparel imports will be subject to the higher tariffs in 2026, leaving fashion companies with fewer options to use existing inventory to mitigate the effects,” Lu said.
In the quest for more competitive costs, fashion companies will also look for vendors that offer speed-to-market, flexibility and agility in 2026, Lu said.
Many apparel retailers and manufacturers are asking suppliers to absorb increased cost burdens, according to McKinsey, while larger firms are renegotiating contracts to add volume buffers, including capacity commitments and minimum order requirements.
“What I've advised companies as a whole is that they need to diversify their supply chains. They can't rely on one country only because you don't know when that country could be impacted by a new tariff regime.”
Angela Santos
Co-leader, ArentFox Schiff’s customs practice
Other brands are reassessing their SKU mix while considering whether to shift production toward certain products.
“Meanwhile, fashion companies increasingly expect suppliers to accommodate last-minute order changes, accept low minimum order quantities (MOQs), arrange raw material sourcing, and offer other value-added services,” Lu said.
The pressure has also continued to push brands to leverage sourcing diversification, as redesigning networks can help bolster operational agility and resilience, thereby reducing costs.
“What I've advised companies as a whole is that they need to diversify their supply chains,” Santos said. “They can't rely on one country only because you don't know when that country could be impacted by a new tariff regime.”
But even that strategy isn’t risk free. Many companies moved operations to Vietnam and India to avoid levies on imports from China, only for the Trump administration to enact tariffs on those countries, Santos said.
“And so even though these companies spent money and time on shifting their supply chains, they were then burned by that because it ended up in some cases being more costly than some Chinese supply chains,” Santos said. “And now I have clients who are actually looking back at China as a possible sourcing area.”
Suppliers also are considering locations away from traditional sourcing hubs, per McKinsey. For instance, the report notes that Gokaldas Exports — a top India-based manufacturer and a supplier to Gap and J.C. Penney — is preparing to combat tariffs by expanding production capacity in Kenya and Ethiopia.
Higher costs are also incentivizing companies to rethink supplier relationships, such as by helping vendors update facilities and processes to help combat volatility, per McKinsey. Without such partnerships, upgrades might otherwise be a challenge to finance.
4. AI use could increase in sourcing, logistics and inventory management
The fashion industry may also see a rise in the use of artificial intelligence in apparel sourcing in 2026, Lu said.
For instance, more apparel brands may begin using AI tools to optimize inventory levels and logistics, evaluate new suppliers and streamline overall operational efficiency, joining companies such as Mango and Asos.
“AI may also play a more crucial role in supporting efforts around supply chain mapping, traceability, and sustainability data collection,” Lu said. “Overall, we could see a more digitalized and data-driven sourcing process in the new year ahead.”
Predictive supply chain mapping technologies can also streamline the customs process by making shipments more easily traceable to avoid fraud, especially as tariff enforcement increases, Santos said.
“AI may also play a more crucial role in supporting efforts around supply chain mapping, traceability, and sustainability data collection.”
Sheng Lu
Professor and Director of Graduate Studies, University of Delaware’s department of fashion and apparel studies
Ongoing efforts to implement global forced labor laws will also push the need for further enhancements to supply chain traceability, she added. Companies have found it challenging to trace supply chains because they typically only have contact with their Tier 1 suppliers, but new laws require an end-to-end view of the supply chain.
“All of that is driving companies to invest in technologies that can help them with this because for large companies it's almost impossible to do it on a manual basis,” Santos said. “So, I think we're just at the tip of the iceberg in terms of how AI is going to help companies or how AI is being used by companies.”
Digitization can also support greater flexibility in sourcing practices, according to McKinsey. Automating parts of sourcing, inventory management and physical sampling operations can also help save money, per the report.
“Using tools such as AI agents, companies can link systems like product lifecycle management and enterprise resource planning to create a unified view of sourcing, enabling real-time analytics and unlocking double-digit cost savings,” per the report.
