Trump's Tariff Plans Spark Uncertainty for the Denim Industry

Yahoo

06-05-2025

'Many consumers might not know this, but the U.S. heavily relies on Mexico for our denim. In fact, in 2023, Mexico was the leading importer of denim fabric (made from at least 85 percent cotton) to the U.S., with imports valued at nearly $56 million, according to Statista,' said Javier Palomarez, founder and CEO of the United States Hispanic Business Council (USHBC). 'If Trump's tariffs on Mexico are broad and ultimately apply to many goods—including materials or products related to denim—the ultimate cost of importing denim from Mexico will greatly increase.'
While specifics are currently scarce, twice-deferred 25-percent duties on goods from Mexico and Canada not covered by the United States-Mexico-Canada Agreement (USMCA) took effect on April 2, which Trump refers to as America's 'Liberation Day.'
Fast-forward to 2025, and the president has continued his aggressive trade policies—this time with an even sharper focus on addressing trade imbalances and 'protecting domestic industries.'
While China was a primary target of Trump's trade policies, his efforts to reshape global commerce extended beyond Asia. He also imposed the United States-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA)—signed in 1992 by Canada, Mexico and the U.S.—to create a 'more balanced and reciprocal trade environment, support high-paying jobs for Americans and foster economic growth in North America,' according to U.S. Customs and Border Protection.
During his first term, Trump imposed tariffs on $380 billion worth of Chinese goods. In response to these aggressive trade measures, the U.S. and China negotiated a Phase One trade agreement in early 2020, aiming to rebalance their trade relationship and safeguard American intellectual property and technology.
Since taking office as the 47th president just over two months ago, Trump has signed multiple executive orders that have caused panic across the globe, including efforts to dismantle the Department of Education and reduce the federal bureaucracy. However, one order that has put the denim industry—along with many others like pharmaceuticals and automotive—on edge is the president's plan to impose new tariffs on key trading partners, including Mexico.
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Despite the challenges ahead, denim mills and brands remain cautiously optimistic.
While Artistic Milliners (AM) is based in Pakistan, where most of its production takes place, it recently expanded its global footprint by acquiring VF Corporation's Dickies de Parras S. de RL de CV facility in Parras, Mexico.
When the acquisition was announced, AM moved quickly to upgrade the 10-acre complex, which consists of two buildings. The company also reaffirmed its commitment to expanding in Mexico, stating that it remains on track to scale its operations in the region. Its decision to push forward with these plans showcases AM's confidence in the long-term viability of its expansion strategy, regardless of looming tariffs.
'We are continuing business as normal. We strongly believe in the add value benefit of being in [Mexico] and investing in it,' Sergio Turbay, executive vice president of global strategy and sales at AM, told SJ Denim. 'The great thing is that our brands and partners believe in this as well. So, we are continuing our investment, and we look forward to expanding our manufacturing in the region [even further].'
Los Angeles-based women's denim brand Ética is also unconcerned about Trump's tariffs and is 'proceeding with business as usual.'
'As of right now, we're not too worried about it—but we'll see what happens [further down the line],' a sales representative at Ética Denim, which operates a factory in Puebla, Mexico, told SJ Denim. 'I've been asking our CEO [Agustin Ramirez] about it, and he doesn't seem too concerned. So, for now, we're taking a wait-and-see approach.'
The representative added that Ética's size gives it more flexibility compared to larger brands. 'We're still a relatively small brand and company, so we're able to be a little nimbler than some of our bigger partners. That gives us some breathing room to adapt if needed.'
Dr. Sheng Lu, professor of apparel studies at the University of Delaware, is not as optimistic, though. Lu noted that if denim products made in Mexico do face new tariffs when exported to the U.S., their price competitiveness could be significantly impacted, potentially leading to a loss of market share.
Lu's research for the '2024 Fashion Industry Benchmarking Study,' conducted in collaboration with the United States Fashion Industry Association, shows that a significant portion of U.S. denim imports from Mexico serve the mass and value market segments, where consumers are highly sensitive to price changes. 'While Mexico is a key supplier of denim products to the U.S. market, similar products are also widely available from Asian countries like Bangladesh and China,' he said. 'Additionally, many 'Made in Mexico' denim garments incorporate U.S. cotton, yarns and fabrics through a regional supply chain. As a result, a decline in U.S. denim apparel imports from Mexico could also have a negative impact on the U.S. textile industry.'
Beyond the tariff increases themselves, Lu noted that a major concern for U.S. denim brands is the ongoing uncertainty surrounding trade policy. With no sourcing destination considered 'safe' or immune to Trump's tariffs, U.S. brands and retailers are hesitant to commit to expanding production in any country, he added.
'A significant increase in sourcing 'Made in the USA' products is unlikely due to limited production capacity,' he said. 'Even sourcing diversification—once a widely adopted strategy to mitigate risk—may be less effective this time, as any country could be targeted.'
Looming labor challenges
Another significant challenge facing mills and brands is the increasing labor shortage in Mexico.
For years, Mexico's appeal as a manufacturing hub has been driven by its low labor costs and young workforce. In fact, fully loaded manufacturing labor costs range from $6 to $8 an hour, including bonuses and benefits, while roughly one-third of the country's population—around 42 million people—is 19 or younger, according to Boston Consulting Group (BCG). However, Mexico's labor market has begun to show signs of strain.
According to AM, rising labor costs in the region are largely due to the USMCA agreement aimed at 'leveling the playing field.'
'Fabric pricing in the region reflects what our clients expect compared to other regions and their macroeconomic situations,' Turbay said. 'Just like our clients, we must remain calm and take a long-term view. We believe that trade policies for clothing will eventually be exempt, and we're in a strong position to compete due to our global presence. This is a key differentiator that we're very excited about.'
Erik Kingsley, partner at Kingsley Szamet law firm—where he focuses on employment law and workers' rights—echoed AM's sentiment, adding that Trump's proposed 25-percent tariffs on Mexican goods could have 'significant implications' for labor markets on both sides of the border.
'If these tariffs take effect, the immediate impact will likely be a downturn in Mexico's textile and apparel manufacturing sector. U.S.-based brands that currently rely on Mexican production may scale back orders, seek alternative suppliers or even relocate operations to avoid higher costs,' Kingsley said. 'This could result in job losses and wage stagnation for Mexican workers in these industries. In some cases, factories may shut down altogether if the cost increase makes them uncompetitive in the global market.'
Over the long term, Kingsley added, continued aggressive trade policies could push companies to diversify their supply chains, reducing reliance on Mexico in favor of other manufacturing hubs in Central America or Asia.
'Mexico may respond by incentivizing domestic production or strengthening trade relationships with non-U.S. partners,' Kingsley said. 'Additionally, we could see increased automation in manufacturing as companies seek to offset higher costs by reducing labor dependence.'
Beyond the impact on Mexico, these tariffs could also disrupt U.S. employment.
'If the cost of importing textiles rises significantly, American retailers and brands may face financial strain, leading to job cuts or price hikes that affect consumers. Additionally, since Mexico remains a key trading partner under the USMCA, these tariffs could strain diplomatic and economic relations,' Kingsley said. 'Businesses operating in both countries should prepare for potential volatility and legal challenges as these trade measures unfold.'
Although the future remains uncertain, Patricia Medina, principal of Mexico-based denim manufacturer Aztex Trading and co-director of Mexmakers, a collaborative network of Mexican textile and apparel manufacturers focused on sustainable and traceable full-package production, believes Mexico will continue to be a vital manufacturing hub—especially for brands that recognize the shifting global landscape.
'The world in which NAFTA was created no longer exists, but Mexico still has a crucial role to play,' Medina said. 'We can and will serve the new markets—those that prioritize more than just the initial cost of production.'
This article is published in SJ Denim's spring issue. Click here to read the full issue.