Last Wednesday, Restoration Hardware CEO Gary Friedman was on a call with Wall Street analysts when he asked an associate to share a âlive readâ on the how the companyâs share price was doing.
âOh really? Oh shit,â Friedman said.
Stocks in the company were tanking as investors reacted to Trumpâs âLiberation Dayâ tariff announcement, which imposed hefty duties on the companyâs key sourcing countries in Asia. By Thursday shares in Restoration Hardware were trading down 41 percent.
The fashion industry didnât fare much better. Like the home furnishings sector, many apparel brands rely heavily on Asia for production. The announcement of eye popping import duties on many of the industryâs biggest manufacturing hubs threatened immediate and consequential profit destruction for companies from Lululemon to Urban Outfitters.
It took a week of market chaos for Trump to roll things back, announcing a 90-day pause on most of the heftiest new duties. But imports to the US will still face an additional 10 percent tariff, and goods from apparel-manufacturing-giant China will be slapped with import fees of 125 percent.
In a pairing no one saw coming, some say there is good news for the planet hidden in the inane, unforced and harmful tariffs. Higher prices will do something that no sustainability professional has been able to deliver â slow frivolous consumption. Tariffs, they argue, could spell the end of fast fashion.
It seems likely there will indeed by a consumer slowdown, but that does not mean good things for fashionâs sustainability efforts. Instead, heightened economic pressure is likely to only accelerate a pullback that was already well underway.
A Long-Brewing Crisis
Fashionâs sustainability efforts were decelerating well before President Trump took a sledgehammer to the industryâs prevailing economic model.
This pullback stemmed from a variety of factors. Sluggish growth has prompted many fashion companies to reduce spending, restructure and cut staff. Sustainability teams and budgets have not been spared, particularly as greenwashing concerns and inconsistent consumer interest in âgreenâ products have made the business case for climate efforts less obvious. The resources that are left have been stretched thin servicing well-intentioned, but administratively burdensome regulation that focuses more on reporting than improving on-the-ground conditions. Add in a backlash against so-called âwokeâ capitalism amongst some investors and itâs clear the pressure is coming from every corner.
Even the exuberant sustainability commitments that emerged in the wake of the Paris Climate Accord have been beaten down by the laws of âbusiness as usual.â
Consider, for example, the pledges made when The Fashion Pact, the largest CEO-led sustainability initiative in fashion, was unveiled in 2019. As signatories, many of the industryâs most prominent brands, including Adidas, Prada, Nike, Inditex and Gap, committed (among other things) to reduce their carbon emissions in keeping with boundaries established by science and intended to stave off the worst effects of climate change.
And yet, five years later, two thirds of fashion brands with revenue greater than $1 billion were not on track to deliver on their decarbonisation commitments, according to a study by McKinsey published last year.
This lack of progress is because brands consistently prioritise short-term profits over the longer term, complex and costly work required to make the industry operate more sustainably.
Professionals in the space are increasingly frustrated and burned out. When one manager who recently left her corporate role wrote that âI felt my work had no real impact on moving the needle toward actual sustainability,â her LinkedIn post was bombarded with empathetic commiseration.
Even companies that have presented themselves as sustainability leaders appear to have pulled back. For instance, as Nike went through a major restructuring last July, it laid off a disproportionality large portion of its sustainability team, including many leaders with decades of experience.
Trumpâs tariffs will assuredly make further decarbonisation progress next to impossible for Nike and almost every other fashion brand. This is because the eye-popping duties imposed on almost every major fashion manufacturing country, especially those in Asia, will cripple profits and leave managers distracted and scrambling to respond to the whims of an unstable US President.
A New Race to the Bottom
According to Trump, tariffs âwill pry open foreign markets and break down foreign trade barriers, and ultimately more production at home will mean stronger competition and lower prices for consumers.â
Not for Nike or the rest of the fashion industry.
Footwear and apparel manufacturing will not return to the United States. Even with the added levies, labour costs of $3.10 per hour in Vietnam, for example, remain far below the average US manufacturing wage of $28.64. At the same time, the skills, machinery makers and raw material suppliers needed to make waterproof outerwear or running shoes have long since left the country. In addition, the low shipping costs (relative to the overall costs) of fashion make the likelihood of any migration back to the United States nil.
With smaller teams devoted to sustainability, Trumpâs tariffs will now make it even harder for public fashion brands to devote meaningful resources and focus to labour rights or climate. Meanwhile, unlisted, smaller private companies are facing an existential fight for survival.
To make matters worse, if the industry reverts to its traditional playbook, brands will likely respond to the margin pressures caused by tariffs by squeezing suppliers and cancelling orders. Manufacturers under pressure on pricing may be tempted to cut corners on labour and climate initiatives. Factories will close and thousands of the most vulnerable workers in the industry will lose their jobs. Meanwhile, the ability to bring accountability to bad actors is at a low ebb, with many of the industryâs most prominent labour initiatives knee-capped by foreign aid cuts led by the US.
Is There a Silver Lining?
To be sure, higher prices for everything from running shoes to sweaters, will cause consumers to pull back. At the same time, sales of secondhand goods, not subject to tariffs, will likely also increase, thereby delivering a rare win-win for sustainability professionals committed to restoring the planet to a safe zone.
However, it is fair to question the durability of this potential âwin.â
Recall that we heard the same hopeful forecast not long ago amidst the pain and disruption of the pandemic. According to many, at the time, the disruption would cause the industry to remake its calendar, slow newness cycles and decrease environmental damage.
Instead, consumption shifted online, cycles accelerated and new âinstant fashionâ brands like Shein propelled ever more planetary damage.
The net of the pandemic for fashion should serve as a humbling reminder.
Tariffs will further constrain resources and challenge commitments aimed at sustainability. Until the structure and rules of the system change, fashionâs sustainability teams and results will continue to suffer.
Kenneth P. Pucker is a professor of practice at the Tufts Fletcher School. He worked at Timberland for 15 years and served as chief operating officer from 2000 to 2007.