Trump’s Tariff Trap For Australian Fashion

As tariffs on Chinese goods ripple through the global fashion industry, Australian fashion brands like Zimmermann, Rip Curl, and Cotton On face a stark choice: adapt or risk losing their footing in the lucrative U.S. market.

Preface

Now, Trump has quite a habit of announcing half-baked and patriotically antagonistic ideas without any sense of strategy or repercussion. With that in mind, the proposed tariffs may disappear into the ether, or they may be implemented in full, or they may land somewhere in-between. Regardless, It’s always wise to account for the worst and profit off the best. This piece is written with an understanding of Trump’s historic behaviour and a focus on fortifying against what may come.

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For decades, Australian brands have thrived on the symbiotic relationship between Chinese manufacturing efficiency and the global marketplace. China’s dominance in global fashion production cannot be overstated. In 2022, it accounted for 60% of Australia’s clothing and textile imports. Labels such as Zimmermann, Rip Curl, and Cotton On owe their success to this finely tuned ecosystem. Trump’s sweeping tariffs on goods of Chinese origin—first enacted during his presidency and now amplified by proposals (or just bullish rhetoric?) of up to 70% tariffs for his second term—threaten to push the cost of operating in the U.S. beyond reach for Australian brands.

The stakes are high for Zimmermann, whose romantic designs and renowned craftsmanship are underpinned by China's unmatched quality, skilled artisanship, and access to specialised machinery and finishing—offered at a competitive price. With high retail prices, there’s plenty of fat to chew. Still, rising costs pose a significant impact on profitability in the U.S., where 30% of its global sales are generated.

With much tighter margins to play with, Rip Curl, a quintessentially Australian surfwear brand with a substantial U.S. market presence, also relies on Chinese manufacturing for its wetsuits and performance apparel. Meanwhile, the Cotton On Group—a fast-fashion powerhouse with over 1,500 stores worldwide—depends on Chinese factories to maintain its competitive edge.

The impact on each of these brands is undeniable:

• A cotton/elastane T-shirt with an import value at $5 would cost $5.83 in 2017 (16.5% tariff), $6.20 in 2024 (24% tariff), and $8.50 in 2025 under proposed tariffs (60%+10%).

• A silk dress with an import value at $60 would have cost $64.44 in 2017 (7.4% tariff), $69.00 in 2024 (15% tariff), and $102.00 in 2025 under proposed tariffs (60%+10%).

• Nylon shorts with an import value at $9 would cost $10.34 in 2017 (14.9% tariff), $11.02 in 2024 (22.4% tariff), and $15.30 in 2025 under proposed tariffs (60%+10%).

Rules of Engagement

The heart of the challenge lies in U.S. tariff policy, which hinges on where a product is made, not where it is exported from. A Zimmermann gown stitched in China and shipped from Australia to the U.S. will still incur tariffs unless it undergoes substantial transformation in Australia. Yet, “substantial” is a high bar: minor tweaks, like repackaging or embellishments, don’t qualify. Meeting U.S. Customs and Border Protection’s stringent standards often requires time-intensive reworking—an unsustainable proposition for brands operating on razor-thin margins.

Zimmerman - East Hampton

Zimmerman - East Hampton

Survival Tactics

The path forward is fraught with complexity, but Australian brands are exploring various strategies:

1. Dual Manufacturing Hubs: Some are considering maintaining Chinese production for non-U.S. markets while shifting U.S.-bound goods to Southeast Asia. Vietnam, with its burgeoning textile industry and favourable trade agreements, is emerging as a contender.

2. Onshoring Value-Addition: Brands might opt to perform significant finishing processes in Australia to alter the country of origin. However, Australia’s high labour costs pose a formidable barrier.

3. E-Commerce Diversification: Direct-to-consumer (DTC) models could help circumvent some tariff hurdles, though country-of-origin rules remain a limiting factor for goods produced in China.

The DTC E-Comm Squeeze

For Australian e-commerce retailers shipping directly to U.S. customers, tariffs are calculated on the product’s declared value at import—typically the retail price, not the factory cost. This difference can significantly impact pricing.

For example, a silk dress sold online in Australia and shipped to the U.S. for $600 would face tariffs calculated on its retail price, not the $60 it cost to produce. With a 15% tariff (the current rate for silk apparel), this adds $90 in duties, driving up the final price for U.S. consumers.

Under Trump’s proposed 2025 tariff increases—rising to 60% plus an additional 10%—the scenario becomes even more extreme. That same $600 silk dress would incur $420 in tariffs, pushing its total cost to over $1,000, a significant deterrent for American shoppers.

To remain competitive, many brands absorb these tariffs, but doing so puts further pressure on already slim margins. One potential solution is localized warehousing: setting up U.S.-based distribution centres to import Chinese-manufactured goods under their factory-declared value. While this approach reduces tariff costs, it requires considerable upfront investment and adds operational challenges, forcing brands to weigh immediate costs against long-term survival.

The Bigger Picture

For Australian brands, the U.S. market represents both opportunity and risk. Fashion exports to the U.S. form a crucial slice of the AUD $47 billion in bilateral trade. Losing competitiveness here could erode years of investment in brand equity. But the tariff debate also exposes a deeper vulnerability: Australia’s dependence on China as a manufacturing hub. While industry rhetoric has long championed diversification, few regions can replicate China’s infrastructure, expertise, and cost advantages. For brands deeply enmeshed in Chinese manufacturing, the tariffs are a wake-up call to rethink not just where they produce but how.

For brands that didn’t begin exploring alternative regions or manufacturing partners during Trump’s last tariff blitz, the ability to pivot production swiftly in the face of a new wave of tariffs may prove a significant challenge.

To thrive, no — survive, in this new era, brands must innovate with agility and invest in supply chain resilience. Those who can fortify themselves against an impending trade war could emerge as leaders in a redefined global market. For others, Trump’s Tariff Trap may prove inescapable.

-G