On a 25 August deadline, VINATEX reports on recent sourcing changes affecting Vietnam's apparel industry.
August 25, 2026
The following is an excerpt...
Tariffs primarily drive Supply chain shifts
The new Section 301 structure establishes three distinct tariff tiers. A group of 17 economies is subject to an additional 10% tariff on top of the MFN rate. For goods from the EU and Taiwan, if the MFN rate is below 10%, the Section 301 tariff is applied only to the difference needed to bring the combined MFN and Section 301 rates to 10%. If the MFN rate is already 10% or higher, the Section 301 tariff is zero. Similarly, the applicable threshold for Japan, South Korea and Switzerland is 12.5%. Other economies, including Vietnam, China, Hong Kong, Thailand and Turkey, are subject to an additional 12.5% tariff on top of the MFN rate.
In addition, the United States has decided to establish tariff-rate quotas (TRQs) for certain textile and apparel products from Bangladesh, Cambodia, Indonesia and Malaysia, based on the volume of U.S. cotton and textile materials imported by these countries. The USTR stated that the mechanism could not be implemented immediately when the new tariffs took effect, but is expected to be established from September 1, 2026. Until the USTR formally establishes the TRQs and announces their effective date, the relevant goods will remain subject to the 10% Section 301 tariff.
Experience from previous rounds of Section 301 tariffs shows that tariffs can significantly reshape import patterns, but do not necessarily bring manufacturing back to the United States on a corresponding scale. According to the U.S. International Trade Commission (USITC) report Economic Impact of Section 232 and 301 Tariffs on U.S. Industries, the Section 301 tariffs imposed on Chinese goods during 2018–2021 were passed through almost entirely to the prices paid by U.S. importers. Across all products, on average, a 1% increase in tariffs reduced both the value and volume of imports from China by approximately 2% after businesses had time to adjust and develop alternative sources of supply.
For the apparel industry, by 2021, the tariffs were estimated to have reduced imports from China by 39.1% compared with a scenario without tariffs, while imports from other sources increased by 25.2%. Meanwhile, U.S. domestic production increased by only 6.3%. Prices of imports from China rose by 14.5%, prices of U.S.-made products increased by 3.1%, and average market prices rose by 4.3%.
A U.S. Fashion Industry Association (USFIA) survey published in July 2026 reached a similar conclusion: only 10.5% of companies increased their purchases of “Made in USA” products, while 57.9% continued to diversify their sourcing countries and 63.2% renegotiated contracts with suppliers.
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