US fashion industry poised for sourcing consolidation and AI integration, study finds

The US fashion industry is facing another year of uncertainty. From the IEEPA tariffs that were ruled unconstitutional by the Supreme Court to the expiring Section 122 tariffs that took their place to the new 301 and 232 tariffs – tariffs remain a top concern for US fashion businesses from brands and retailers to importers. The United States Fashion Industry Association (USFIA) surveys about 30 of them and publishes its findings in the annual USFIA Fashion Industry Benchmarking Study, which provides an essential roadmap of where apparel supply chains and corporate leadership are heading.

“What is different this year is that brands and retailers are changing how they respond to the tariffs and trade uncertainty. Successful sourcing strategies have shifted from diversification to consolidation. Since tariff challenges will affect costing and availability for the foreseeable future, the goal is to maintain geographic diversity while consolidating sourcing networks to work more closely with key strategic partners overseas that offer sourcing flexibility and strong compliance,” sums up USFIA president Julia K. Hughes in the foreword.

FashionUnited highlights ten strategies of the US fashion industry for the coming years.

1. From crisis response to operational resilience

The 2026 study reveals that despite operating in a highly uncertain business environment shaped by elevated tariffs, rising sourcing costs, geopolitical tensions and increasingly complex regulatory requirements, the industry is entering a new phase of strategic maturity. Rather than treating geopolitical friction and duty hikes as temporary shocks, US fashion companies are shifting from short-term crisis management to long-term operational resilience.

“Compared with 2025, survey results suggest that companies are moving beyond short-term crisis response and increasingly adopting longer-term strategies focused on supply chain optimisation, compliance capabilities and operational resilience,” finds the study.

2. Protectionist trade policies and rising sourcing costs

Trade policy uncertainty remains the single largest headache for global fashion executives. A staggering 92 percent of respondents rated “Protectionist US trade policies and related policy uncertainty, including the impact of the Trump tariffs” as one of their top two business challenges in 2026.

Furthermore, “Increasing production or sourcing costs” rose to become the third most significant corporate challenge. These cost spikes directly squeeze financial margins and reduce capital available for product innovation and sustainability programs.

3. Sourcing consolidation: partnering with fewer, highly capable vendors

In a major departure from post-pandemic expansion strategies, fashion companies are shifting away from rapid vendor expansion toward vendor network consolidation. Only about a fifth (21 percent) of respondents plan to source from additional countries through 2027 (down from 59 percent in 2025), and just about a fourth (26 percent) plan to expand their supplier count (down from 41 percent).

Nearly half of surveyed companies intend to trim their supplier rosters. Hughes highlights this tactical shift, stating that because tariffs continue to influence costs, the objective is to “preserve geographic variety while tightening sourcing networks to partner more intimately with key overseas allies that provide sourcing adaptability and robust compliance.”

4. Higher tariff policy does not equal reshoring

The survey reinforces that a policy of higher tariffs does not automatically translate into reshoring of production. Only 10 percent of respondents identified sourcing more “Made in the USA” products as a tariff response strategy.

“USFIA remains committed to working with brands and retailers and our supply chain partners to develop creative solutions and incentives to support manufacturing in the US and in our key FTA partners,” promises Hughes from the association side. “Fashion companies know from history that tariffs will not achieve that goal,” she adds.

5. Balanced diversification across global sourcing hubs

While individual companies are working with fewer suppliers, collective geographic diversification remains high. Surveyed firms sourced from 49 countries in 2026 (up from 46 in 2025), with about two thirds (65 percent) of large firms maintaining sourcing footprints across ten or more nations.

However, concentration at the upper extreme fell dramatically: only 7 percent of brands sourced from 20 or more countries in 2026, down from 20–30 percent in previous years. Although Asia remains dominant, utilisation rates in traditional hubs like China, Vietnam and Bangladesh declined as sourcing expanded into non-Asian destinations like Guatemala, Egypt and Jordan.

6. Nearshoring momentum and constraints in the western hemisphere

Nearshoring into Central and South America gained clear traction, with three fourths (76 percent) of respondents sourcing from CAFTA-DR member nations in 2026 (up from 64 percent in 2025). About one fourth (24 percent) source over 10 percent of their total volume from the region, primarily Guatemala, El Salvador and Honduras). Sourcing from USMCA members (mainly Mexico) held steady.

However, regional growth is bottlenecked by narrow product capabilities—focused primarily on basic t-shirts (67 percent), activewear (33 percent) and bottoms (27 percent). The report emphasises that “exempting CAFTA-DR and USMCA-qualified apparel products from additional tariffs... and avoiding policy uncertainty will be essential to supporting US fashion companies' nearshoring efforts.”

7. Legal and technical tariff mitigation strategies

Rather than relying purely on factory relocation, corporate trade teams are using specialised legal and financial mechanisms to offset tariff impacts. Almost two thirds (63 percent) of brands actively renegotiated supplier contracts in 2026, while more than half (58 percent) utilised sourcing diversification, alongside tariff refund applications and First Sale Valuation rules.

As the study authors Sheng Lu and Emilie Delaye note, “US fashion companies today view successful tariff mitigation as requiring not only sourcing capability but also strong expertise in trade regulations and close collaboration with suppliers and other supply chain stakeholders.”

8. Forced-labour risk & regulatory compliance integration

Managing forced-labour compliance has moved to the core of executive decision-making, climbing from tenth place in 2025 to sixth place in 2026 among top corporate business challenges. Heightened enforcement under the Uyghur Forced Labor Prevention Act (UFLPA) and global traceability mandates have prompted brands to invest heavily in supply chain mapping. Executives report collecting detailed origin data down to the yarn and raw cotton level to maintain regulatory compliance and prevent costly customs detentions.

9. Artificial intelligence scaling across sourcing & operations

Artificial intelligence is no longer an experimental gimmick in fashion management; it has become central to operational workflows. The study revealed that more than half (56 percent) of fashion companies now use AI for “demand forecasting and inventory planning,” while half (50 percent) utilise AI for “sustainability tracking,” “risk management” and “sourcing strategy and cost optimisation.” AI tools are increasingly deployed to model tariff scenarios, optimise fabric yield and monitor supplier compliance risks in real time.

10. Hiring increase: in-demand roles

A standout highlight for corporate professionals is the robust expansion in white-collar positions. A majority (87 percent) of surveyed fashion companies plan to increase hiring over the next five years—up from 75 percent in 2025 and tying the highest level recorded since the pandemic.

Demand is concentrated across specific corporate and technical roles like data scientists and analysts to lead predictive demand modelling, inventory agility and AI integration. Trade compliance specialists and customs attorneys are also in demand to navigate shifting tariffs, free trade agreements and First Sale valuations.

To oversee carbon accounting, traceability and green regulatory compliance, fashion companies are looking for environmental sustainability and ESG managers. Sourcing executives and vendor relationship managers are also high on the list to manage consolidated, multi-country vendor capabilities. Last but not least, companies are looking to hire supply chain transparency officers dedicated specifically to audit forced-labour risks and tier-3/tier-4 raw material mapping.

Long-term outlook

Despite persistent trade barriers, executive sentiment remains resilient. The fundamental takeaway of the 2026 USFIA report is that the era of chasing the lowest unit cost in a single market is over. The modern fashion enterprise is winning through structural agility, data intelligence and compliance rigour.

In addition, companies that invest in skilled white-collar talent—pairing trade legal experts and data scientists with forward-thinking sourcing directors—are best positioned to navigate ongoing market turbulence and drive sustainable growth.

The USFIA Fashion Industry Benchmarking Study is an annual survey of executives from 30 leading US fashion brands, retailers and importers, a majority of which (80 percent) have more than 1,000 employees.This year’s survey was conducted by Dr. Sheng Lu and Emilie Delaye at the University of Delaware in collaboration with the USFIA.

The complete report can be viewed and downloaded from the USFIA website.