US apparel firms tackle tariffs by front-loading inventories: S&P

Evidence shows an increase in front-loading of inventories, with US seaborne apparel imports rising by 14.5 per cent year-over-year (YoY) in April, before reversing in May. In June, there was a significant 27.3 per cent surge in imports compared to May, as companies rushed to meet potential tariff hikes in July. Inventories for six large apparel importers increased to 71 days of sales, up from 64 days a year earlier, though this was consistent with 2023 levels.

Price hikes are being used cautiously by firms, due to concerns about the potential impact on consumer demand. Market intelligence forecasts predict a slowdown in consumer spending on apparel, with growth expected to decelerate to 1.5 per cent by Q1 2026, down from 3.1 per cent in Q2 2025.

To share the burden of tariffs, firms are negotiating with suppliers, which has led to a 4.1 per cent drop in import prices for apparel from China in May 2025 compared to February, authors Chris Rogers, Eric Oak, Ines Nastali, and Vania Alvarez Murakami said in a blog post on S&P Global’s website.

Apparel firms are actively restructuring their sourcing strategies, with mainland China's share of US apparel imports falling to 21 per cent in the past 12 months, down from 33.8 per cent in 2017. ASEAN countries, particularly Vietnam, have gained significant market share. However, strategic investments in reshoring remain on hold due to concerns about potential tariff ‘snapbacks.’

While some firms have successfully reduced the cost impact by negotiating with suppliers, a reversal of the inventory build-up and a slowdown in demand could lead to a reduction in US imports of apparel and footwear. Market intelligence projects a 6 per cent YoY decline in imports in Q2 2025, followed by a 27 per cent drop in Q3. However, imports are expected to rise by 10.8 per cent in Q1 2026, with South and Southeast Asia continuing to perform well as reshoring away from China progresses, it further added.

ALCHEMPro News Desk (SG)