INSIDE THE FASHION INDUSTRY — 2025 in Review: Tariffs, Strategy Shifts, and What Comes Next

2025 was a year when the business of fashion stopped pretending that the old rules still applied. Between abrupt tariff shifts, continued supply-chain fragility, and an industry-wide sprint to harness new technologies, brands — from legacy houses to ambitious startups — had to rethink where they make things, how they sell them, and how they talk to consumers. The headline story that everyone felt in their margins was trade policy: sudden and sweeping tariff changes pushed landed costs higher, squeezed gross margins for import-dependent businesses, and forced commercial teams to rebuild costing models mid-season. That single pressure accelerated decisions that had been on the boardroom whiteboard for years — nearshoring and supplier diversification moved from “nice to have” to core strategy almost overnight as brands hunted for ways to protect price and speed-to-market. Business of Fashion+1

But tariffs were only one vector! 2025 also crystallised a multi-front market reset. Luxury and prestige labels doubled down on experiential retail and curated inventories to justify premium pricing, while many high-street chains consolidated physical footprints and layered far more sophisticated sales channels. The technology layer evolved fast: AI moved from experimental use cases into commerce plumbing — from product discovery and dynamic merchandising to chat-assisted checkout and virtual try-on — materially improving conversion for brands that invested early and flattening customer acquisition costs for those who integrated AI into search and personalization flows. Vogue+1

At the same time consumer behaviour continued its long pivot toward circularity and resale. The second-hand market kept expanding and became an expected channel for growth rather than a fringe play; brands that partnered with resale platforms or created owned recommerce programs found a way to monetise post-purchase life while improving lifetime value. This shift forced design and sourcing teams to think about durability, repairability, and materials that can live multiple lives — practical changes that resonate with conscious consumers and reduce returns and waste.

How did brands respond in practice? We saw several repeatable strategies emerge. 

1. A return to detailed landed-costing and SKU-level profitability: treasury, commercial and product teams worked much closer together to model tariffs, duties, and shipping volatility so decisions about price, markdown and assortment were data-driven.

2. Supply-chain elasticity: brands hedged risk by creating multi-tier supplier networks across Southeast Asia, Central America and select nearshore partners, balancing unit cost with speed and tariff exposure. 

3. Strategic vertical integration: a number of labels expanded control over key stages — from fabric finishing to limited in-house cut-and-sew capacity — to protect margin and quality when global logistics spiked. 

4. A sharper customer acquisition playbook based on AI: brands that leveraged AI for discovery and personalization saw measurable uplifts in conversion and lower CAC, allowing them to invest more in product and service.

Source: Anthesis+1

For emerging designers and international brands trying to break into the U.S., 2025 was unforgiving but clarifying. The tariff environment raised the cost of market entry and forced smaller labels to be strategic — not everything can be sold everywhere. Smart new entrants pivoted to higher-value product categories, smaller but more profitable drops, and partnerships with U.S. distributors or localized manufacturers to mitigate duty exposure. Others leaned into storytelling and direct relationships: owned digital channels, tight community-driven launches, and resale partnerships created routes to scale without requiring deep discounting. The practical reality is that access to the U.S. now requires either a price premium, a highly efficient supply model, or an exceptional brand story that builds loyalty quickly; attempting to compete purely on low price from a distant, tariff-exposed supply base is a losing strategy. Fashion Dive

Looking ahead to 2026, expect these shifts to compound rather than reverse. Tariff volatility will remain part of the backdrop, so sourcing diversification and nearshoring will continue to gain traction — but domestic manufacturing revival will be selective and slow, reserved for categories where speed, compliance, or margin justify the investment. AI will keep reshaping customer journeys: brands that incorporate AI across merchandising, inventory forecasting and customer acquisition will widen the gap with those that treat it as a marketing experiment. The resale and circular economy will not slow; if anything, pressure from consumers and regulators will push more brands to design for longevity and to build recommerce into their P&L. Finally, capital allocation will favour businesses that can demonstrate unit economics at the SKU level and a clear path to profitability, which changes how investors evaluate growth. McKinsey & Company+1

For emerging brands, the practical checklist for 2026 is simple but hard: 

• model your landed cost with worst-case scenario tariffs

• diversify production outside your primary country

• design for durability and resale

• invest in data (even a small ERP + better forecasting will outpace competitors that are still guessing on inventory)

• build community early — loyal customers offset price pressure

• consider partnerships (U.S. distributors, recommerce platforms, or shared production hubs) rather than going it completely alone

I’ll dig deeper into each of these strategic moves and break down operational playbooks and supplier playbooks in my next post next week, where I’ll offer tangible templates you can use to stress-test your business for 2026.

If you want tailored feedback on how these changes affect your specific line — from costing and sourcing to go-to-market strategy — schedule a free 30-minute strategy call with me through the link below. We’ll map immediate steps you can take to protect margins, accelerate U.S. traction, and build a supply strategy that lets your brand grow without bleeding cash.

Schedule your free 30-minute strategy call here: https://go.oncehub.com/BarbaraSessim