For makers of internationally sold goods, global supply chains are essential to ensure a solid bottom line, timely delivery, and meeting price targets across markets. None more so than fashion brands, which “make their money by seeing how little they can pay,” Dana Thomas, author of Deluxe: How Luxury Lost its Lustre, told Vogue Business in July.
This year, international fashion houses will face new challenges from tariff threats by U.S. President Donald Trump. Meanwhile, legacy obstacles persist, as suppliers of exclusive brands are causing their clients legal problems.
The situation is pressuring design houses to seek new suppliers that are reliable and meet mandated quality standards and costs. “Sourcing from emerging markets has recently gained traction,” said Kendall Atkinson, sustainability and corporate communications associate at BPCM, a U.S.-based consultancy. “These markets, often characterized by rapid economic growth and development, present lucrative opportunities for fashion retailers.”
This year, Egypt started attracting international garment producers, including several from China and Turkey, that agreed to build local factories for export to open in 2026. However, to become part of the supply chains of brands like Dior, Armani, and the like, local producers need to comply with stringent quality, technology, disclosure, and cost requirements.
Old challenges
According to Kristy McGregor, the executive European editor at Vogue Business, “2024 was a year of reckoning for the fashion and luxury goods supply chain.”
Last year, consumer confidence in luxury fashion brands waned. In March, Italian Loro Piana, one of French LVMH Group’s 19 fashion brands, was in legal trouble in the United States after Congressman Robert Garcia investigated the brand’s production facilities in Peru. “This seems to me as clear exploitation, and it is a huge multinational corporation that is owned by some of the wealthiest people in the world,” Garcia, a Democrat from California, told Bloomberg. “Seeing no benefit coming down to the immense labor … happening [in Peru], I think, is really concerning.”
In June, the Italian Competition Authority investigated the French Christian Dior and Italian Giorgio Armani fashion houses regarding how their overseas suppliers manage workers after several media reports found they don’t comply with Italian or international labor laws.
An Italian court deemed that while they were not legally at fault, it stressed the brand’s managers and executives were negligent by not taking “appropriate measures to check actual working conditions or technical capabilities of contracting companies,” the court’s decision read.
In July, Chief Financial Officer Jean-Jacques Guiony of LVMH Group, which owns Christian Dior, told Italian lawmakers the company would conduct an internal audit of its suppliers. In January, LVMH Group announced its findings, blaming contracted third-party supplier auditors for not identifying violations “despite passing … environmental and social inspections,” Apparel Resources, a specialized portal, reported.
That situation arose due to “cost-reduction strategies within the luxury fashion industry,” said Apparel Resources. “By outsourcing production to a vast network of external contractors, brands prioritize cost-effectiveness, potentially incentivizing suppliers to cut corners and exploit workers.”
Marijn Visser, global vertical head of lifestyle at shipping and logistics company Maersk, told Vogue Business ultra-high-end fashion brands will be increasingly looking to “manage and control their end-to-end supply chain internally, as well as be able to create transparency for their customers.”
AON, a consultancy, stressed, “Building supply chain resilience, embedded in a strong governance framework and the use of data, is so important when it comes to navigating [fashion] business volatility and responding in a timely way — especially in an environment of increasing uncertainty through climate change and political unrest. It not only ensures ‘business as usual,’ but also offers another route for a brand to build trust both with its suppliers and consumers.”
Tariffs and fashion
Sheng Lu, a professor and director of graduate studies at the University of Delaware’s Department of Fashion and Apparel Studies, told Supply Chain Dive, a specialized portal, in February that the current U.S. administration’s decisions “present risks to fashion supply chains, with tariffs a leading concern.”
So far, Trump has been openly willing to apply tariffs on everyone. He started by threatening universal duties on all imported products. Trump then targeted Canada, Mexico, China, and the EU, which are among the top five U.S. trading partners. Later, he focused on overseas manufacturers of metals, semiconductors, pharmaceuticals, and automobiles.
Trump also threatened to impose tariffs on U.S. imports from Russia, if it doesn’t end the war in Ukraine, and India if it doesn’t buy more U.S. oil, gas, and military aircraft and agree to “potential concessions,” reported Reuters in January.
He also threatened BRICS, a 10-nation intergovernmental organization that includes India, China, Russia, and Egypt, with tariffs if they created an alternative currency to the dollar. Trump also threatened Colombia with 25% tariffs if it didn’t accept deported migrants from the United States. Lastly, he waved the duties stick against South Africa, a BRICS nation, after they passed a law allowing the state to seize land without compensation to owners.
Trump is currently threatening reciprocal excise taxes on nations that impose tariffs or non-tariff barriers on American goods. “One tricky situation is that most leading apparel suppliers to the U.S. market, including China, Vietnam and India, set … higher tariff rates … than the United States,” said Lu. Meanwhile, non-tariff barriers are evident in the EU’s Carbon Border Adjustment Mechanism, which taxes imports not complying with emissions regulations.
Such threats have put fashion brands on alert. “While there are no new tariffs for the moment, … Trump’s request for a review of trade puts the world on notice that more [duties] could well be coming and that more countries will be targeted,” Neil Saunders, an analyst at GlobalData, a think tank, told Just Style, a specialized portal, in February.
“We hope they don’t arrive,’’ Italian National Fashion Chamber President Carlo Capasa told the media in February.
Yet, some fashion houses are taking preemptive action, relocating to countries not on Trump’s radar. “It feels like every day is a moving jigsaw piece,” Emma McGrory, a senior associate at Lewis Silkin, a U.K. law firm that advises brands on trade law, told Glossy, a fashion news platform, in February. “Brands are wondering: Do we suffer the increase in tariffs, or do we relocate manufacturing to a third country?”
Fashion ready?
Egypt has a real shot at becoming part of the supply chain for high-end fashion brands that sell in the United States. In 2023, Egypt exported nearly $1 billion in garments and apparel to the world’s largest economy, which is over half of its U.S. exports, according to government data.
Almost all those garment and textile exports entered “duty-free” and with no quota limit under the Qualified Industrial Zone (QIZ) protocol, according to AmCham Egypt research. Signed in 2004, QIZ requires eligible companies to comply with U.S. regulations. In 2023, AmCham Egypt’s study found that 80% of eligible QIZ companies were apparel and accessory producers, accounting for nearly 90% of QIZ exports to the United States.
However, local garment producers will face tough competition from other African countries when targeting top fashion houses. According to Atkinson of BPCM, “Africa’s emerging markets, such as Ethiopia and Kenya, are gaining recognition for their growing textile and apparel industries. Success requires careful planning, due diligence, and a commitment to ethical and sustainable sourcing practices.”
This article first appeared in March’s print edition of Business Monthly.
