The fallout of US tariffs on fashion retailers and inventory levels has begun to take shape. While uncertainty remains high, the early implications of new trade policies across global regions meant many brands chose between pulling in inventory ahead of schedule to increase stock cover, and pausing production - risking low stock availability. Now, there’s the issue of inventory purgatory, where businesses have been left with too little or too much seasonal stock.
The time is now for fashion brands to react with smarter inventory control to protect profit, and not be left overstocked, or missing sales, no matter how the tariffs evolve.
Recent Tariff Timeline
- April 2: A 10% baseline tariff was imposed on all imports, with higher rates for countries with significant trade deficits with the U.S.
- April 9: The US implemented a 104% tariff on Chinese imports and a 20% tariff on goods from the EU, with a baseline global tariff of 10%. China responded with a 34% tariff on all U.S. imports.
- April 10: Trump announced a 90-day pause on tariffs for most countries. However, tariffs on Chinese imports were sharply increased to 125%.
- May 2: De minimis exemption for goods valued under $800 eliminated for shipments from China and Hong Kong, making all goods from these regions subject to duties.
- May 26: Pause of proposed 50% tariffs on imports from the EU until July 9
- May 30: Higher 50% steel and aluminum tariffs announced, indicating a broader trend of increasing trade barriers.
Tariff impacts and retail reactions
According to e-commerce data platform Particl, which tracks sales data from 70,000 retail companies, online apparel transactions decreased in sales volume between June 2024 and May 2025. This coincided with significant increases in import tariffs on apparel.
In light of the sales challenges, retailers have been facing difficult decisions of whether to absorb costs, which decreases buying capital, or pass increases onto consumers, which will potentially slow inventory turnover even further.
Additionally, with cash flow issues from slowed sales and tariff costs, brands, particularly growing brands, will struggle to maintain optimal stock levels and keep their product lines new and enticing to customers. In response to these challenges, many apparel companies are actively realigning their business models to mitigate costs, while continuing to serve their core customers.
- Target US explained that the company was maintaining a larger-than-normal cushion on the balance sheet to make sure it provides the affordability and value that customers look for. The major retailer engaged in strategies like pulling 20% of their lead times out of categories like apparel to help reduce volatility over time, as well as shifting out of China to other places around the world to diversify production.
- Nike has since raised its prices by $5, as the company focuses on cleaning up inventory and enhancing full-price selling through 2026. For its wholesale partners, Nike is making investments in sales-related returns, reducing forward supply, and providing higher wholesale discounts to liquidate aged inventory. The sportswear leader will also return to selling its products at online retail giant Amazon for the first time in six years.
- In its Q4 2024 earnings call, Aritiza commented that 40% of its revenue is generated outside the United States, and they “already have almost half of the inventory we anticipate needing for this fiscal year.” The company is partnering with its suppliers to uphold quality standards, protecting margins while maintaining value, diversifying its supply chain, and realizing cost reductions across the business.
- Adidas has moved toward updating orders with supply chain partners on a monthly or weekly basis. This gives the company a crucial buffer against sudden policy changes.
Forecasting inventory amid fluctuating demand
Aversions to price hikes aside, the impact tariffs will have on consumer purchasing behaviours is not fully realised yet, but fashion retailers must be prepared for all scenarios. AI-driven inventory optimisation will be key for brands to maintain critical levels of stock to meet demand, in all its peaks and troughs.
For value-led brands, or those with loyal customer bases, leveraging AI will be an essential way to offset tariff costs without raising prices. Predictive analytics and forecasting tools can help to refine assortment plans to push full-price sales, as well as identify emerging customer preferences in real time to capitalize on unexpected demand more effectively.
Predictive forecasting is crucial to the success of Zara’s business model. The major retailer tracks inventory in real-time to forecast demand and avoid overstocking with its ‘Just-In-Time’ strategy. By producing products in small batches with frequent shipping to stores, the brand ensures rolling new arrivals, and the removal of aged stock. Monitoring sales data and adjusting inventory in real-time allows Zara to stock its stores with the most popular items - optimizing inventory turnover and full-priced sales.
While most brands simply can’t operate at Zara’s fast fashion speed to market and scale, the learnings are there. By having a lean supply chain and optimizing stock availability with its most popular, high-margin products, Zara is able to operate by only having two markdown cycles per year, which further keeps profit margins intact.
The answer for fashion retailers is clear: investing in intelligent, accurate product forecasting can offset tariff havoc by being able to reduce lost sales opportunities, lower markdown spend, help boost profit margins, and visualize future cash flow by knowing exactly when sales are set to peak and trough.
The right forecasting tools will overcome fashion's biggest time-eroders - human error and manual data analysis - to give teams the right answers to keep inventory tight, and customers well-served.
Main Image Credit: Toteme
