Tariffs Hit 36%-54% in Fashion-Off-Price Winners Emerge as Brands Get Squashed

Tariffs are reshaping apparel economics now

Tariffs are no longer background noise. The weighted average tariff on apparel and footwear spiked from 13% to 54% last spring and stood at 36 percent as of mid-October-still well above historical norms. Add the latest policy action, where most nonexempt goods face 10% or 12.5%, and the pressure on clothing costs is hard to miss. That helps explain why the sector is splitting now rather than later.

This is already showing up in earnings

This is no longer just a supply-chain headline. 76 percent of fashion executives say trade disruptions and rising duties will shape the industry in 2026, and several public companies are already reporting margin pressure. VF said tariffs cost more than $100 million through gross margin, while Levi Strauss said tariffs cut margin by 100 basis points and expects another 150 basis points this year.

Why some retailers are handling it better

Brands with weaker pricing power face a familiar squeeze: absorb the tariff and accept lower margins, or raise prices and risk weaker demand. At the same time, value-oriented shoppers are trading down, which helps off-price and other discount models while putting more pressure on full-price apparel brands.

Three signals separate tariff winners from losers

With tariffs still distorting apparel costs, the clearest filter is to follow the supply chain. Here are three tells to watch.

Tell 1: Check what is already in the door

If a company is still buying mostly against freshly tariffed factory orders, the full hit has not landed yet. TJ Maxx has a built-in buffer because it imports only a small percentage directly from factories overseas and mostly buys excess or already-imported brand inventory. In practical terms, most of those goods already cleared the tariff gate before TJX picked them up. That structure helped support forecasts as budget-conscious shoppers kept showing up, and TJX raised its annual comparable-sales and profit forecasts.

Tell 2: Read the sourcing mix like a price tag

If a retailer relies heavily on one high-tariff source, you have to ask whether it can pass costs through without hurting traffic. Walmart gets about 60% of its imported merchandise from China, so tariffs matter more by design. But it also has scale, supplier leverage, and a low-price model. Recent sector data show trade-down is real: consumers have been flocking to Walmart, and apparel and home-goods demand improved. That is not a free pass, but it is a different kind of resilience.

Tell 3: Listen for buffer language

A useful tell is when management stops acting like inventory buffers will absorb most of the shock. Early on, companies could point to pre-tariff stockpiles. Now the evidence points elsewhere: prepaid buffers are fading while value-channel demand is holding up better. Traditional brands are still absorbing hits-VF said tariffs cost more than $100 million, and Levi Strauss flagged additional margin pressure ahead.

The caveat is simple: this framework weakens if companies successfully rework sourcing or policy eases materially. Until then, value positioning matters more than branding alone.

The market may be underestimating the durability of the split

This is no longer a narrow textile issue. The latest USTR action reaches 60 trading partners, and most nonexempt goods are subject to an additional duty of 10% or 12.5%. That widens the pressure across nearly every major apparel supply chain. If costs remain this high, the gap between value retailers and regular-price brands could stay open longer than some investors expect.

Why the off-price case looks more durable

TJX is the clearest example. Management raised its annual comparable-sales and profit forecasts and also increased its buyback target to $2.75 billion to $3.0 billion. That matters because guide hikes and bigger repurchases usually point to repeatable demand, not just one-off bargain hunting. If budget-conscious shoppers keep trading down, off-price leaders may be better placed than full-price brands to get through this cycle.

Why the pricing risk has not gone away

The bear case is still valid. Some brands are absorbing tariffs before the full effect shows up in results, which means the next risk is a sharper round of price increases. VF said tariffs already cost more than $100 million, and management warned tariffs are only just starting to hit us. If brands raise prices to defend margins, consumers may finally push back harder.

Policy also adds another wrinkle. The Supreme Court struck down IEEPA tariffs, but other tariff authorities remain in place. The latest action also includes exemptions covering about 50 percent of the imports from covered countries. That does not remove tariff pressure; it makes the backdrop more complex.

What to watch next

• Price increases: whether brands pass costs through quickly or wait until margins are already compressed.
• Margin commentary: whether tariff pressure is still moving deeper into the income statement.
• Comp growth durability: whether discount demand remains strong as tariff buffers continue to fade.