Editor’s Note: This article is the second in a three-part series by Richa Agarwal examining how the 2025 tariff environment and broader economic disruption are reshaping the global fashion industry. In Part 1, Richa explored the macro forces at play – from trade policy upheaval and consumer fragility to the unraveling of outdated operating models.
Missed Part 1? Catch up here.
Here in Part 2, Richa turns to the strategic responses underway: how fashion leaders are recalibrating sourcing, rethinking merchandise planning, investing in intelligent technologies, and redefining leadership for a more volatile world.
The Forced Evolution: Adapting to Uncharted Territory
This period of intense pressure is compelling a critical re-evaluation of established norms, forcing strategic shifts across the value chain.
1️⃣ Sourcing Recalibrated: The High-Stakes Game of Global Diversification
The “China Plus Many” strategy has shifted from long-term goal to urgent necessity. A temporary U.S.–China tariff truce (reducing some rates to ~30% for 90 days) offers a brief pause, but the broader landscape remains volatile – with a baseline 10% U.S. tariff on most imports and the risk of new “reciprocal” tariffs on others.
Nearshoring to Mexico and CAFTA-DR nations is gaining traction, but comes with trade-offs: higher costs, capacity constraints, and inconsistent duties (e.g., 25% on some Mexican imports). While CAFTA-DR’s share of U.S. apparel imports dropped from 9.6% to 7.6% in early 2025, FTA utilization rose from 73.8% to 81.1%, suggesting brands are becoming more adept at extracting value from the agreement, even as overall volume dips.
India is also emerging as a key alternative sourcing hub, combining mature capabilities with geopolitical alignment. However, expanding there at scale means navigating regulatory complexities and ensuring high standards for quality, ethics, and compliance.
The rush to diversify must not come at the cost of integrity. As brands enter newer or less mature markets, ethical labor, environmental compliance, and human rights must remain non-negotiable. AI-powered supplier vetting and third-party audits can support this vigilance – safeguarding reputation while enabling agility in an increasingly fragmented global sourcing environment.
2️⃣ Merchandise Planning Remastered: Precision, Prudence, and Predictive Power Become Standard
The traditional, often rigid, seasonal merchandising calendar is proving increasingly ill-suited to an era defined by extreme uncertainty. Success now hinges on embedding a new level of precision, prudence, and predictive capability into the planning process:
- Hyper-Responsive Pricing and Promotion Strategies: With acute consumer price sensitivity—over half of consumers are willing to switch brands due to significant price hikes —and volatile input costs, AI-powered dynamic pricing tools are transitioning from innovative options to essential instruments.
- AI-Driven Predictive Forecasting as a Baseline: In a fluctuating economic climate, achieving high forecast accuracy (where AI can offer up to a 20% improvement or even cut errors by up to 50% as McKinsey suggests) is vital for optimizing inventory, minimizing markdowns, and understanding nuanced shifts in demand elasticity.
- Strategic Assortment Curation and Inventory Management: A more discerning approach to assortments is emerging, often characterized by a “less is more” philosophy that prioritizes core items, proven sellers, and higher-margin products. There’s increased caution regarding highly experimental lines until consumer demand patterns stabilize. On-demand manufacturing and agile hybrid fulfillment models are also being actively explored to reduce upfront inventory risk.
- Adapting to the De Minimis Revolution: The definitive elimination of the de minimis trade provision for direct shipments from China and Hong Kong (with new effective duties around 54% for these individual postal shipments) fundamentally alters the cost structure for ultra-fast fashion and D2C brands relying on this channel. This necessitates new pricing, global logistics, and potentially U.S.-based warehousing and fulfillment strategies.
3️⃣ Technology as the Indispensable Engine: AI, DPC, and PLM
In this complex, data-intensive, and rapidly changing global environment, technology is no longer merely an enabler of efficiency but the critical engine for adaptation, resilience, and sustained competitive advantage.
➡️ Artificial Intelligence (AI) – The Strategic Intelligence Layer:
AI’s role is expanding far beyond initial applications. It is now essential for:
- Sophisticated Risk Modeling: Integrating and analyzing diverse data streams related to trade policy volatility, geopolitical shifts, macroeconomic indicators (including credit conditions and consumer sentiment), and even climate-related disruptions to provide predictive risk assessments.
- Advanced Demand Sensing and Consumer Analytics: Moving beyond historical sales data to interpret real-time market signals, social media sentiment, and nuanced shifts in consumer behavior and purchasing power.
- Supply Network Optimization and Simulation: Enabling dynamic management of complex global supply networks, simulating the impact of potential disruptions, identifying optimal alternative pathways, and proactively reallocating resources.
- Enhancing Sustainability, Transparency, and Compliance: Leveraging AI for verifying material provenance, tracking ethical compliance across multi-tier supply chains, and accurately calculating and reporting Product Carbon Footprints (PCFs).
➡️ Digital Product Creation (DPC) & 3D Design
The urgent need for speed, cost reduction, and sustainability makes DPC and 3D design technologies indispensable. As demonstrated by industry leaders like Perry Ellis (who reportedly reduced physical samples by 50% and shortened product development calendars by two months through DPC), these tools radically diminish reliance on physical prototypes, slash material waste and shipping costs, and facilitate faster, more collaborative, and iterative design processes.
➡️ Advanced Cloud Product Lifecycle Management (PLM) Systems
Modern, cloud-based PLM platforms serve as the central nervous system for today’s fashion enterprise. They are essential for ensuring data integrity, fostering seamless global collaboration among design, development, sourcing, and merchandising teams, enhancing supply chain visibility and traceability, and enabling the rapid execution of sourcing and production pivots demanded by the current environment.
4️⃣ The Evolving Fashion Leader: Architects of Resilience in an Age of Ambiguity
This era of profound disruption calls for a new paradigm of leadership and a significant evolution in professional roles, particularly for merchandising experts – a key focus at industry gatherings like PI Apparel Merchandise Planning New York. The traditional art of merchandising, while still valuable, must now be powerfully augmented by the science of data, technology, and strategic global awareness.
The modern fashion executive and merchandiser must increasingly function as a strategic orchestrator, demonstrating:
- Deepened Financial and Geopolitical Acumen: A sophisticated understanding of global economics, the intricacies of international trade policy, currency risk, and the far-reaching implications of macroeconomic events like sovereign credit rating downgrades.
- From Predictor to Scenario Architect: The ability to move beyond attempting to forecast a single future to skilfully modeling multiple complex scenarios and developing robust contingency plans for diverse trade, economic, and geopolitical outcomes.
- Mastery of Resilient Value Networks: A strategic focus on designing, building, and managing adaptive, multi-nodal global value networks, shifting from an emphasis on linear chain optimization to holistic ecosystem resilience.
- Champion of Data-Driven Transformation & AI Literacy: The leadership to drive the enterprise-wide adoption, integration, and effective strategic utilization of advanced analytics, AI tools, and digital platforms.
- Decisive and Agile Leadership Under Pressure: The capacity to make informed, high-stakes decisions swiftly and confidently, often navigating ambiguity with imperfect or rapidly evolving information.
Looking Ahead
The strategies explored here in Part 2, mark the foundation of fashion’s transformation. But strategy alone is not enough.
In Part 3, I’ll distill these insights into a set of actionable imperatives – the essential building blocks of an antifragile fashion system. From operational resilience to ethical clarity and ecosystem collaboration, I’ll explore what it truly takes to lead through uncertainty and shape a stronger, more intelligent industry on the other side.
Part 3 will be released on Tuesday 3rd June…
Sources
McKinsey & Company, AI-Driven Operations: Forecasting in Data-Light Environments, 25 Apr. 2024
Bloomreach, The Merchandiser Reimagined: How AI Is Changing the Role
Syrup Tech, AI in Footwear Merchandising: Advancing Flexibility and Profitability
Techpacker, How Artificial Intelligence is Revolutionizing the Fashion Industry
Marketsy.ai, AI and Fashion: How AI Is Revolutionizing the Fashion Industry
Logistics Viewpoints, Amazon and the Shift to AI-Driven Supply Chain Planning, 26 Mar. 2025
PYMNTS, Walmart Develops AI Assistant That Helps Merchants Source Products
Alvarez & Marsal, Global Shift: Taxing De Minimis Imports and E-Commerce Strategies
Maersk Insights, Navigating 2025’s Geopolitical Supply Chain Landscape
BoF x McKinsey, The State of Fashion 2025
For a full list of citations and further resources provided by the author, please contact us or reach out to Richa directly.
