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This week’s briefing comes to you from Florence, where I’ve been based for a quick reporting trip the last few days (more on that in next week’s edition).
It’s still August in Italy, so things are quiet, but there’s already a slightly frenetic energy in the air ahead of a high stakes September for luxury brands and their “Made in Italy” supply chains.
That’s all still to come. This week has been all about the latest twists in Trump’s trade war: a final end to duty-free US shipments for low-value packages means cheap, fast fashion is going to get slower and pricier, while India is facing hefty new tariffs. Then of course, there’s Taylor Swift’s engagement to Travis Kelce, which the beleaguered mined diamond industry is trying to turn into a marketing moment.
Read on for my take on all this and more, and as always, send me thoughts, feedback and tips.
Cheap Thrills
Every week, American consumers take delivery of millions of relatively low-value, international packages containing everything from Shein hauls to Etsy crafts.
Until recently, so long as these purchases cost less than $800, they carried no duties, helping lubricate the rapid flow of cheap foreign fashion into the world’s biggest consumer market.
Now those shipments are going to get slower and more expensive.
From Friday, the US will start to tax cheap imports, no matter where in the world they come from, ending an exemption that has lasted for nearly a century.
Duties on low-cost packages from China (read Shein and Temu shipments for peak fashion relevance) have been in place for months already, but the new customs regime closes off any potential work around by shipping via other countries and will affect international discount sellers and online marketplaces no matter where they are based in the world.
So What?
So far, many companies have held off passing price increases on to consumers, but as tariffs begin to bite, this may change.
Processing all these low-value packages through customs is also going to take time (US Customs and Border Protection reckons more than 1 billion shipments entered the country under de minimis last year). To expedite things, postal carriers can opt to pay a flat fee, but that starts at $80 for shipments from countries with the lowest import duties into the US.
So far, rollout has been predictably chaotic. International carriers have suspended some services to the US as they try to figure out how the new customs regime will work. Online marketplace Etsy has halted its shipping-label service for US-bound packages shipped by providers in the UK, Australia and Canada until there’s greater clarity around delivery.
Some brands, like Korean skincare label Olive Young, have already announced price hikes. The company said it will introduce a 15 percent customs fee at checkout for all American shipments from this week.
Not Just America
Other countries are also trying to curb the avalanche of cheap Chinese stuff hitting their markets.
In Latin America, governments from Mexico to Chile are starting to tax low-cost imports, while Europe and the UK are also looking at revising customs rules for cheap packages. This fall, French legislators are due to finalise a radical anti-fast-fashion law that could stop brands like Shein from advertising and impose “sin tax”-like penalties on polluting products.
Yes, But
The ultra-fast-fashion industry is down but not out. To an extent, the rollback of de minimis exemptions for all packages levels a playing field previously stacked against packages from China. Temu resumed direct shipments to the US earlier this week and is increasing advertising spend in the country once more.
“To the extent that the US consumer is going to change their taste for, you know, cheap quick goods, I don’t know. They just might not be as quick or as cheap.”
— Bloomberg reporter Laura Curtis on the Big Take Podcast
India’s Tariff Turmoil
This time of year, the whir of industrial sewing machines should punctuate the air across India’s fashion and textile manufacturing hubs, as factories gear up production to make sure new lines hit the shelves in time for the busy Christmas sales season.
Instead, some factories are sitting empty, as the country reels from crushing new duties imposed on imports to the critical US market.
On Tuesday, India got hit with 50 percent tariffs, making it one of America’s highest-taxed trading partners.
The US had already introduced duties of 25 percent on imports of Indian goods earlier this month, but made good on threats to double the tariff rate this week in retaliation for Indian purchases of Russian oil — a trade the US says helps fund the war in Ukraine.
The move is a disaster for India’s sizable fashion, textiles and jewellery manufacturing sectors, effectively pricing them out of the country’s largest export market. Textile and apparel manufacturers in regions including Tirupur, Delhi and Surat have already halted production due to “worsening cost competitiveness,” according to the Federation of Indian Export Organisations.
Who Wins?
India’s loss is likely Bangladesh’s gain. After a perilous few months, the fashion manufacturing giant is looking at 20 percent duties for US shipments (a big improvement from the 37 percent initially proposed by the US in April) and now much reduced competition from its rival neighbour.
Who Loses?
Meanwhile, the livelihoods of millions of low-paid garment workers hang in the balance. Factories in Tamil Nadu have already begun cutting jobs and reducing hours, according to business and human rights consultant Nandita Shivakumar.
“The crisis has once again exposed fashion brands’ behaviour: when shocks strike, they retreat,” she wrote on social media this week. “Once again, suppliers and workers in the Global South are carrying the burden.”
Best Believe I’m Still Bejewelled
Unless you’ve been living under a rock, you should know by now that pop royalty Taylor Swift and American football star Travis Kelce are engaged. Brands are already jostling to cash in on Tayvis wedding fever (American Eagle dropped news of a collab with Kelce less than 24 hours after the engagement was announced). But the biggest winner so far may be the mined diamond industry.
The massive vintage rock on Swift’s ring — prominently featured in her engagement post — is arguably the best thing to happen to the sector since Marilyn Monroe put on a magenta sheath dress and shimmied down some stairs singing ‘Diamonds Are a Girl’s Best Friend.’
The diamond market could do with the boost. Once coveted and considered de rigeur for declarations of lasting love, the position of mined stones is now under assault from lab-grown alternatives. Demand and prices are down, with many couples now opting for artificial options when they get engaged.
Vogue is already on top of the important questions, asking will Taylor Swift’s engagement ring launch a trend for old mine cut diamonds? The industry certainly hopes so.
“Judging by the tens of millions of people who are showing their excitement on Instagram, we can now expect a resurgence in old mine cuts and other heritage ring designs,” De Beers CEO Al Cook wrote on LinkedIn. “Taylor’s ring might be extraordinary in its size and rarity. But it is a reminder that every natural diamond is a unique and ancient treasure from the Earth – as special as the couple it brings together.”
Translation: “Thank god she didn’t opt for lab-grown.”
The bottom line: While mined stones are back in the conversation, this doesn’t fix the diamond industry’s malaise. In fact, it’s facing fresh problems in the shape of Trump’s new tariffs on India, since the country is one of America’s biggest suppliers of cut stones. Meanwhile, the consensus in BoF’s edit meetings this week was that demand for giant gems à la Swift could actually juice the lab-grown market, which opens up the option for much bigger stones at less exclusive price points.
Want more? Keep an eye out for Diana Pearl’s upcoming story on the Tayvis engagement and what it means for fashion and jewellery.
What Else You Need to Know This Week:
- Climate (Un)Diplomacy: President Trump is taking his pro-fossil fuel agenda overseas, using tariffs and other economic threats to pressure countries to drop climate goals. [The New York Times]
- So, So, So Scandalous: Over the last few months, the fashion industry has managed a hot streak of culturally insensitive and offensive marketing mis-steps. But what to do when an ad campaign gets controversial? Mike Sykes reports. [The Business of Fashion]
- Oh Nuts: Nigeria has introduced a six-month ban on shea nut exports. The move is an effort to transform the leading producer of raw shea nuts into a maker of higher value processed shea butter — a vital moisturising ingredient in many beauty products. [The Business of Fashion]
