Tariffs, war, and a broken supply chain: What’s really happening in fashion right now

The last month or so has been brutal for fashion’s brittle supply chain. Macro factors (renewed turbulence in the trade landscape and yet another geopolitical crisis in the Middle East) have forced planning teams back on the defensive. These events have had a significant impact on what things cost and when they will arrive, two essential variables to have under control. Now, neither can be predicted with confidence.

Planning has turned into re-costing

Fashion relies on planning lead times and costs, but there’s always a level of uncertainty in these numbers. No one ever truly knows what the supply chain will bring. This is normal.

What is not normal is the tariff landscape being thrown on its head, only a year after it was first thrown into chaos. The same applies to soaring energy and freight costs on the back of another war.

Usually, planning teams managing a 15% tariff can handle it well. They’ll model the tariff, absorb it, and pass it on. But when the applicable rate is contested, a refund entitlement is unclear, or a legal challenge could restructure the regime before the next shipment clears customs, they are no longer planning.

They are constantly monitoring and re-costing. This causes a ripple effect, with pricing conversations left unresolved and sourcing commitments deferred because the cost basis underlying them has not stabilised.

Every decision that should be structural becomes situational and reactive.

The current complexities surrounding the US tariff landscape exemplify this. When the Supreme Court ruling disrupted the existing framework in late February, it did anything but produce clarity for businesses. Reuters reported that companies were not expecting to pass on any savings because those savings were entangled in refund processes that were opaque.

A new 10-15% structure followed, but importers were still uncertain as to what applied to their specific categories, what prior exposure they could recover, and how durable the framework would be. Legal challenges arrived almost immediately. The gap between a lower headline rate and a stable planning basis continues to widen, and no brand really knows where they stand.

Gap disclosed that US import duties would reduce its current-quarter gross margin by approximately 200 basis points, while American Eagle flagged that it would be hit by a $60 million tariff impact in the first half of 2026, before accounting for post-ruling changes.

Macy’s also acknowledged a larger first-half hit because existing inventory had already been exposed to earlier conditions. Even Lululemon, which said it expected to offset almost all its tariff impact through commercial levers, still carried around $380 million of tariff exposure in its 2026 outlook.

Each company is managing a different version of the same problem. The divergence doesn’t just reflect different sourcing footprints, but instead the absence of any shared, stable assumption to plan against.

Delays are no longer contained

While fashion reckons with a volatile tariff framework, it is simultaneously trying to wade through the consequences of the war in Iran – something worth keeping separate from the tariff situation, since the remedies are notably different.

The conflict in Iran has disrupted air and sea routes through the Gulf with downstream effects on freight costs, marine insurance, port congestion and energy prices.

Fashion’s exposure primarily lies in Bangladesh, India, and Pakistan, some of the industry’s core apparel production hubs. More than half of Bangladesh’s air cargo and approximately 41% of India’s typically move through Gulf transit points. Reuters reported in early March that garments from major retailers, including Inditex, M&S, Primark and H&M, were piling up at South Asian airports after Gulf carriers cancelled flights.

The freight surcharge alone is problematic enough for fashion, but it is not the main problem. When goods do not arrive on time, planning teams manage floor-set failures, replenishment gaps, and markdown risks that inevitably follow a missed launch window.

Air freight has historically been used as a lever for brands to recover from these situations; however, that option is now materially more expensive and harder to access precisely when the demand for it is at its highest. Re-routing decisions that would have previously been delegated are being escalated, while air bookings that were a last resort are competing for limited capacity.

Teams that should be focused on the next season are increasingly spending their time triaging issues escalating in the current one. The decisions being made reactively, under pressure, are the same ones that should have been made deliberately, with full commercial transparency.

Paired with the instability caused by tariffs, it’s clear why the fashion supply chain is under significant strain. It wasn’t designed for cost assumptions and lead times to be so unpredictable at the same time.

But crucially, the more important point is that those managing the disruption most effectively are not doing so because they forecast better. When variables become structurally unstable, forecasting offers diminishing returns. What matters is maintaining control over decisions that can still be controlled.

Costing isn’t a one-time decision anymore

One of the best examples of decisions that can be corrected amid turbulence is landed costs. Take a product that was costed in November. It was priced based on assumptions made before the Gulf disruptions and the Supreme Court’s tariff ruling. That cost is now likely to be wrong.

We’re not talking about it being slightly off, either.

It’s wrong in ways that significantly impact whether the margin on the product is acceptable, whether the retail price holds, and whether a wholesale commitment made at that price is still commercially viable.

Brands working on those assumptions are not managing margins; they are managing fictional numbers that must be carried forward until their P&L forces a correction.

This creates a re-costing loop that, on its own, is expensive.

Finance teams have to revisit calculations mid-season while commercial teams reopen pricing conversations with wholesale partners who expect settled terms. Buying teams also have to work out whether a purchase order still makes commercial sense at a cost that has moved since it was placed.

The impact trickles down into every department and creates a diversion of both resources and attention. Worse still, if the underlying assumption keeps shifting, then each diversion continues to compound.

Brands with the ability to update landed cost calculations as freight rates, tariff exposure, and sourcing inputs change are not just better equipped; they end up making fewer decisions that need to be reversed.

Delays compound across teams

Product Lifecycle Management is an essential component of fashion operations, but in a constantly changing landscape, calendar planning can feel broken.

A development milestone that slips in month three, e.g., a sample delayed because a vendor in South Asia is waiting on a fabric shipment rerouted around the Gulf, or a fitting pushed back because the sourcing team is absorbed in logistics triage, does not stay contained.

It compresses the approval window for the next phase. The merchandising team loses the time needed to review the range, while the buying decision gets made with less information or less confidence. Purchase orders also go out later, meaning lead times tighten and the brand becomes dependent on logistics channels that are already under pressure.

By the time the deadline arrives, a delay that started in development has worked its way through design, sourcing, production and inbound logistics. The commercial consequence (be that a missed window, a compressed sell-through period, or a markdown that could have been avoided) is only known at the end.

The decision that caused it was made months earlier, and often by a team that had no clear sight into what it was setting in motion. This is why cross-functional coordination in product development is imperative.

When vendor dependencies are fragile and logistics timelines are compressed, a delay that one team absorbs becomes a problem that another team inherits. Teams must work from the same plan to surface risk earlier, act faster, and limit the downstream damage.

Scarcity without control is just shortage

Allocation is one of fashion’s strongest guardrails against volatility, but recent events have shown how few have developed their process to protect themselves in turbulent times.

When the supply environment is constrained, allocation is less a logistics decision and more a commercial one. This is why most brands make allocation decisions before inventory exists. Pre-season commitments, forward reservations against future receipts, and channel prioritisation calls are made in advance.

All of these are allocation decisions that carry real commercial weight. A brand that hasn’t decided this in advance isn’t avoiding the decision; it’s delegating it to whoever processes the order first.

The channel conflict this creates should not be overlooked. Wholesale commitments made early in the cycle compete with retail replenishment needs that emerge mid-season, eCommerce availability collapses because stock has been pulled forward to fulfil key account orders, and retail performance is distorted because the inventory it receives is not the inventory it actually needs.

Each decision could be defensible in isolation, but they produce commercial outcomes no one wanted.

This issue is particularly acute for fashion, where volume is everything. When brands manage hundreds of thousands of purchase and sales order lines across channels, regions and seasons, allocation decisions that look routine are not always routine; they accumulate fast.

A consistent pattern of over-serving wholesale at the expense of eCommerce, or of fulfilling top-line volume at the expense of key account protection, is not visible in any individual decision. It only becomes known in channel performance data, margin outcomes and relationship strain, when the damage is already done.

Scarcity, when managed deliberately, can reinforce commercial discipline and protect the most valuable relationships. When it is not, it becomes a shortage with a distribution problem. The difference here is not the inventory level, but the decision-making that sits above it.

Control is an operational necessity

The current disruption will ease, and when it does, the industry will conduct its usual post-mortem via resilience reviews, sourcing audits, and scenario planning exercises.

What those reviews will actually reveal is that the operating model was already running with less control than it appeared to have. Volatility will never go away, and it could never be fully mitigated. But better systems, processes and governance can limit the damage.

The brands that come out of this in the strongest position will not be those that absorbed the impact most efficiently; they will be those that used the pressure to build genuine control over what things cost, over when things arrive, and over where constrained inventory goes.

This is the work K3 does with fashion brands: helping them build stronger control over landed cost, calendar discipline, and allocation, so decisions on margin, timing, and inventory are made deliberately.

If these pressures are affecting your business, talk to us to see how you can gain better control today.