Usmca under threat: fashion brands face shifting sourcing uncertainty

The bedrock of North American fashion sourcing – the USMCA trade agreement – is fracturing, leaving brands scrambling for stability and triggering a potential slowdown in expansion plans.

A deal in jeopardy? trump’s review sparks new questions

Washington’s decision to withhold reaffirmation of the USMCA, following President Trump’s criticisms and concerns over trade imbalances, has injected a potent dose of uncertainty into the apparel and textile supply chain. The agreement remains in force, but the prospect of annual negotiations until a compromise is reached – or until 2036 – is sending ripples through the industry.

For years, Mexico has presented itself as a critical alternative to China, offering reduced lead times, preferential trade terms, and political alignment. But the latest developments are forcing companies to confront a stark reality: the region’s stability is no longer guaranteed.

The yarn-forward rule: a critical bottleneck

The agreement’s “yarn-forward” rule – demanding that finished products largely originate from within the USMCA region – remains a key hurdle. A shirt cut and sewn in Mexico, for instance, may not qualify for preferential treatment if the fabric was sourced outside North America, potentially limiting the country’s attractiveness to brands.

“These results underscore the importance of creating a stable and predictable policy environment,” says Steve Lamar, president and CEO of the American Apparel & Footwear Association (AAFA). “Companies remain stumped by where to go, but many are maintaining their sourcing relationships in China because the alternatives lack the predictability needed to justify major investments.”

Data reveals a concerning trend

A recent survey by the University of Delaware and USFIA reveals a significant decline in apparel sourcing from Mexico. Just under a third (31.6%) of leading US fashion companies reported sourcing apparel from Mexico this year, down from 52.9% in 2025 and 60.7% in 2024. Only 33% planned to increase apparel sourcing from Mexico over the next two years – a dramatic drop from 47% in 2025’s survey.

Despite the decline, Mexico remains a competitive destination for speed to market (72% cited speed as a critical reason), duty savings (63%), and flexibility. However, the policy environment’s instability is now weighing heavily on companies’ willingness to expand sourcing there.

Beyond the numbers: brand experiences

Lora Baby’s founder, Andrea Herrera, vividly illustrates the challenges. “Because of the origin rules, we could not get the certificate even if we manufacture in Canada, because the fabric is created in China,” she explains. “No one in the United States or Canada produces the fabric.” This anecdote underscores how even the most compelling regional advantages can be undermined by seemingly technical compliance hurdles.

Kim Glas, president and CEO of the National Council of Textile Organizations (NCTO), emphasizes the industry’s relief at the agreement’s continued force, but highlights the new uncertainties surrounding the review process. “This injects uncertainty at a time when our industry has lost 41 textile plants over the last two years.”

A complex web of dependencies

The USMCA framework is more than just a trade agreement; it's a critical component of a complex, interconnected supply chain. USFIA president Julia Hughes stresses the industry’s support for preserving the trilateral structure, emphasizing that a fragmented approach would create compliance headaches and diminish the region’s competitive advantage. “The industry supports no change in the rules of origin for our sector, and we believe the negotiators support that position,” Hughes states.

Ultimately, the fashion industry faces an uncomfortable question: how to navigate a shifting landscape where the promise of trade volatility threatens to derail carefully laid sourcing strategies. The answer, it seems, may lie not in chasing quick fixes, but in building a more resilient and adaptable supply chain – a task that demands both strategic foresight and a willingness to confront the uncomfortable realities of a rapidly changing world.