New York, NY – Recent shifts in global trade policy, including substantial tariff implementations and subsequent dismantling, have yielded unexpected outcomes for U.S. manufacturing, with domestic output in key sectors declining and Asian imports experiencing a significant surge. Despite an initial aim to bolster domestic production, the complex interplay of geopolitical factors and fluctuating tariff regimes has led to a scenario where American producers are not realizing the anticipated benefits.
Kearney’s latest 2026 Reshoring Index reveals that domestic output growth continues to lag, with little improvement observed between 2024 and 2025. The report indicates that U.S. manufacturers did not benefit from the volatile tariff policy changes. Overall manufactured goods output in the U.S. saw a slight dip of 0.4 percent, equating to a $28 billion decrease. The textile, fabrics, and mill products sector experienced a more pronounced decline of 4 percent, while the apparel segment suffered a marked reduction of 17 percent.
In stark contrast, combined imports from 14 Asian low-cost countries, including China, which were targeted with significant duties, grew by 6 percent, or $60 billion. This trend suggests that tariffs may have prompted trade diversification, but not necessarily towards the U.S. market or even the Western Hemisphere.
Dr. Sheng Lu, a professor of fashion and apparel studies at the University of Delaware, whose research informed the U.S. Fashion Industry Association’s latest Fashion Industry Benchmarking Study, noted that a record percentage of surveyed companies expanded their sourcing to over 10 countries last year. Nearly 60 percent plan to further broaden their sourcing networks. Despite this diversification effort, Asia remains a dominant source for U.S. apparel imports. In 2025, a substantial 72.6 percent of U.S. apparel imports, by value, originated from Asia, an increase from 71.6 percent the previous year.
Lu’s research highlights that Vietnam, Bangladesh, Indonesia, India, and Cambodia collectively accounted for a new record of 50.6 percent of U.S. apparel imports in the past year, a significant jump from approximately 37.1 percent before the COVID-19 pandemic. “In other words, due to production capacity constraints, many U.S. fashion companies have been diversifying sourcing within Asia rather than significantly shifting orders to other regions,” Lu stated. He further explained that emerging sourcing destinations like Cambodia, Indonesia, and India have built capacity and are supported by investors from China, which likely contributed to their significant export growth to the U.S. last year.
Patrick Van den Bossche, a partner in management consultant Kearney’s Strategic Operations Practice and author of the 2026 Reshoring Index, observed that despite significant investments in U.S. manufacturing over the past four years—triple the cash infusions seen in 2021—very little new capacity has been added. “We would figure by now some of that [investment] should start translating into manufacturing gross output,” Van den Bossche told. “And then, of course, the tariffs came along, and we thought, ‘It’s really time to turn these things on.’ Lo and behold, that’s exactly what didn’t happen.” Current manufacturing capacity utilization in the U.S. has fallen below 75 percent, a historically low point.
Kim Glas, president and chief executive officer of the National Council of Textile Organizations (NCTO), has also witnessed this trend. She believes that China-originating textiles and apparel continue to flood the U.S. market through Southeast Asian countries that have gained prominence. “The result is a deeply distorted market in which subsidized, below-cost products are overwhelming domestic manufacturers and their Western Hemisphere partners,” Glas stated. This phenomenon, she contends, has contributed to the closure of at least 40 U.S. textile mills over the past two-and-a-half years. The NCTO is focused on preserving the 453,122 jobs currently supported by the industry, which saw $27 billion in exports of fiber, fabric, and clothing last year.
Data from the Office of Textiles and Apparel confirms significant import shifts between 2024 and 2025, underscoring the growing dominance of Asian producers. U.S. apparel imports from Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) countries decreased by 6.7 percent by value and 8.1 percent by quantity year-over-year. Conversely, apparel imports from Southeast Asian nations saw substantial increases by quantity, including Bangladesh (up 12.4 percent), Cambodia (up 35.3 percent), Pakistan (up 15.4 percent), Vietnam (up 12.9 percent), Indonesia (up 13.9 percent), and India (up 4.2 percent). The value of these imports also grew due to volume increases and the impact of tariffs, with Bangladesh up 11.7 percent, Cambodia up 27 percent, Pakistan up 10.8 percent, Vietnam up 11.8 percent, Indonesia up 9.7 percent, and India up 5.5 percent.
Glas noted that many producers expected sourcing from the Americas to increase, given the approximately 10 percentage point tariff differential between CAFTA-DR countries and Asian nations. “You would assume with that differential that you would see more Western Hemisphere sourcing, but we saw a decline,” she said. “Intuitively, you would say, ‘Well, they have higher tariffs — that should deter sourcing from [Asia]; I’d rather mitigate costs and come closer to home and pay a modest 10 percent tariff,’ but that’s not what happened.”
The NCTO has previously advocated for targeted tariffs on goods like textiles and apparel, believing it could provide U.S. producers an advantage against cheap, Asia-made products. Glas commented on the initial tariff policy, stating, “When this was first deployed… it was thought that this would lead to more onshoring here in the United States and help protect from some of the worst trade behaviors.” However, she added, “in this environment, I think it added fuel to a fire that allowed Asia and China to grow. So tariffs alone are not going to recalibrate all of this.”
Bill Rogers, president and CEO of Mount Vernon Mills, an NCTO member, emphasized the need for trade policy stability that is legislatively entrenched rather than subject to executive directives. He described how clients of Mount Vernon Mills rushed to import goods before the tariffs took effect, leading to a six-month period for inventory to clear. While business saw a slight pickup afterward, Rogers indicated a significant hesitancy from customers entering 2026 due to ongoing tariff policy shifts. With the recent dismantling of certain duties, the administration has explored other avenues, including Section 301 investigations, to impose higher levies. “I think the uncertainty has still got a lot of people paralyzed,” Rogers said. He also pointed out that countries facing high duties, such as India, Pakistan, Bangladesh, China, and Vietnam, absorbed costs to remain competitive. When tariffs were later removed, the price gap between U.S. and foreign producers widened, posing challenges for U.S. producers vying for cost-conscious brands and retailers.
James McKinnon, CEO of Cotswold Industries Inc. and Central Textiles Inc., commented on the ongoing confusion in sourcing decisions. He cited a lack of policy that encourages reinvestment in the Western Hemisphere’s overall footprint, including increased fabric and needle availability, as a primary reason for the Americas not securing a larger share of the textile and apparel sourcing market. McKinnon suggested that strengthening the Berry Amendment, which mandates the use of domestic textiles for military service members, could scale U.S. production. He also highlighted the economic disparity, with labor rates in the Americas significantly exceeding those in Asia, presenting a considerable challenge for hemispheric sourcing opportunities. While large retailers express an interest in domestic production, they also face economic realities that limit their ability to bring back substantial business. McKinnon advocates for creative government policies and tariff strategies to incentivize the use of U.S. inputs, such as reciprocal tariff exemptions for clothing made in Southeast Asia using U.S. fabrics.
Glas echoed the sentiment that a different strategy is required. “What are some other tools in the toolbox that could be utilized right now that helps drive more sourcing here?” she questioned. She believes that addressing systemic issues undermining domestic industry success involves more than just tariff numbers. Glas submitted public comments to the Office of the U.S. Trade Representative regarding the Section 301 investigation into forced labor, which covers 60 trading partners. She recommended imposing Section 301 duties on textiles and apparel from China and South and Southeast Asian countries using forced labor. Additionally, she proposed preserving duty-free treatment for qualifying CAFTA-DR and U.S.-Mexico-Canada Agreement products, incentivizing Western Hemisphere sourcing, and rewarding supply chains free of forced labor. Other suggestions included tariff exemptions for necessary imported inputs and machinery not produced domestically, and strengthened customs enforcement to prevent illicit goods. Glas emphasized the need to consider the current dynamic period and stated, “I think looking at tariff rates is not the only way to look at the issue” regarding the promised U.S. manufacturing renaissance.
