These so-called “rebalancing measures” will take effect on April 1. They include import duties on various goods, including textiles and leather products. In total, the EU’s tariffs will cover goods worth approximately €18 billion. The purpose of these measures is to match the economic value of EU trade affected by the new U.S. tariffs.
What fashion businesses need to know about the EU’s rebalancing measures
The import tariffs announced on March 12 are essentially a revival of measures first introduced in 2018 in response to the Trump administration. Looking specifically at the fashion industry, a significant number of textile-based products will be subject to a 25% tariff. This includes items like carpets and suitcases containing textile materials, as well as garments, footwear, and headwear for men, women, and children made from textiles originating from American companies. The same applies to leather goods.
Following the announcement, several media outlets claimed that jeans would become more expensive. However, fashion entrepreneur Daan Broekman called this “fake news” on LinkedIn. Why? Because the definition of “goods originating from the United States” refers specifically to items manufactured in the U.S. As explained later in this article, many American fashion brands — including Levi’s, Wrangler, and Lee — produce their products in factories around the world. These companies can change their production sources to avoid the increased tariffs, meaning that prices for these items may rise less sharply — or not at all — if they sidestep the rules.
However, the practical application of the term “originating from the United States” remains unclear. When FashionUnited asked an EU spokesperson for clarification, they responded that further investigation was needed. According to established customs law principles, a product is considered to originate from a particular region if it is either wholly manufactured there or has undergone “substantial transformation” in that location. As lawyers Judith Bussé and Lorenzo Di Masi from international law firm Crowell & Moring explained in a 2018 article for FashionUnited, substantial transformation refers to a process that gives a product a new essential characteristic — beyond mere labeling, packaging, or branding.
“In the case of jeans, clothing, and cosmetics — which typically involve complex production processes — the concept of ‘substantial transformation’ may be subject to interpretation. By ensuring the final stage of production takes place outside the U.S., manufacturers can mitigate the impact of the tariffs,” they noted.
While the EU tariffs on U.S. goods could affect the fashion industry, history shows that many American companies have ways to avoid them. Because the production operations of major U.S. fashion brands are globally distributed, they can minimize additional costs and keep price increases for European consumers relatively low. Still, the exact interpretation of “originating from the United States” will ultimately determine the full impact of these measures.
Source: FashionUnited
Photo: Shutterstock
