When it comes to sourcing and trade in 2024, U.S. brands and retailers are wringing their hands over issues new and old.

The U.S. Fashion Industry Association’s (USFIA) newest Fashion Industry Benchmarking Study, conducted in collaboration with University of Delaware department of fashion and apparel studies professor Dr. Sheng Lu, surveyed executives from 30 leading U.S. brands and retailers from April through June.

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Released Monday, the study revealed that a predictable set of issues are still on the minds of many—but fresh concerns are also emerging.

While more than half of those execs ranked familiar themes like “Inflation and economic outlook in the U.S.” and “Managing the forced labor risks in the supply chain” as their most pressing business challenges this year, “Shipping delays and supply chain disruptions” and “Managing geopolitics and other political instability related to sourcing” are new sources of worry that have surfaced more recently.

As the U.S.-China trade relationship continues to simmer, many business leaders worry it’s at risk of boiling over. About 45 percent listed the “Protectionist trade policy agenda in the United States” as a top-five business concern in 2024, up 15 percent from last year.

Risks of China sourcing

According to USFIA and Lu, companies are deeply concerned about the deterioration of the bilateral relationship and are putting plans in place to further “reduce China exposure” as a means of mitigating risk.

The study authors said a record 43 percent of survey-takers sourced less than 10 percent of apparel product from China this year, compared to just 18 percent of respondents in 2018. The change illustrates how far China has fallen in the sourcing portfolios of U.S. brands; almost 60 percent said the country is no longer their top apparel supplier, a huge difference from pre-pandemic, when 25 to 30 percent said the same.

China’s still an economically competitive option, they believe—its vertical manufacturing capacity, relatively low MOQs, unmatched capabilities and agility, as well as costs and speed to market are definite upsides—but the risks are starting to outweigh the rewards. In the face of geopolitical tension (which could be exacerbated by the upcoming election) and the high risk of sourcing goods tainted by forced labor, U.S. companies are increasingly seeking out other alternatives—even those that sell goods in China.

The Uyghur Forced Labor Prevention Act (UFLPA) and the desire to comply is a big motivator for brands in 2024, the research showed.

Many U.S. companies have adopted proactive and comprehensive approaches to compliance, with over 90 percent reporting that they are “Making more efforts to map and understand our supply chain, including the sources of fibers and yarns contained in finished products.” In fact, the same number said they had mapped their entire value chains, from Tier 1 to Tier 3, in 2024, representing 40-percent growth over the past few years.

Diversifying and ‘de-risking’

According to the survey, nearly 80 percent of brands will make more cuts to their China apparel sourcing over the next two years. Larger firms with more than 1,000 employees that source over 10 percent of their products from China are the most ambitious about “de-risking.’’

Diversification is the primary strategy for doing so. Nearly 70 percent of those large-scale companies said they are currently sourcing from 10 or more countries—a much larger contingent than the 45 percent to 55 percent seen in recent years. Small- and medium-size companies, too, are upping their mix, with many sourcing from six or more locales.

The vast majority (over 80 percent) of executives said they “intentionally reduce sourcing from high-risk countries” as a direct response to UFLPA. Another three-quarters of respondents said they flatly ban the use of Chinese cotton in their apparel offerings.

Almost half (45 percent) said they’re looking to sourcing destinations beyond Asia to further distance themselves from forced-labor risks. Notably, though, under 10 percent said they would make further cuts to apparel sourcing from other Asian countries this year.

USFIA and Lu said “field experience” led them to the conclusion that respondents want greater transparency from U.S. Customs and Border Protection (CBP)’s UFLPA enforcement, especially when it comes to shipment detentions and targeted entities and commodities. Talking to respondents revealed a desire for CBP to focus more on “bad actors,” reduce repeat detentions and elucidate the rules for recycled cotton.

As companies seek greater compliance with the UFLPA, the trend toward diversification is also is poised to continue. About 80 percent of respondents said they plan to hold steady or broaden their sourcing portfolios from today through 2026. Some will do so by sourcing from more vendors, while some will seek to keep their supplier base manageable while opening up to more countries.

Who stands to benefit

As China continues to shed sourcing market share, other sourcing hubs are snatching it up.

Notably, more respondents reported sourcing from India (89 percent utilization) than Bangladesh (86 percent utilization) than any time since the survey began. But companies are looking to diversify further—almost 60 percent said they planned to expand beyond India over the next two years, topping planned expansion from any other Asian country.

The Western Hemisphere is also gaining ground. Mexico and Guatemala tied for 7th most utilized apparel sourcing destination this year, and a record 52 percent of companies said they plan to source more from Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) countries over the next two years, up from 40 percent in 2023.

While that number is high, most companies looking to CAFTA-DR countries also plan to explore more global sourcing regions. Nearly all of those that said they would look to the Western Hemisphere over the next two years also said they were looking to countries in Asia, too.

That’s because raw material sourcing continues to present hurdles for brands looking to manufacture with nearshore neighbors; 75 percent said the issue was the primary block to sourcing more from CAFTA-DR. Yarns and fabrics made from fibers other than cotton and polyester—like nylon, viscose, rayon and wool—are in short supply.

Mexico, which benefits from the U.S.-Mexico-Canada Trade Agreement (USMCA), has seen a considerable lift, reinforcing the efficacy of trade legislation in shaping global trade patterns.

Among respondents that reported expanding nearshoring efforts in 2024, 65 percent said they brought in goods from Mexico or Canada—up from just 40 percent between 2019 and 2020. Over one-third of brands said the agreement played a part in their decisions to source apparel in the Americas.

Destination Africa

American brands and retailers are adamant that the Africa Growth and Opportunity Act (AGOA) must be renewed expeditiously—and for the long term.

The trade preference program, which covers three dozen Sub-Saharan African nations and thousands of products, expires in September 2025.

In 2024, companies reported sourcing from Lesotho, Kenya, Madagascar, Mauritius, Tanzania, Ghana and Ethiopia, which lost its AGOA eligibility two years ago. Most companies that reported buying apparel goods from Africa were larger in scale with robust international supply chains.

More than 86 percent of all survey-takers said they want to see AGOA renewed for at least another decade—and notably, not one objected to the proposal. According to USFIA and Lu, the U.S. fashion industry fully bought into the program—and they’re relying on its renewal to continue doing business in Africa.

More than 70 percent of executives said a 10-year AGOA renewal is essential to their continued sourcing from the region. What’s more, almost one-third (30 percent) said they’re already pulling back on AGOA sourcing due to the uncertainty surrounding the program’s renewal. That number could grow steadily the longer Congress delays reinstatement.