From rising corporate taxes to new climate regulations and trade policies, industry experts weigh in on how US Democratic presidential candidate Kamala Harris' economic agenda could affect the US apparel industry if she were to win the race in November.

In vice president Kamala Harris’ first major policy speech since accepting her Democratic Party nomination, she proposed what GlobalData retail analyst Neil Saunders describes as a “populist” economic agenda.

Through a livestream on CBS News, Harris has advanced much of former Democratic presidential candidate Joe Biden’s economic agenda but also aimed to introduce policies specific to her, as she sought to clarify her position on key issues to millions of voters.

Just Style investigates Harris’ key pillars of her economic approach that present both opportunities and challenges for apparel companies, particularly in the areas of improving the cost of living, taxation, climate change, and job creation.

Source: CBS News 

The impact of an opportunity economy for the US 

At the heart of Harris’ economic policy is her vision for an “opportunity economy,” which she described as a system where everyone can compete and have a real chance to succeed and remove the barrier to opportunity.

“Donald Trump fights for billionaires and large corporations. I will fight to give money back to working and middle-class Americans,” she declared while simultaneously hailing the middle class as one of “America’s greatest strengths.”  

She continued: “When I am elected president, I will make it a top priority to bring down costs and increase economic security for all Americans.”

Despite her optimism in what she called cutting needless bureaucracy, and unnecessary regulatory red tape and encouraging innovative technologies, Harris’ emphasis on raising wages and creating jobs could have a mixed impact on the apparel industry.

On the one hand, Saunders notes that increasing the wealth of middle-class Americans would likely lead to increased consumer spending, which is beneficial for the apparel sector. More disposable income could translate to higher demand for clothing, both in brick-and-mortar stores and online, he says.

On the other hand, Harris’ approach to job creation might involve more government intervention in the private sector, which, Saunders argues creates “populist soundbites” and often produces mixed results.

“If Harris can engineer a rise in wealth among middle-class Americans, then that will be helpful for apparel demand,” he adds. “But it is no good if this is offset by higher burdens on the apparel industry and ends up producing lower profits.”

University of Delaware professor of fashion and apparel studies, Dr Sheng Lu, highlights the potential impact of Harris’ opportunity economy on what he says is an already significant US fiscal deficit and persistent inflation. He adds that high inflation is a key factor contributing to reduced demand for clothing expenditure.

Push against corporate price gouging

One of the cornerstones of Harris’ economic policy is her stance on corporate taxation. While she has previously advocated for a corporate tax rate as high as 35%, Saunders expects her to take a more moderate approach, likely raising the rate to around 28%.

It would still represent an increase from the current 21% rate, which was reduced under the Trump administration.

“This will still be unwelcome, but somewhat less onerous,” explains Saunders.

During her speech in Raleigh North Carolina, Harris compared her plan to that of her presidential candidate opponent Donald Trump. She claimed he intends to cut corporate taxes by over a trillion dollars “That’s on top of the $2tn tax cut he already signed into law when he was president,” which she said overwhelmingly went to the wealthiest of Americans and corporations.

For apparel companies, particularly those operating in the US, higher corporate taxes could be a significant burden. Saunders points out how the apparel industry, which already faces pressure from rising material and labour costs, would likely see tighter margins.

If corporate taxes increase, companies may pass those costs along the supply chain, potentially leading to higher retail prices for consumers.

This would make US-based manufacturing less competitive globally, as imported apparel might remain cheaper, particularly from countries like China or Bangladesh, which dominate global apparel production.

Lu agrees and adds a general shift in the tax rate would not only impact companies’ operational costs and profit margins but influence their investments and global expansion decisions. He explains that larger corporations typically have more resources than smaller ones to manage higher taxes.

However, the impact of higher corporate taxes might not be entirely negative.

Increased government revenue from these taxes could fund Harris’ proposed tax relief for middle-class Americans, boosting consumer spending power.

“People will have differing views on this, but the best way to great growth and prosperity is for the government to step out of the way and reduce the burden on ordinary people and on companies,” says Saunders.

He argues that Trump’s approach of imposing more tariffs is “unhelpful to the apparel sector” and will end up becoming a tax on consumers.

“So, neither candidate is entirely friendly for the apparel industry,” suggests Saunders.

Instead, he hopes that if consumers have more disposable income due to tax credits and wage increases, the demand for apparel could rise, balancing out some of the cost pressures that companies face.

During her speech, Harris warned that Trump’s economic policies would translate into higher costs borne by middle and working-class families. She characterised Trump’s plans to impose a tariff on all US imports as a “national sales tax,” arguing it would raise prices on everything from clothing to food to gas.

Later on, Harris blasted Trump’s plan to further cut taxes on the richest Americans. “You know, I think that if you want to know who someone cares about, look who they fight for,” she said.

Gherzi Textil Organization’s partner Bob Antoshak highlights the time lag between wage increases and the resulting boost in consumer purchasing power, suggesting that while higher wages will eventually benefit apparel companies through increased demand, businesses may struggle to absorb the higher costs in the interim.

Harris acknowledged that most businesses are creating jobs, contributing to the US economy and playing by the rules but, she also argued “some are not” and stated that action is needed when that is the case.

Climate change and sustainability regulations

Vice president Harris declared in July 2023 that “one of the most urgent matters of our time” is the climate crisis. During a speech in Baltimore, Maryland, she said: “It is clear that the clock is not only ticking, it is banging. And we must act.”

In her latest speech on her proposed economic policy as president, Harris made it clear that climate change and sustainability are central to her economic vision.

While apparel companies have increasingly recognised the need for sustainability, many are wary of additional regulation, which could raise production costs and complicate supply chains.

Antoshak notes that while higher wages and job creation could benefit the industry, “companies will cringe at the thought of higher taxes” and the costs associated with sustainability initiatives.

The apparel industry is one of the largest contributors to global pollution with fast fashion in particular driving unsustainable production and waste. Antoshak believes Harris’ emphasis on sustainability means she may favour stricter environmental regulations, which is “something the industry has generally resisted”.

Lu argues that if Harris becomes the next US president she might support legislation that requires greater transparency in the fashion apparel supply chain, particularly regarding labour practices and fashion companies’ broader societal responsibilities.

He mentions how during her tenure as vice president she supported the Green New Deal, which calls to address climate change and treat it as a social issue.

Moreover, Harris’ plan to help smaller businesses thrive through government support and incentives might ease some of the financial burdens, allowing apparel firms to invest in sustainable practices without sacrificing profitability.

“As president, I will bring together labour with small businesses and major companies to invest in America to create good jobs achieve broad-based growth and ensure that America continues to define the future and lead the world,” Harris said.

American Apparel & Footwear Association (AAFA) president and CEO Steve Lamar believes smart trade policies and well-implemented environmental, social, and governance (ESG) programmes are critical for benefiting all Americans.

The importance of renewed global trade agreements for apparel

“American companies want to see the next administration renew expiring and expired trade preference programmes, expand current trade agreements, negotiate new trade agreements, and end the Section 301 tariffs that vice president Harris herself has said are a tax on hard-working American families,” continues Lamar.

He stresses that renewing agreements such as the Generalized System of Preferences (GSP) and the African Growth and Opportunity Act (AGOA) would offer tangible benefits to US consumers while spurring investment and job growth in the apparel sector.

One potential concern raised by Saunders is the potential uneven playing field that could result from Harris’ sustainability policies.

He warns that US companies might be “angered” if they face stricter regulations while fast-fashion giants from overseas continue to import unsustainable apparel without the same scrutiny.

A two-tier system in which foreign competitors can continue to operate without facing the same level of environmental regulation would, as Saunders puts it, be seen as “iniquitous and damaging” to the competitiveness of US apparel businesses.

Addressing these concerns, in early August the National Council of Textile Organizations (NCTO) welcomed the introduction of the bipartisan “FIGHTING for America Act,” which aimed to ensure corporate giants like Singapore-headquartered Shein and China-headquartered Temu cannot use the de minimis process to avoid paying tariffs on textiles, shoes and apparel.

NCTO president and CEO Kim Glas has said she hopes the legislation will help shield and support the critical domestic textile and apparel manufacturing supply chain.

Harris plans to address her policies in greater detail to build an opportunity economy, but for now the apparel industry experts seem to agree that if she can balance business needs with her commitment to supporting the middle class and combating climate change, her agenda could help boost the resilience of the US apparel industry.