Fashion industry experts share their insights on the top garment manufacturing countries to watch in 2025.

It is widely accepted there will be an acceleration in fashion brands sourcing from countries where they have more political alignment as costs continue to surge, trade policies become less favourable and expectations to comply with social and environmental sustainability rise.

According to McKinsey, trade barriers and supply disruptions have increased five-fold since 2015, with around 3,000 trade restrictions imposed in 2023.

And China seems to be the one fashion brands are keen to leave behind, diversifying away from China at the fastest rate since 2010, down 6 percentage points (%points) in 2023 versus 2019.

Meanwhile the share of apparel manufacturing foreign direct investment into nearshoring regions has increased 20%points in the last five years for the US and 8%points for the EU.

Key garment manufacturing destinations in 2025 and what’s prompting the shift 

Markets such as India, Vietnam and Bangladesh are expected to become key sourcing hubs for US and European apparel and textiles. Meanwhile, China is progressively losing cost-competitiveness due to rising labour costs, which increased by 38% from 2010 to 2021.

Nearshoring is expected to become an increasingly relevant sourcing strategy, with US and EU apparel and textile imports from nearshoring destinations expected to increase 2%points and 3%points respectively by 2030.

McKinsey’s ‘State of Fashion’ report reveals fashion brands and retailers are laser focused on becoming cost-competitive and increasing labour costs in China are compromising manufacturer cost-competitiveness compared to other Southeast Asian countries such as Vietnam, where average hourly labour costs are less than half of those in China.

In addition, shipping costs have drastically increased across Asia-to-US shipping routes. There was a 165% increase in Asia-to-US east coast route container rates on 5 February 2024, compared to two months prior.

Worries are looming around tariffs and protectionist trade policies, especially following the re-election of President Trump. But sustainability is also a determining factor in where brands are choosing to source from.

Gherzi Textil Organisation partner Robert P. Antoshak notes that as costs increase in traditional sourcing hubs like China, more companies will continue to diversify their supply chains and move toward nearshoring and reshoring, particularly in regions like Mexico and Central America by US buyers and Türkiye and Northern Africa for European buyers.  

“Further, overall sourcing will continue to expand in Southeast Asia, India, and Pakistan, while orders will also gain in the AGOA region,” he suggests.

But Lever Style chairman Stanley Szeto says sourcing location will mostly be determined by the strengths of buyer-supplier partnerships.

He says brands need to address tariff threats head-on by working with suppliers that offer expansive sourcing alternatives outside of China, allowing them to diversify and safeguard production to manage risks more effectively.  

“Beyond tariff-related shifts, there is a pressing need for brands to build more resilient supply chains with fewer and stronger supplier partnerships. Companies are increasingly favouring suppliers that provide agility and high-mix, low-volume production — enabling them to quickly respond to market shifts without excess inventory. To achieve this, brands should partner with suppliers that can platform or pre-position materials, digitalise processes, and offer flexible manufacturing setups. These capabilities help reduce inventory risks while maintaining scalability during demand surges.”

Chief of sustainability and supply chain strategy at Bureau Veritas Consumer Products Services, Rick Horwitch, notes that the global landscape continues to evolve at an unprecedented pace and that geopolitical uncertainties, complex sustainability regulations, and shifting consumer behaviours are reshaping the way retailers, brands and suppliers are going to comply, compete and lead into 2025.   

When it comes to supply chain strategy, he believes leaders must “mitigate risks, enhance agility, and prioritise supply chain transformation and nearshoring strategies.”

“To meet with these market dynamics, leaders are exploring strategies around how they can conduct their sourcing better and smarter, factory upskilling, reduce overall costs through efficiency gains, and a focus on QA and enhanced use of data to unlock these opportunities.”

But he points out sustainability and incoming legislation that hold brands accountable for happenings across their entire supply chain related to people and the environment, will also influence decisions on where they source from.

“Retailers, brands and their supply chain partners will need to collaborate closely to develop a costing structure that is not solely dependent on first cost, but is more holistic. From a quality perspective, this will require a greater focus on efficiencies and developing strategic QA programmes (versus transactional QC programmes).”

Will Asia remain relevant?

In a nutshell, yes, but sourcing will be spread across wider Asia with places like India and Bangladesh becoming hotspots.

“In the US, apparel and textile imports from these countries increased 3%points and 2%points respectively between 2020 and 2023. This trend is expected to continue as fashion executives rank Asia growth markets as their top sourcing hotspots for the next five years and regulatory incentives fuel manufacturer capability building in these countries,” reads the report.

Steve Lamar, president and CEO of the American Apparel and Footwear Association points out: “Although China will remain an important market and sourcing partner, the prospect of 60-100% tariffs is daunting. It’s difficult to know where these challenges beyond China will emerge, but President-elect Trump did talk about Mexico during the campaign and, at the end of the first Trump Administration, Section 301 investigations were started on Vietnam and the European Union.”

But, Dr Sheng Lu, professor and graduate director of apparel studies at the University of Delaware is unconvinced brands are ready to quit on China yet.

He acknowledges that tariff policy is spooking brands and that they will likely continue to leverage sourcing diversification to mitigate risks.

“However, the “reducing China exposure” and sourcing diversification movement has yet to substantially benefit nearshoring or emerging sourcing destinations such as the Western Hemisphere and Sub-Saharan Africa (SSA). This result was mainly because fashion companies utilised China to source a wide range of various products, whereas Western Hemisphere and SSA suppliers can only produce a few basic categories.  

For example, my latest studies show that in the first nine months of 2024, even excluding major platforms like Shein, Amazon, and Temu, US fashion companies sourced more than 60,000 Stock Keeping Units (SKUs) of clothing items from China. In comparison, India and Vietnam each supplied approximately 15,000 SKUs, Cambodia and Bangladesh each contributed 3,000 SKUs, Mexico provided only 2,000 SKUs, and CAFTA-DR and AGOA member countries supplied around 200 SKUs each. Therefore, even if fashion companies report sourcing from more countries, they are likely to stay sourcing from more Asian countries with closer export capacity and structure to China. Meanwhile, the total value or volume of trade may not fully capture the whole picture of sourcing diversification. This trend may persist in 2025, even with new tariff escalations.”

Horwitch agrees with Lu noting we are unlikely to see major shifts in the sourcing landscape over 2025. He says companies have already been transitioning out of China over the last six years to countries including Vietnam, Bangladesh, Indonesia, India, Türkiye, Latin America, etc., but he says many have remained “loyal” to China. 

“In 2025 retailers and brands will continue to diversify, but with a China +2/3/4 type of strategy. This does not mean 2025 will be a “quiet” year. In fact, 2025 will be as challenging (if not more so) then previous years.”

But International Apparel Federation secretary general, Mattijis Crietee, says the crystal ball into the world of sourcing is looking cloudy, at least in the near term.

“There are plenty of push and pull factors, but it’s difficult to predict what the net effect on the sourcing map will be. For instance, as a result of existing and expected trade restrictions, US and to a lesser extent EU companies are sourcing less apparel from China. The fast rise of new online retail platforms from China that source a major part of their garments in China moves the needle in the opposite direction.

“A greater need for higher speed to market is creating a nearshoring trend, but at the same time price pressure — which is even greater than usual —  is also pushing sourcing in an opposite direction, farther out. This is shown by the current EU import figures that show that despite an alleged and often described nearshoring trend, in reality the share of nearshoring in total EU apparel imports has only inched up slightly in the past years.”

“We do expect though that in 2025, the share of imports from countries in Asia that are seen as strong alternatives to sourcing in China, such as Vietnam, Bangladesh, Cambodia, Indonesia, India and Pakistan will rise. This rise will often be enabled by Chinese investments. Similarly, Türkiye will step up its investments in the production of garments in countries closeby, including Egypt and perhaps Uzbekistan and other countries nearby.”

India, Bangladesh and Türkiye 

India is expected to play a more prominent role in 2025. While challenges in production capabilities have impacted scale to date — India had the highest percentage of apparel products that failed quality standards in 2023 — these pressures may start to ease. The Indian government has invested around $2.5bn in Production-Linked-Incentives and reforms to Quality Control Orders, while foreign investment has increased three-fold since 2019, according to McKinsey & Co.

Bangladesh, despite being a favoured sourcing location in recent years, has experienced increased political and climate disruptions, leading to brands shifting up to 40% of orders in the second half of 2024 to other markets in the region, the report adds.

Türkiye’s share of global textile production has doubled over the past two decades. In 2023, its share of textile and apparel exports to Europe reached 6%, surpassing Vietnam.

More than 25% of European brands listed Türkiye as a crucial sourcing location, according to supply chain compliance company Qima. Brands, including Inditex, H&M, Boohoo and Asos all have large sourcing footprints in Türkiye.

Advantages include increased supply chain traceability and reduced order-to-fulfilment times, from 150 to 170 days in Asia-Pacific to under 50 days in Türkiye, with an average of seven days in transit.

Nearshoring

What is interesting is that while there remains much talk around nearshoiring objectives from fashion brands and retailers, little action is happening.

In fact, McKinsey reveals the share of imports to Europe and the US from nearshoring countries has remained flat since 2019.

“This is due to the limited manufacturing capacity and capabilities of local suppliers, with lower labour productivity meaning total landed cost remains higher than other regions — despite competitive labour rates, lower shipping costs and tariff advantages. However, these challenges are likely to be addressed going forward.

But Lamar says the sourcing picture is further muddled by the failure of trade policy to provide certainty and support to other locations, such as preference or FTA partners.

“Nearshoring, including to USMCA and CAFTA-DR, which should be an obvious choice, remains uncertain due to potential tariff threats and a trade policy that has favoured enforcement over facilitation for trusted partners in the region.”

MAS Holdings COO Shakthi Ranatunga says the decision around nearshoring will come down to whether it can make a supply chain more agile and believes we will see more of it in 2025 as companies look to reduce reliance on single regions and improve speed-to-market. MAS’ production network spans Jordan to Indonesia which Ranatunga says allows the company to “take advantage  of regional verticality”.

But Randy Carr, CEO of World Emblem, believes nearshoring will become “essential”.

“In 2025, nearshoring will become a primary strategy for many midsize manufacturers seeking faster turnaround times, better quality control, and overall cost savings. The recent port strikes have only underscored the need for more localised production that reduces the reliance on distant, often disrupted supply chains. We expect this shift to improve production agility and strengthen supply chain resilience for US companies, with substantial reductions in lead times and transportation costs

Latin America’s importance to US brands and retailers

65% of US fashion companies say they increased sourcing from USMCA members in 2023, especially Mexico — up from 40% in 2020 — owing to advantageous trade agreements for textiles and apparel and increased US investments.

Mexico-US shipping routes have cost and speed advantages compared to China, costing around $5,000 for a single container versus $18,000 and taking five to 10 days versus 60 days in China, the latter of which has doubled due to supply chain disruptions.

The value of apparel and textile exports from Guatemala to the US has increased 10% from 2020 to 2023. While manufacturing in the country costs around 5 to 10% more than in Vietnam and shipping times are around three times faster.

Carr notes: “By relocating production to neighboring countries like Mexico, businesses can reduce transportation costs, shorten lead times, and gain greater oversight of manufacturing processes. Nearshoring has the potential to boost the growth of Mexican manufacturing exports to the US from $455bn today to an estimated $609bn in the next five years, according to Morgan Stanley Research.”

Earlier this year a report suggested rising political tension would overshadow the trend for friendshoring with civil unrest unlikely to subside in key garment hubs.

In 2023, Just Style revealed the sourcing countries to watch in 2024 with diversity, agility and transparency all remaining top priorities for fashion sourcing executives.