The U.S. cotton and apparel market experienced mixed trends in late 2025. While consumer spending over the holiday season surpassed pessimistic forecasts, labor market weakness and rising import tariffs suggest pressure on retailer margins. Online sales led growth, wages rose moderately, and inflation remained above the Federal Reserve’s target. Brands must navigate cost increases while maintaining pricing stability to protect profitability.
How Did Consumer Spending Perform During the Holiday Season?
Private reports indicate that consumers spent more than anticipated during the holiday season, challenging earlier predictions of year-over-year contraction. Visa data shows retail spending (excluding autos, gas, and food) increased +4.2% year-over-year. Physical stores still accounted for 73% of transactions, but online sales drove much of the growth. Adobe Analytics reported a near 7% increase in online spending, setting new holiday records.
What Is the Current Labor Market Situation?
Employment trends suggest continued labor market weakness. Since May, only one month had payroll gains exceeding +100,000, while three months recorded net job losses. December added approximately +50,000 jobs, with downward revisions in October (-68,000) and November (-8,000). The twelve-month average employment gain is +49,000, well below the previous year’s +168,000. The unemployment rate fell slightly from 4.5% to 4.4%, and wages rose +3.8% year-over-year, exceeding inflation but trending lower than prior years.
How Is Consumer Confidence Affecting the Market?
The Conference Board’s Consumer Confidence Index declined for the fifth consecutive month, dropping -3.8 points to 89.1 in December. This reflects slightly below-average sentiment compared with the 95–115 range observed since 2021. Decreased confidence may temper discretionary spending, making it critical for brands to adjust marketing and pricing strategies accordingly.
What Are the Trends in Apparel Prices and Imports?
U.S. apparel prices showed stability despite tariff pressures. Between September and November, CPI for garments rose +0.7%, while year-over-year retail price changes were flat to slightly negative (-0.3%). Average import tariffs doubled from 14.6% in 2024 to 30.4% by September 2025, creating margin pressure. Total sourcing costs, including tariffs, rose +20.5%, while base cost of goods increased +3.2%, indicating U.S. retailers face tighter profitability despite steady retail pricing.
| Metric | Change |
|---|---|
| Year-over-Year Retail Spending (Excl. Autos, Gas, Food) | +4.2% |
| Online Sales Growth | +7% |
| Apparel CPI (Sept-Nov 2025) | +0.7% |
| Import Tariffs (Jan-Sept 2025) | +30.4% |
| Employment Average (Jan-Dec 2025) | +49,000 |
| Unemployment Rate | 4.4% |
| Wage Growth YoY | +3.8% |
Who Is Affected by Rising Tariffs and Cost Pressures?
U.S. apparel retailers and brands are most impacted. Higher import tariffs combined with slightly increased production costs create margin pressure. Companies sourcing products globally must carefully manage costs, negotiate supplier contracts, and consider pricing strategies that maintain competitiveness while protecting profitability. LSLONG, with expertise in OEM/ODM solutions, helps brands navigate these challenges through efficient production and supply chain management.
Where Are the Opportunities for Apparel Brands?
Online channels and strategic sourcing offer growth potential. With e-commerce contributing most to year-over-year retail growth, brands can leverage digital platforms to expand reach. LSLONG’s end-to-end production capabilities—from design to delivery—support both small-batch and large-scale orders, helping brands optimize inventory, reduce lead times, and maintain product quality despite market fluctuations.
LSLONG Expert Views
Navigating the current apparel market requires a balanced approach. While online sales continue to rise, labor market softness and higher tariffs create cost pressures. Brands must strategically manage sourcing, pricing, and production to maintain margins. At LSLONG, we focus on delivering flexible solutions for global partners, combining advanced manufacturing, rigorous quality control, and efficient logistics to ensure brands can adapt to market dynamics effectively.”
Conclusion
The U.S. apparel market in early 2026 faces a combination of strong consumer spending, labor market challenges, and rising import costs. Brands must focus on digital growth, efficient sourcing, and cost management. Leveraging partners like LSLONG ensures production flexibility, consistent quality, and optimized supply chains, helping brands maintain profitability in an environment of tariff increases and evolving consumer behavior.
FAQs
Q1: How are online sales influencing the apparel market?
A1: Online channels accounted for most of the holiday season growth, with nearly 7% year-over-year increase. Brands should prioritize e-commerce strategies for visibility and sales.
Q2: What impact do tariffs have on U.S. retailers?
A2: Doubling import tariffs has increased total sourcing costs by over 20%, squeezing margins despite stable retail prices.
Q3: How is the labor market affecting consumer spending?
A3: Weak payroll growth and moderate wage increases can constrain discretionary spending, affecting retail performance.
Q4: Why is partnering with LSLONG beneficial for brands?
A4: LSLONG provides flexible OEM/ODM solutions, optimized supply chains, and quality control, allowing brands to manage costs and scale efficiently.
Q5: Are retail prices expected to rise further?
A5: Retail prices have remained stable despite higher tariffs, but ongoing cost pressures may require careful pricing strategies to protect margins.