In a rare show of consensus, some of the US' most influential apparel, footwear and textile organisations have come together to advocate a redesign of the country's trade incentives. Traditionally divided over tariff policies, the National Council of Textile Organizations (NCTO), American Apparel & Footwear Association (AAFA), United States Fashion Industry Association (USFIA) and the U.S. Industrial and Narrow Fabrics Institute (USINFI) have jointly submitted a proposal to the Office of the United States Trade Representative (USTR) that seeks to reshape sourcing decisions through market-based incentives rather than additional import restrictions.

The proposal, submitted as a part of the ongoing Section 301 proceedings, introduces a tariff offset mechanism designed to encourage sourcing from USMCA and CAFTA-DR countries while rewarding the use of American-made yarns and fabrics. More importantly, it signals a shift in how the industry views supply-chain resilience moving beyond punitive tariffs towards incentives that make regional manufacturing commercially viable.

Why are competitors speaking in one voice?

The alliance reflects the economic pressures facing the American textile sector. Over the past two-and-a-half years, over 40 domestic textile mills have shut permanently, resulting in widespread job losses and declining industrial output. While policymakers have promoted nearshoring and regional production, Asia continues to dominate apparel sourcing.

Today, Asian manufacturing hubs account for almost 79 per cent of all apparel imported into the US, while the Western Hemisphere's share has fallen to just 12 per cent. This imbalance has also weakened demand for American textile exports, nearly 70 per cent of which traditionally flow to manufacturing partners across the Western Hemisphere. Against this backdrop, organisations that have always disagreed over tariff policy now argue that rebuilding regional supply chains requires positive commercial incentives instead of trade barriers alone.

The coalition believes the proposal can simultaneously strengthen domestic manufacturing, reduce dependence on Asia, and create commercially attractive alternatives for apparel brands seeking diversified sourcing strategies.

Rewarding regional manufacturing

What led to this proposal is a tariff credit programme linked to verified, forced-labour-free production. Instead of merely imposing higher duties on imports from countries facing Section 301 actions, companies would earn credits by purchasing qualifying garments manufactured in USMCA or CAFTA-DR partner countries. The proposed framework operates in three tiers. Brands importing qualifying apparel from these regional partners would receive a baseline credit equivalent to 20 per cent of the garments' declared customs value. The incentive increases if those garments incorporate American-made textile inputs.

If US-manufactured yarn is used, companies would receive an additional credit worth 30 per cent of the yarn's export value. Garments using American-made fabric would qualify for an even larger incentive equivalent to 40 per cent of the fabric's export value. These accumulated credits could then offset Section 301 duties on imports from countries identified by USTR under its enforcement framework. The proposed structure is intended to make regional sourcing financially competitive without compelling companies to completely abandon Asian production networks.

Table: Proposed tariff offset credit structure

Economic impact could extend beyond manufacturing

Industry projections suggest the policy could substantially alter regional trade flows. The coalition estimates that annual US textile exports to the Western Hemisphere could double from $14.5 billion to $29 billion if the programme succeeds in shifting sourcing decisions. That increase would directly benefit domestic spinning, weaving and textile manufacturing while creating stronger demand for American cotton, which supplies nearly all fibre processed by US mills.

Supporters also estimate the framework could generate more than 56,000 direct and indirect jobs while attracting fresh investment into textile innovation, including circular manufacturing and advanced production technologies. Equally significant is the anticipated shift in sourcing geography. The Western Hemisphere's share of US apparel imports could potentially rise from 12 per cent to 25 per cent, reducing Asia's dominance from 79 per cent to around 66 per cent over time.

Table:  Projected industry realignment

Making compliance commercially attractive

A defining feature of the proposal is its effort to align trade policy with labour compliance objectives. Experts argue that existing tariff-rate quotas and conventional trade remedies lack the certainty necessary for companies to commit long-term investments in regional manufacturing. In contrast, a predictable credit mechanism tied to verified forced-labour-free production could transform compliance into a competitive business advantage rather than merely a regulatory obligation.

The proposal also aligns with broader geopolitical efforts to diversify supply chains, strengthen trusted trade partnerships and reduce exposure to concentrated manufacturing hubs. For brands facing growing pressure to demonstrate ethical sourcing, the framework offers an opportunity to improve compliance while protecting operating margins.

Practical illustration of the incentive

The coalition has shown the proposal through a sourcing scenario involving a mid-sized American casualwear retailer. Currently dependent on East Asian suppliers for 80 per cent of its denim and activewear, the company pays substantial Section 301 tariffs. Under the proposed framework, shifting 30 per cent of production to factories in El Salvador and Guatemala using American yarns and North Carolina-made denim fabrics would generate tariff credits that could fully offset duties on the retailer's remaining specialised Asian imports.

The example shows the proposal's broader objective: encouraging companies to rebalance not necessarily replace their sourcing strategies while maintaining commercial competitiveness. Rather than forcing abrupt decoupling from Asia, the framework seeks to gradually strengthen Western Hemisphere production through financial incentives that reward regional value addition.

As USTR evaluates potential Section 301 enforcement measures, the industry's unified proposal represents more than another tariff recommendation. It reflects an evolving consensus that future competitiveness will depend not only on restricting imports but also on creating commercially sustainable supply chains that integrate North American and regional manufacturing with stronger domestic textile production.