The worldwide vogue trade is bracing for 2026, navigating a market outlined by geopolitical instability, macroeconomic uncertainty, and, above all, unprecedented U.S. tariffs. As leaders pivot from specializing in “uncertainty” to acknowledging the surroundings is solely “difficult,” tariffs have emerged because the primary hurdle going through executives.
The severity of the commerce panorama can’t be overstated, executives instructed McKinsey and the Enterprise of Style for the 2026 version of The State of Style report. U.S. tariffs on attire and footwear imports, which had been round 13% earlier in 2025, dramatically spiked to 54% following preliminary authorities bulletins in April. Though charges later eased, the weighted common tariff charge for attire and footwear from the highest 10 importers stood at 36% as of mid-October, properly above historic norms. This sudden surge locations the attire and footwear trade amongst these most uncovered to the tariffs’ profound impacts. Reflecting this important scenario, 76% of vogue executives surveyed imagine responses to commerce disruptions and tariffs would be the single most necessary issue shaping the trade in 2026.
For the tenth anniversary of the report, which started in 2016, McKinsey and Enterprise of Style charted the various adjustments for the trade since 2016, from a generalized “age of volatility” to Asia’s plain rise to disruptions in how buyers store. For 2026, they chart main points, together with “tariff turbulence” and three emergent shopper appetites: a deal with resale, a way of “well-being” of their purchases, and a future marked by synthetic intelligence (AI).
The report finds manufacturers making value adjustments, shifting sourcing, and bettering effectivity in a bid to counteract the affect of tariffs. Bigger suppliers are responding by optimizing their footprints whereas chasing digitization and automation, and smaller gamers, in the meantime, are underneath mounting strain. “Agility would be the defining issue enabling manufacturers and suppliers to keep up their aggressive edge.” Amid this financial disruption, Levi Strauss CEO Michelle Gass spoke to Joan Kennedy of Enterprise of Style about how she’s adopted an aggressive and methodical tariff playbook, positioning the 170-year-old denim big as a standout in managing the chaos.
Levi’s benefit, and painful fact
Crucially, Levi’s entered this era with a structural benefit: Roughly 60% of its enterprise is worldwide, decreasing the tariff burden in comparison with many home opponents who’re extra closely penetrated within the U.S. But, even with this benefit, the tariff will increase demanded strategic motion. Gass described the general surroundings as “very advanced,” encompassing macroeconomic forces, geopolitical points, and big disruption in know-how and AI, and he or she articulated the mandatory, unavoidable actuality of spending some prices on to the buyer, stating plainly: “There’s solely a lot you’ll be able to take in from the tariffs, as a result of they’re simply very excessive.”
Levi’s method to pricing is multifaceted: First, focused and surgical pricing will increase are being carried out, a measure additionally being taken by most attire retailers (55% of executives count on additional value will increase in 2026 in response to tariffs). Second, the corporate is using promotional levers, particularly pulling again on reductions reminiscent of “20% off” occasions, which helps elevate the model and mitigate tariff affect by bettering margins. Third, the corporate is pricing for innovation, leveraging new merchandise the place shoppers are “possible keen to pay extra.”
Levi’s didn’t reply to Fortune’s request for touch upon extra specifics about pricing will increase to come back.
Past pricing, Levi’s has prioritized inside operational prowess. Gass, who took over as CEO in 2024, has been driving a course correction targeted on transformation, streamlining the enterprise and decreasing unwieldy stock. Tactical strikes included reducing slower-selling SKUs. Extra considerably, the corporate is present process a basic “rewiring” to cut back complexity throughout its community of 120 international locations. By growing the commonality of product throughout all world shops from lower than 10% to about 40%, Levi’s is producing efficiencies throughout design, sourcing, and merchandising. As Gass summarizes this technique: “We’re working in a posh surroundings, however we ourselves have gotten much less advanced.”
This disciplined method has delivered outcomes. Levi’s reported a 7% year-on-year enhance in quarterly gross sales in October 2025, posting its fourth consecutive quarter of high-single-digit development. The corporate additionally raised its full-year income outlook, even because it cautioned that tariffs would affect margins within the fourth quarter.
The trade general is adapting to the brand new commerce map, with 35% of executives planning to shift sourcing to markets with extra favorable commerce agreements. Nevertheless, Levi’s emphasizes that in a risky commerce surroundings, agility relies upon closely on strategic provider partnerships constructed on collaboration. Gass famous that Levi’s groups discuss to distributors 24/7, treating it as a “relationship enterprise” the place sourcing from a number of international locations provides essential flexibility in opposition to tariffs and supply-chain disruptions.
