Fashion’s tariff fight has moved from the customs desk to the courthouse, again.
On August 3, 25 Democratic-led states and governors filed a complaint in the US Court of International Trade challenging the Trump administration’s latest forced labor Section 301 tariffs. The complaint casts the tariffs as the administration’s third attempt to preserve a broad tariff regime under cover of labor enforcement, after earlier efforts under the International Emergency Economic Powers Act (IEEPA) and Section 122, which had kept a 10% duty in place for 150 days, were struck down.
For fashion, the case lands at an already fraught moment. Last month, the United States Trade Representative (USTR) used Section 301 to impose 10% or 12.5% tariffs on imports from 60 economies, targeting trading partners the administration says have failed to prohibit or enforce restrictions on goods made with forced labor. What’s more, the USTR has also imposed a separate 25% tariff on certain goods from Brazil; Trump has invoked Section 338 of the Tariff Act of 1930 to impose 50% duties on some Canadian imports, effective August 19, and a further Section 301 probe into structural excess capacity remains pending.
The lawsuit also widens the constitutional frame. States are arguing that the administration has stretched delegated tariff authority beyond what Congress allowed. “The states coming to the court may ultimately force this issue,” Gamalski says.
Still, the case is not a referendum on whether Section 301 can be used for tariffs at all. Nathaniel J. Halvorson, partner in Baker McKenzie’s international trade practice, says the essential issue is whether these particular tariffs fit the statute.
“Section 301 clearly contemplates tariffs, so the real questions are going to be about how the administration used that authority here and whether it satisfied the requirements Congress put around it,” he says.
Halvorson is careful about how much weight the word “pretext” can bear. “I hear it in public discourse, but in the courtroom the question will be whether the evidence can support the conclusions the USTR drew, and whether USTR complied with the statute,” he says. He understands the instinct, given the sequence from IEEPA to Section 122 to Section 301. But resemblance between tariff regimes does not settle the legal question, in his view. “The more important issue is whether the administration has independently satisfied the requirements Congress established for Section 301.”
That distinction is critical. Section 301 is a more established trade tool than IEEPA, and courts have historically given the government a wide berth to maneuver in trade cases. Angela Santos, partner and customs practice leader at ArentFox Schiff, says the states’ complaint raises valid concerns, including the speed of the investigation and the mismatch between the forced labor rationale and the sweeping remedy. But she cautions against assuming that a legally vulnerable tariff action is certain to fall.
“All the trade lawyers I’ve discussed this with do not think this is legally sound, but it doesn’t mean that it’s going to be struck down,” Santos says.
Relief is not a planning strategy
That uncertainty leaves fashion companies in a curious position: they may have reason to believe the tariffs are vulnerable, but they still have to pay them, price for them and make sourcing decisions around them.
Halvorson says companies should not expect the litigation to resolve quickly enough to affect near-term merchandise flows.
“I certainly wouldn’t advise a company making sourcing or pricing decisions today to assume these tariffs are going away before its fall or holiday merchandise enters the US,” he says. “That’s part of what makes this difficult for companies: they have to make purchasing and pricing decisions months in advance while the legal rules governing the ultimate landed cost can still be changing.”
For Silvia Curioni, founder and CEO of accessories brand Zipperly, the legal question is already narrower than the business problem. The states are challenging the forced labor tariff, which accounts for 12.5 percentage points of her Brazil exposure. A separate Brazil-specific action still leaves the country at a steep disadvantage to Italy, where Zipperly makes its bags. “Even in the best case we go from 37.5% to 25%,” Curioni says. “Still much higher than Italy. It does not change any decision we made.”
Nor is Zipperly preserving its refund rights in the meantime. “I know I should,” Curioni says. “But protecting a refund you may never get requires time and expertise that a small team does not have. Big companies have people whose whole job is this. We do not, so it sits on the list until something breaks.”
Santos sees the legal challenge as credible, if not commercially actionable. While the courts may eventually narrow or strike down the forced labor action, the administration, she says, may also reach for another tariff authority. For companies making purchase orders now, that makes legal vulnerability a poor substitute for planning certainty. “I would plan for the tariffs to remain,” she says. “I don’t think that any practical company can eliminate the tariff calculation from their costing.”
Halvorson frames the shift in broader terms. Three different statutes, three different sets of conditions and limitations, but for companies the lesson remains regardless of which one survives review. “Tariffs increasingly aren’t just a fixed cost to plug into a spreadsheet,” he says. “They’re a variable that can change during the lifecycle of a sourcing or purchasing decision.”
The compliance penalty
Beneath the state-budget argument lies a more fashion-specific claim: who actually shoulders the burden of these duties. The complaint argues that broad tariffs do not necessarily punish companies or countries tied to forced labor. They tax US importers, including firms that have invested in keeping forced labor out of their supply chains.
That is a particularly pointed claim for fashion, where cotton, apparel and footwear supply chains have been under sustained forced labor scrutiny, especially since the Uyghur Forced Labor Prevention Act entered into force. “A lot of these companies have invested so heavily on forced labor compliance, and they are not being rewarded at all,” Santos says. “They’ve invested millions of dollars on supply chain diligence, on programs, on codes of conduct, on audits, and they’re treated just like every other industry.”
The lawsuit makes a similar argument: flat tariffs can leave the comparative advantage of forced labor intact because compliant and non-compliant importers face the same duty, while companies spending more to keep their supply chains clean may struggle to absorb the added cost.
Santos does not expect the states’ complaint to be the last such filing. “This is probably just the beginning for 301,” she says, predicting more litigation, not less, as “the new normal for the next couple of years.” If the forced labor tariffs are struck down, she notes, the administration is not lacking in alternatives. “They have in their back pocket alternative authorities, like Section 338, that they would invoke.”
For smaller brands, the problem is more acute in the meantime. Curioni says litigation mostly adds uncertainty because a legal victory and a cash refund are not the same thing. “Winning and getting paid are two different moments, and they can be years apart,” she says. “A big company can wait. We cannot plan on a ‘maybe.’”
That means the commercial damage can happen long before a court ruling. A sourcing shift not made, a product not launched, a factory relationship not developed: none of it comes back with a refund.
“Maybe you get some duty back,” Curioni says. “You do not get back the product you did not launch or the factory you did not open. That part is gone.”
