The global cotton industry is entering a period of adjustment, shaped by legal rulings, trade policy recalibrations, and a softening US labor market. From textile mills to retail giants, supply chain stakeholders are reassessing strategies as uncertainty over tariffs combines with cautious consumer behavior.

Legal tug-of-war over tariffs

At the heart of the current upheaval is a decisive Supreme Court ruling on February 20th, which found that the administration lacked legal authority to modify tariff rates under the International Economic Emergency Powers Act (IEEPA). This decision effectively nullified most of the tariff hikes announced throughout 2025 and opened the possibility of a substantial refund process, currently under review by the Court of International Trade.

Relief for importers, however, was short-lived. Just four days later, the administration turned to Section 122 of the 1974 Trade Act to implement a new 10 per cent tariff on imports from all countries. While Section 122 gives a clear legal path forward, it carries strict limitations, including a 150-day time frame and a maximum 15 per cent rate. Industry analysts are also watching for potential moves under Section 301 of the same Act, which allows for broader investigations into foreign trade practices and does not impose explicit time or tariff caps.

The tug-of-war over legal authority has created a highly fluid environment, forcing importers, distributors, and manufacturers to navigate multiple regulatory contingencies simultaneously.

Labor market signals a slowdown

Beyond the courtroom, the US economy is displaying signs of strain. February 2026 saw an estimated net loss of 92,000 jobs, following downward revisions for previous months. December 2025’s job gains were revised from 48,000 to 17,000, while January was adjusted slightly from 130,000 to 126,000. Wage growth has decelerated to 3.8 per cent year-over-year, down from peaks of 4.1 to 4.8 per cent in 2023.

Table: US labor market trends (2024-26)

The softening labor market leads to pressure on household incomes and discretionary spending, even as wage growth remains positive. This slowdown highlights the fragility of the broader economic recovery amid regulatory shifts.

Consumer resilience amid uncertainty

Despite these headwinds, consumer confidence has remained surprisingly steady. The Conference Board’s Index of Consumer Confidence rose to 91.2 in February, reflecting sentiment levels comparable to the early pandemic recovery period. Overall US spending growth slowed to 1.7 per cent year-over-year in December 2025, the lowest since late 2022. However, apparel spending continued to outpace the broader economy, rising 5.4 per cent over the same period, with a 12-month average growth of 6.5 per cent. Retail prices have remained stable despite tariff pressures. The Consumer Price Index (CPI) for garments increased just 0.3 per cent in December, keeping prices largely in line with early 2023 levels.

Supply chain in transition

Data for the 2025 calendar year indicates a stabilizing but flat import environment for apparel. Annual shipments, measured in square-meter equivalence (SMEs), declined marginally by 0.4 per cent compared to the previous year. While volumes have plateaued, resilient consumer demand and stable pricing suggest the supply chain is navigating regulatory uncertainty without major disruptions.

Looking ahead to the second half of 2026, the central question remains whether the administration will pursue more permanent tariff justifications. For now, the cotton supply chain is in a cautious wait-and-watch mode, balancing the paradox of robust consumer demand with a deteriorating labor market and a volatile regulatory landscape.