Legal shifts and softening labor market impacting US cotton imports

The global cotton industry and the US macroeconomic scenario has been impacted in recent times. Reason: a landmark US Supreme Court ruling and a cooling labor market, stakeholders across the supply chain, from textile mills to retail giants are bracing for a new era of trade regulations and shifting consumer behavior.

The legal tug-of-war over tariffs

At the heart of the current industry upheaval is a major shift in US trade policy. On February 20th, the Supreme Court ruled that the administration lacked the legal authority to adjust tariff rates under the International Economic Emergency Powers Act (IEEPA). This decision effectively revoked most tariff increases announced throughout 2025, potentially triggering a massive refund process currently being reviewed by the Court of International Trade (CIT).

However, the relief for importers was short-lived. By February 24th, the administration pivoted to Section 122 of the 1974 Trade Act to impose a fresh 10 per cent tariff on goods from all countries. While this provides a new legal justification, Section 122 comes with strict boundaries: a 150-day time limit and a maximum tariff cap of 15 per cent. Experts are also watching for the potential use of Section 301 of the 1974 Trade Act. Unlike Section 122, Section 301 does not have explicit time or rate limits, though it requires a formal investigation into other countries' trade practices before implementation.

Labor market signals a slowdown

Meanwhile, the US economy is showing visible signs of fatigue. In February 2026 alone, the economy is estimated to have lost 92,000 jobs. This follows downward revisions for previous months: December figures were revised from a gain of 48,000 to just 17,000, while January's growth was adjusted from 130,000 down to 126,000

Table: US labor market trends (2024-26)

Wage growth has also fell 3.8 per cent year-over-year as of February, a marked decline from the 4.1 to 4.8 per cent peaks recorded in 2023.

Consumer resilience amidst uncertainty

Despite the dip in labor market, consumer sentiment and apparel spending remain surprisingly resilient. The Conference Board’s Index of Consumer Confidence rose to 91.2 in February, placing it within a stable range similar to the early pandemic recovery period. While overall US spending growth slowed to 1.7 per cent year-on-year in December 2025, the slowest since late 2022 spending on garments remained a standout.

• Overall Spending Growth:7 per cent (Year-over-year, Dec 2025).
• Apparel Spending Growth:4 per cent (Year-over-year, Dec 2025).
• 12-Month Average (Apparel):5 per cent growth, significantly outpacing the general economy.

Retail prices for clothing have remained remarkably stable. Despite the pressure of new tariffs, the Consumer Price Index (CPI) for garments rose only 0.3 per cent in December, keeping prices in line with levels seen since early 2023.

Supply chain goes flat

Recent trade data for the full 2025 calendar year highlights a stabilizing, if flat, supply chain. Annual shipments were virtually unchanged from the previous year, showing a minor decrease of 0.4 per cent in terms of square-meter equivalence (SMEs).

As the industry looks toward the second half of 2026, the primary question remains whether the administration will seek more permanent tariff justifications. For now, the cotton supply chain remains in a wait and watch mode, balancing resilient consumer demand against a darkening employment outlook and a fluctuating regulatory landscape.