Flexibility Beats Cheap Labor: Executives Map Sourcing Risk for 2027

The effective U.S. tariff rate sits near 11 percent — the highest since 1943 — and, according to AlixPartners' Sonia Lapinsky, U.S. trade policy churned through four different tariff mechanisms in roughly a year, now covering close to 99 percent of imports. That is the backdrop executives named as they laid out, in Sourcing Journal's Fall Sourcing Report, how they are bracing for geopolitical shockwaves heading into 2027.

The through-line across four practitioners — a brand founder, a consultant, a sneaker maker and a logistics operator — is that flexibility, not lowest unit cost, now decides sourcing strategy. Tariffs matter, but the instability of the policy itself is the harder variable to plan around.

What did the tariff whiplash actually look like?

Lapinsky, leader of fashion retail and partner and managing director at AlixPartners, walked the sequence: IEEPA tariffs, then a flat Section 122 surcharge, then Section 301 forced-labor duties of 10 percent to 12.5 percent that replaced Section 122 the moment it expired on July 24. Add a new Section 338 action of 50 percent on certain Canadian goods, paused as of Aug. 19 and under negotiation.

"Landed cost is a moving target, and that whiplash is harder to plan around than the absolute rate," she said. "The line between compliance and cost is gone. Where your materials come from used to be about avoiding a border hold. Now it also drives your tariff rate."

What vulnerabilities did disruption expose?

Lapinsky's list is the sharpest in the report:

• Hidden China dependence. "Moving production out of China didn't move the materials," she said. Fabric and yarn often still come from China — "'we left China' was only half true."
• Landed-cost blindness. When rules changed mid-season, most teams couldn't recalculate true landed cost fast enough, and few supplier contracts spelled out who absorbs a tariff increase.
• Single-route freight risk. Too much dependence on one shipping lane means no fallback when a corridor closes.
• Upstream origin gaps. Retailers track fabric and suppliers; proving origin down to yarn and cotton remains limited.

Cart.com co-founder and CEO Omair Tariq flagged a paperwork surprise: refund entitlement under the Supreme Court's IEEPA ruling runs to the importer of record, and a surprising number of companies could not immediately say who their importer of record was on which lanes. His company coordinates about 80 million orders a year for thousands of customers.

Tariq also called out pricing power. "Some raised prices, maintained their volume and found they had more room than they believed. Others raised prices, watched demand dry up," he said.

Which regions are winning volume?

Lapinsky's map: Vietnam holds the top spot in Asia; Indonesia and Cambodia grow fastest; Egypt is an emerging standout, up double digits into the U.S. on duty-free access and government investment, while Turkey's rising costs push some work toward Egypt. Two caution flags: India is having a tariff-driven down year on U.S. goods but remains a deep base — "a rough patch, not a decline" — and Africa's duty-free program was renewed for only a year and expires at the end of 2026.

Nearshoring talk hasn't translated. Central America has held roughly 15 percent of U.S. apparel imports since 2010 despite years of interest, and Brazil's world-class leather-footwear capacity is priced out by a separate 50 percent tariff. "Even where the factories exist, one tariff line can make a region uninvestable," Lapinsky said.

For Bread, the three-year-old elastic lace brand founded by Nick Prentiss, Mexico has grown attractive on proximity and responsiveness, while China — still its main sourcing base — now "requires more consideration." Prentiss won't move production solely because of tariffs: "We can plan around a known cost increase. It's much harder to plan around something that could change between placing an order and receiving it."

How much do tariffs drive the decision?

Tariq's read is blunt: tariffs drove the decision for about 18 months, and the industry is correcting now. Moves made on duty rate alone in 2024 and 2025 pushed production into factories that had never run the product at volume, producing defects, rework, missed set dates and chargebacks. Several brands are now moving production back toward suppliers they had left.

"A duty rate says exactly nothing about whether a manufacturer can consistently maintain tolerance rates across a full production year," he said. His numbers that matter: defect rate, rework hours, return rate, retailer chargebacks and expedited freight, tracked by supplier over several quarters.

What about climate risk?

Veja co-founder François-Ghislain Morillion ranks climate above tariffs. Veja monitors Amazon deforestation by satellite — where its rubber tappers live — and weathered serious floods in southern Brazil two years ago that forced one tannery to close and rebuild; the region holds most of Veja's industrial operations and 90 staff. This year, drought left one-third of its cotton-farming families with no production at all; contracts now require at least two additional crops.

On tariffs, Veja sat down with partners and split the bill between the customer, Veja's margin and the factory. It won't relocate production over unpredictable tariffs: "We don't make choices based on tax."

Tariq watches energy first, because it touches freight, trucking, warehousing and the consumer's wallet. Cart.com's demand and inventory models, built on its order data, outperform manual projections by more than 40 percent, he said.

The decision this report forces on sourcing desks: build optionality across regions, prove origin upstream to yarn, and cost the product dynamically — because the map is moving too fast to bet on one place.