Cotton Incorporated
Executive Cotton Update
U.S. Macroeconomic Indicators & the Cotton Supply Chain
March 2026
Macroeconomic Overview: U.S. trade policy continues to evolve. On February 20th, the Supreme Court ruled that the administration did not have legal authority to change tariff rates under the International Economic Emergency Powers Act (IEEPA). Following the ruling, most of the tariff increases that were announced throughout 2025 were revoked. A process that may allow for eventual refunds is working its way through the Court of International Trade (CIT).
In response to the court ruling, the administration pursued alternate legal justifications to support its ability to change tariffs. These alternate (non-IEEPA) justifications can involve limitations that were not a part of the IEEPA-based process. An example is Section 122 of the 1974 Trade Act. This option was leveraged as a means to impose the 10% addition to tariffs on goods from all countries that started February 24th. While Section 122 was used to justify the administration’s immediate response to the Supreme Court ruling, it limits tariff increases to a maximum of 15% and imposes a time limit of 150 days.
Beyond Section 122, there are other possible legal justifications for tariff increases. One of these is Section 301 of the 1974 Trade Act, which was used to increase tariffs on goods from China in 2018 and 2019. Section 301 does not impose explicit time limits or rate limits, but it requires an official investigation into other countries’ trade practices, which can take time to complete.
Employment: The U.S. economy is estimated to have added +130,000 jobs in January. Revisions to figures for previous months were negative, with the value for November falling -15,000 from +56,000 to +41,000 and the figure for December falling -2,000 from +50,000 to +48,000. The current twelve-month average is +30,000. One year ago, the twelve-month average was +103,000.
The unemployment rate decreased marginally, from 4.4% to 4.3%. This is the lowest reading since July, when the value was also 4.3%. In November, the rate was 4.5%.
Wages were up +3.7% year-over-year in January, matching the value from December. Apart from a dip in July 2024, these are the lowest readings since 2021. Nonetheless, these values remain higher than any values in the decade that followed the financial crisis and remain higher than the rate of inflation.
Consumer Confidence & Spending: The Conference Board’s Index of Consumer Confidence® increased +2.2 points month-over-month to 91.2 in February. Recent values have been within a range between 85 and 95 (March 2025-February 2026), which is generally where readings were during the COVID period (April 2020-February 2021). In much of the time between the COVID period and early 2025, values generally held between 95 and 115.
Government data on consumer spending are currently available through December 2025. In December, spending was flat month-over-month (+0.1%) but up +1.7% year-over-year. The +1.7% rate of annual growth in overall spending was the slowest since December 2022. The current twelve-month average for overall spending growth is +2.7%.
Spending on garments was down 0.8% month-over-month in December. This decrease followed several months of strong growth, and year-over-year spending on clothing was up +5.4% in the last month of 2025. The current twelve-month average for spending growth on apparel is +6.5%, far outpacing the rate of growth for overall spending.
Consumer Prices & Import Data: As measured by the CPI for garments, average retail prices for clothing increased +0.3% month-over-month in December. Year-over-year, average retail prices for clothing were up +1.7%. Despite pressure on sourcing costs from tariffs, the current level for the CPI for clothing is relatively close to values that have been posted since early 2023.
Trade data for the full 2025 calendar year recently became available. For the entire year, shipments were flat year-over-year in terms of square-meter equivalence or SMEs (-0.4%). However, that annual stability masks significant variability at the monthly level. Early in the year, there were strong year-over-year increases, with cotton-dominant volumes were up as much as 22% (January). Year-over-year increases continued through April (+1% in February, +13% in March, and +14% in April), but turned more negative later in the year (-9% in May, +2% in June, -2% in July, +5% in August, -3% in September, -20% in October, -14% in November, and -6% in December).