Cotton Incorporated
Executive Cotton Update
U.S. Macroeconomic Indicators & the Cotton Supply Chain
July 2025
Macroeconomic Overview: After “reciprocal” tariffs were lowered on April 9th, July 9th was set as a deadline for trade negotiations between the U.S. and most partner countries (Chinese negotiations to continue until August 12th). In early July, several framework plans around tariff increases were announced, but complete sets of official details have not been made available.
In the frameworks that have been released, there were some adjustments relative to the “reciprocal” rates that were introduced in early April, but the tariff increases proposed in the July frameworks generally resembled those outlined a few months ago. Implementation dates for the tariff changes announced in July were delayed to August 1st. Officials have indicated that negotiations can continue ahead of implementation and that eventual agreements have the potential to differ from currently revealed frameworks. Until August 1st, the ten-percentage point increase in tariffs that went into effect on April 9th will remain in place.
The framework revealed for Vietnam specified higher rates for transshipped goods, with a 20% tariff addition for goods made in Vietnam and a 40% tariff addition for goods transshipped through Vietnam (transshipped goods are items made in one country that pass through another before eventually being shipped to the U.S.). It is not clear whether provisions involving transshipment will be a common feature in other deals. It is also not clear what level of transformation may be required of component materials processed in an intermediary country in order not to be considered as a transshipment.
Just ahead of the string of announcements involving the frameworks for tariff rates in early July, the U.S. Congress passed a major piece of legislation concerning taxation, spending, and the budget. Among the elements included in the bill was the elimination of de minimis shipments from all locations by July 2027 (de minimis shipments are deliveries under $800, which have had duty free access to U.S. consumers and had been a growing channel for retail in recent years).
Amid the series of policy changes, the Federal Reserve has been examining monetary policy. Around the middle of June, the Federal Reserve met and decided to hold interest rates at their current level. In addition, the Fed updated its macroeconomic forecasts. Relative to estimates released in March, the central bank’s June projection for U.S. GDP growth in 2025 was lowered from +1.7% to +1.4% and the forecast for 2026 was lowered from +1.8% to +1.6% (U.S. GDP growth in 2024 was +2.8%).
Employment: The U.S. economy was estimated to have added +139,000 jobs in May. Revisions to previous months were negative, with the figure for March falling -65,000 to +120,000 and the figure for April falling -30,000 to +147,000. The current 12-month average for job growth is +144,000.
The unemployment rate was unchanged at 4.2% in May, holding at its highest value since 2021. While higher than it has been recently, the unemployment rate remains at a historically low level. It is rare unemployment to hold below five percent. With the exception of the volatility around COVID, the rate has been below five percent since 2016.
Average hourly earnings increased +3.9% year-over-year in May. The rate of wage growth has been trending slowly lower since the post-COVID and post-stimulus peak of +5.9% in March 2022. While a downward trend remains in place, the rate of decline has slowed, with most readings in 2025 near the value posted in May.
Consumer Confidence & Spending: After a rebound in May, the Conference Board’s Index of Consumer Confidence Index decreased in June (-5.4 points to 93.0). The current reading is slightly below the range between 95 and 115 that had contained values for most of the past three and a half years. In April, the index set a recent low (85.7). This represented the lowest level since the onset of COVID (values were near 85 in April and May of 2020).
Overall consumer spending decreased -0.3% month-over-month in May, which was the third time in 2025 that spending fell month-over-month (also contracted in January and February). Year-over-year, overall spending was +2.2% higher, which is the slowest rate of annual growth since February 2024. Spending on garments increased +1.1% month-over-month in May. Year-over-year, spending on apparel was up +4.9%. The annual rate of clothing spending accelerated in March, with growth over four percent each month from March to May. The average over the previous twelve months was +2.3%.
Consumer Prices & Import Data: The CPI for garments decreased -0.4% month-over-month and -0.7% year-over-year in May.
Despite the latest decreases, recent values are slightly above the levels registered between 2012-14 and remain among the highest experienced since the early 2000s.
The latest available import data are through May, which means there are two months available after the first major round of tariff increases were implemented (April and May). In April, imports were up month-over-month in seasonally adjusted terms (+3.3% in terms of all-fiber weight volume). In May, imports turned sharply lower (-22.0%). Import volumes had been surging. In the seven months between September and March 2025, all-fiber apparel import weight volume was up +15.2% year-over-year.