By Avi Salzman

Tariffs or no tariffs, the conventional wisdom in the apparel industry is there is no way clothing manufacturing can move back to the United States.

That's wrong, says American Giant CEO Bayard Winthrop: The San Francisco-based company makes T-shirts in America that retail at Walmart for $12.98. But he keeps having the same irritating conversation lately where someone tells him it can't be done.

"People don't know what they're talking about," he says. "We're doing it right now."

American Giant has been making all-American clothes -- from the cotton fields to the factory to the store -- for over a decade. Its clothes are sewn in factories in North Carolina and Los Angeles.

Until recently, most of its items were priced at a premium. American Giant's classic hoodie sweatshirts sell for $138 on its website. The sweatshirts have gotten strong reviews for their durability, but they are out of reach for the average American.

Now the company has shown that it can manufacture in bulk and sell American-made clothes at a much lower price point. In 2024, it started selling the low-price T-shirts at Walmart. This year, it launched a $39.98 sweatshirt line there, too, and it is working on a broader line of T-shirts and fleece items.

American Giant is an anomaly. Only around 3% of the clothing sold in the U.S. is made here, down from more than half the clothing in the 1980s. U.S. employment in apparel and textiles fell by 1.4 million jobs between 1979 and 2019, an 81% drop.

It is simply much cheaper to make the goods overseas. About one-quarter of apparel is made in China, with a larger share coming from a group of Asian countries including Vietnam, Indonesia, and India. The supply chains and expertise have also moved offshore.

The American Giant story is a glimmer of hope Winthrop says other companies can build upon. He wouldn't reveal most of the details of the Walmart contract, and American Giant is a private company that doesn't publicly disclose its results. But he says the company's deal with Walmart is solidly profitable.

"We would not engage in any business that wasn't good, healthy, double-digit margins," he says.

Volumes are significant too, with the opening order "hundreds of thousands" of shirts. Outside of the Walmart business, he says American Giant's sales are in the "high double-digit millions."

American Giant had a few advantages that wouldn't be available to the average business. Walmart agreed to buy a large number of shirts over a long period, allowing American Giant to lock in suppliers on long-term contracts. The numbers would not have worked if the buyer had made a short-term commitment.

The Walmart shirts are also made using a less-expensive tubular construction, and the fabric is a different quality than the company's higher-end products.

Winthrop says there is plenty of manufacturing capacity in the U.S. if the company needed to increase production -- "If volumes tripled in that program, we'd be fine" -- but he also thinks there are limits to how much clothing could actually be made in the U.S.

While there is capacity for knitwear such as shirts, there isn't nearly as much capacity in woven goods like dress shirts. Brooks Brothers once made dress shirts at a North Carolina factory, but closed it in 2020 when it filed for bankruptcy protection.

There is almost no sneaker manufacturing in America either, and putting together all the supply chains would probably take years. A few shoemakers like Allen Edmonds put them together in the U.S. after sourcing parts overseas.

"There's a handful of tiny manufacturers in the U.S.," Winthrop says.

Despite the American Giant example, analysts doubt tariffs will inspire other companies to bring clothing manufacturing back to the U.S.

"They'll wait this out," says TD Cowen analyst John Kernan. "I don't think any of the publicly traded companies are making plans to nearshore."

Labor costs are simply too high in the U.S. relative to other countries such as Bangladesh to make it worthwhile, he says. Tariffs don't change the pricing structure enough to change that.

While American Giant built its cost structure around manufacturing in the U.S., the big publicly traded firms are too deep in overseas manufacturing to turn back now, Kernan says.

"They've built their whole companies around this," he says.

Winthrop also thinks the problem starts in the boardroom. Today's executives have little institutional memory of manufacturing in America. He thinks now is the perfect time to make some effort toward reshoring -- even if it is a small and symbolic move.

First, it would be good public relations for them. And second, he says it could open up opportunities to shift supply chains in the event the trade war drags on and escalates.

"I wouldn't wait," he says. "I would do that now."

Write to Avi Salzman at avi.salzman@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 12, 2025 03:00 ET (07:00 GMT)

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