Rules, Risk, and Reckoning: The Regulatory Squeeze Reshaping the Global Textile Industry

Tariff wars, forced labour laws, chemical bans, and a newly empowered consumer base: the global textile industry is navigating one of its most complex regulatory environments in decades. The question is no longer whether companies must comply, but whether they can do so fast enough.

The textile industry has always operated on thin margins and long, complex supply chains. But the convergence of geopolitical instability, tightening environmental and social regulations, and shifting consumer expectations has created structural pressures rather than cyclical ones. What began as targeted regulatory moves in the European Union and the United States has evolved into a layered, global compliance architecture that companies across every tier of the supply chain must now navigate.

The Trade Picture: Tariffs as a Policy Tool

The US-China trade conflict reached a sharp inflection point in 2025. US apparel imports from China in May 2025 dropped to USD 556 million, the lowest level in 22 years [1]. The result was not a collapse in overall sourcing but a redistribution. Vietnam, Bangladesh, India, and Mexico absorbed much of the volume that left China.

This redistribution has not been seamless. Bangladesh faces significant pressure on its apparel exports from higher US tariffs, India’s revocation of transshipment facilities for Bangladeshi cargo in April 2025 [2], and ongoing energy shortages. The situation is further compounded by the country’s graduation from Least Developed Country (LDC) status on 24 November 2026, which will result in the loss of duty-free access in major markets such as the EU and higher tariffs and logistics costs [3].

Mexico has benefited from USMCA preferences, offering qualifying goods near duty-free access and supporting some nearshoring momentum, with USMCA utilisation rates rising sharply in response to tariff pressures [4]. However, broader nearshoring attempts have shown mixed results so far. Apparel imports from Mexico grew modestly in 2025 despite tariff advantages, while ongoing reciprocal tariff adjustments and uncertainty continue to challenge suppliers in Vietnam and India.

Despite expanding opportunities for some suppliers, the global textile industry continues to navigate persistent tariff uncertainty, ongoing geopolitical disruptions affecting logistics, rising input and compliance costs, and intensifying competition among sourcing destinations. Companies that previously relied on two-to-three-year sourcing plans are now operating with planning horizons of just a few months.

The European Regulatory Framework: Comprehensive and Accelerating

The EU has moved decisively to make its textile sector accountable at every stage of a product’s lifecycle. Several significant measures took effect or advanced in 2026.

Under the Ecodesign for Sustainable Products Regulation (ESPR), large companies must comply with the prohibition on the destruction of unsold apparel, clothing accessories, and footwear starting 19 July 2026, except in narrowly defined circumstances such as safety risks, legal requirements, or irreparable damage. Brands are required to document any destruction and the reasons behind it. Large companies must also publish initial disclosures on unsold products covering financial year 2025 data by the end of 2026 [5].

Extended Producer Responsibility (EPR) schemes for textiles are advancing, with EU Member States required to transpose the revised Waste Framework Directive rules into national law by mid-2027 and establish operational EPR systems by April 2028 [6]. These schemes will make producers financially and operationally responsible for the collection, sorting, and treatment of textile waste.

On chemicals, the REACH restriction on PFHxA and related substances applies to certain textile and footwear products from October 2026 (with some elements phased from April 2026 for other uses) [7]. Additionally, prohibitions on most uses of the industrial solvents DMAC and NEP in textile and fibre production take effect from December 2026, subject to limited derogations until 2029, where substitution is not yet feasible.

The Corporate Sustainability Due Diligence Directive (CSDDD) applies to the largest companies—those with more than 5,000 employees and EUR 1.5 billion or more in annual net turnover—requiring them to implement human rights and environmental due diligence processes across their operations, subsidiaries, and upstream value chains [8]. Application is phased, with full obligations for in-scope companies beginning in 2029 following transposition by Member States.

The United States: Fragmented but Tightening

The US regulatory picture is more fragmented than Europe’s, but is moving in a similar direction of heightened accountability. A key example is California’s leadership in state-level rules that often influence national practices.

California’s Climate Corporate Data Accountability Act (SB 253) requires companies with annual revenues exceeding USD 1 billion doing business in the state to publicly disclose Scope 1 and Scope 2 greenhouse gas emissions, with the first reports due by 10 August 2026 (covering the relevant prior fiscal year). Scope 3 reporting follows in 2027 [9].

California’s textile Extended Producer Responsibility (EPR) law, the Responsible Textile Recovery Act (SB 707), mandates that producers of covered apparel and textile products join an approved Producer Responsibility Organisation (PRO) by 1 July 2026. Landbell USA was selected as the PRO in March 2026 [10]. Penalties for non-compliance can reach USD 50,000 per day for intentional or repeated violations, with full program implementation phased in through 2030.

The Uyghur Forced Labour Prevention Act (UFLPA), enforced by US Customs and Border Protection (CBP), imposes a rebuttable presumption that goods produced wholly or in part in China’s Xinjiang region are made with forced labour and are therefore prohibited from entering the US [11]. Importers must provide clear and convincing evidence of supply chain due diligence, including traceability of raw materials such as cotton and documentation of supplier relationships. This has created a substantial compliance burden, particularly for brands with limited prior visibility into upstream tiers, and continues to result in detentions and heightened scrutiny in the apparel and textile sector.

India: Opportunity and Obligation

India occupies a distinctive position in the current global textile order. It has been both a beneficiary of sourcing shifts away from China and a country whose domestic regulatory framework is still aligning with the stricter standards demanded by its major export markets.

The opportunity remains tangible. As brands diversified in response to US-China tensions, India captured a meaningful share of redirected volumes alongside Vietnam and Bangladesh. The government’s Production Linked Incentive (PLI) scheme for textiles, with a focus on man-made fibres (MMF), apparel, fabrics, and technical textiles, continues to support efforts to move up the value chain. Applications under the scheme were open until 31 March 2026, with recent rounds approving new participants to boost investment and competitiveness [12]. Bharat Tex 2026, held in July 2026 in New Delhi, was positioned as a major global showcase for India’s manufacturing capabilities and growing emphasis on sustainability [13].

The challenges are equally significant. In 2025, steep US tariffs on Indian goods (reaching up to 50% at peak, later moderated in parts through a February 2026 trade agreement to around 18%) triggered order disruptions, factory closures, and layoffs, particularly in hubs like Tiruppur [14]. Brands leveraged the uncertainty to demand discounts of up to 30% in some cases, placing severe cost pressure on manufacturers already facing higher compliance expectations.

These demands stem directly from the regulatory environments of India’s key export markets. European buyers increasingly require Indian suppliers to deliver supply chain traceability data, chemical compliance documentation, and emissions information to meet ESPR, CSDDD, and forthcoming Digital Product Passport (DPP) obligations. Many mid-sized and smaller Indian manufacturers lack the systems to readily provide such documentation, making it a de facto cost of continued market access.

On chemicals, India has taken steps aligned with Stockholm Convention commitments but lacks a comprehensive domestic PFAS restriction framework comparable to the EU’s REACH rules. Exporters must therefore comply with European standards for shipments to the EU. Similarly, while India does not yet have a mandatory human rights due diligence law equivalent in scope to Germany’s Supply Chain Act or the EU’s CSDDD, its suppliers to European and US brands are effectively subject to those requirements through buyer-led due diligence on upstream value chains.

The trade realignment has presented India’s textile industry with a genuine opportunity. Sustained success, however, will depend on advancing beyond cost advantages toward the traceability, environmental, and social compliance standards that export markets now demand.

The Consumer Factor

Regulation does not occur in isolation. Investigative journalism, human rights reports, and heightened public awareness are powerful drivers shaping both regulatory agendas and enforcement priorities. Exposés on forced labour, poor working conditions, greenwashing, unmanaged textile waste, and unethical sourcing increasingly prompt regulatory responses and consumer backlash.

A widely cited statistic from industry analyses and advocacy groups indicates that less than 2% of global garment workers earn a living wage [15]. This figure, drawn from ongoing research and earlier ILO-linked assessments, has gained prominence in mainstream media and is influencing both regulatory proposals and purchasing decisions in key markets.

The EU’s Digital Product Passport (DPP), part of the Ecodesign for Sustainable Products Regulation (ESPR), is expected to become mandatory for textiles following the adoption of sector-specific delegated acts in 2027, with implementation likely phased in from 2028 onward [16]. This will provide consumers with verified, accessible information on a product’s origin, materials, environmental footprint, and end-of-life options.

Even as the proposed Green Claims Directive was placed on hold in mid-2025, the Empowering Consumers for the Green Transition Directive (which amends the Unfair Commercial Practices Directive) strengthens protections against misleading environmental claims. National transposition is advancing, with enhanced enforcement expected from September 2026 [17]. Greenwashing as a commercial strategy faces a steadily narrowing window.

What Companies Are Actually Doing

The industry response is not uniform. Large brands with established compliance infrastructure are accelerating supply chain mapping and investing in traceability technologies such as blockchain, AI-driven platforms, and digital product data systems. Many are actively reducing reliance on high-risk sourcing locations. Recent surveys and company reports show a continued push to diversify away from China, with specific firms like Oxford Industries lowering their China exposure from around 40% to 15% in their fiscal 2026 run rate [18].

For manufacturers in sourcing countries, the picture is more challenging. Compliance costs — including documentation, testing, and traceability systems — are substantial. Many smaller factories lack the resources or technical capabilities to meet these requirements independently and rely on support from brand partners. A key risk is that heightened regulation accelerates consolidation toward larger, better-capitalised suppliers. This could reduce competition, limit options for brands seeking diversification, and place further pressure on smaller producers in countries like Bangladesh, India, and Vietnam.

The global textile and apparel industry is projected to continue expanding, with estimates pointing to steady growth driven by demand for higher-value, performance, and sustainable products. However, the compliance burden acts as both a challenge and a filter — favouring companies that can integrate regulatory demands into their core operations while weeding out those that cannot adapt.

The Bottom Line

The global textile industry is in the midst of a profound regulatory realignment that will take years to fully unfold. Trade policies, environmental and chemical restrictions, labour standards, and product transparency requirements are converging from multiple directions at once.

The era of opaque supply chains, vague sustainability claims, and unchecked chemical use is drawing to a close. This change is not happening because the industry chose it voluntarily, but because governments and increasingly informed consumers have decided to demand greater accountability.

GLOSSARY

CSDDD: Corporate Sustainability Due Diligence Directive
ESPR: Ecodesign for Sustainable Products Regulation
EPR: Extended Producer Responsibility
UFLPA: Uyghur Forced Labour Prevention Act
DPP: Digital Product Passport
REACH: EU chemicals regulation framework
PFAS: Per- and polyfluoroalkyl substances

References: