Qualifying garments from Central America now enter the United States duty-free while Vietnamese apparel carries a combined tariff of roughly 29% and Chinese product averages about 36.5% — a 25-to-35-percentage-point advantage for CAFTA-DR suppliers, according to an analysis by Global Finance Magazine.

The exemption survived the latest turn in U.S. trade policy. When the July Section 301 tariffs targeting 60 economies over forced-labor concerns replaced the earlier 15% surcharge, qualifying CAFTA-DR textiles and apparel kept their exemption. That surcharge, in turn, had followed the U.S. Supreme Court's February ruling striking down the original tariff regime.

The shift marks a sharp reversal from a year ago, when blanket 10% duties on the region's exports overrode the preferential access granted under the two-decade-old Dominican Republic-Central America Free Trade Agreement (CAFTA-DR).

How did the exemptions build up?

Relief arrived in stages, with each successive tariff regime expanding the region's carve-outs.

• Last November, Washington reached agreements with Guatemala and El Salvador that restored duty-free treatment for qualifying apparel.
• Those deals also exempted 237 agricultural product categories — including coffee, bananas and other tropical fruit — from the new tariffs.
• February's Supreme Court decision struck down the original regime; the replacement 15% surcharge exempted qualifying textiles and apparel from all six CAFTA-DR countries.
• July's Section 301 tariffs, effective July 24, left the CAFTA-DR apparel exemption intact.

Standard U.S. duty on apparel (HTS chapters 61 and 62) averages about 16.5%, ranging from 10% to 32% by category, according to the U.S. International Trade Commission and the U.S. Trade Representative. CAFTA-DR waives that duty for qualifying garments. China's Section 301 total combines a 7.5% legacy List 4A duty with the new 12.5% levy, plus other fees.

What does this mean for sourcing decisions?

Sheng Lu, associate professor of fashion and apparel studies at the University of Delaware, said: "If the tariff gap between U.S. apparel imports from CAFTA-DR and United States-Mexico-Canada Agreement members and those from Asian countries continues through the rest of 2026, it may further incentivize U.S. fashion companies to explore additional man-made fiber apparel sourcing opportunities in the Western Hemisphere."

The manufacturers best positioned to absorb any order shift are long-established players. Gildan Activewear and Fruit of the Loom operate plants in Honduras, while local suppliers Elcatex Group and Kattan Group produce for Calvin Klein and IZOD.

For sourcing teams, the practical question is capacity and lead time: the region's advantage applies only to qualifying goods under CAFTA-DR rules of origin, and the existing plant base — not new entrants — holds the relationships and certifications to scale quickly.

Are the wins limited to apparel?

No. Washington's 25% tariff on Brazilian goods spares Brazilian coffee but not Brazilian sugar, giving Central American producers an edge over the world's largest sugar exporter — although U.S. quotas limit how much additional sugar can enter the market. Costa Rica ships significant volumes of coffee, bananas and pineapples to the U.S., alongside its much larger medical device industry.

Whether the tariff gap holds through the remainder of 2026 will determine whether U.S. fashion companies move beyond exploratory man-made fiber sourcing in the Western Hemisphere and shift order books at scale.