The industry enters 2026 navigating tariff shocks, AI disruption and consumers who are spending differently.
Fashion leaders are bracing for another difficult year. According to The State of Fashion 2026 by McKinsey & Company and The Business of Fashion, nearly half of global executives expect conditions to worsen next year as trade tensions, shifting consumer priorities and rapid advances in artificial intelligence reshape the sector.
The biggest immediate threat is tariffs. With US duties now redrawing sourcing maps, 76% of respondents say higher trade barriers will define industry performance in 2026. Supply chains are fragmenting, costs are rising and smaller suppliers especially are struggling to keep pace.
Yet AI is emerging as the clearest opportunity. Executives view it as the single most transformative force across design, merchandising, marketing and operations. As large language models begin influencing shopping decisions — even acting as autonomous buying agents — brands will need richer product data and more adaptive digital infrastructure to ensure visibility in AI-driven discovery.
Consumers, meanwhile, are becoming more value-conscious. The mid-market is now fashion’s fastest-growing segment, while jewellery and “smart eyewear” are outperforming traditional categories. Luxury houses, pressured by price fatigue and softening demand, are entering a period of creative reinvention.
For the industry, 2026 will reward agility more than scale. Brands must diversify sourcing, rewire workforces for AI and pivot to categories where consumers see lasting value. Those able to balance efficiency with relevance — and adapt quickly to a world where machines increasingly mediate fashion choices — stand the best chance of gaining market share in an otherwise sluggish year.
