H&M shifts production to Morocco amid potential US trade barriers

Swedish retailer H&M is strengthening its manufacturing presence in Morocco as part of a strategic response to potential US trade restrictions, according to the company's finance chief. This move represents a significant shift toward regional supply chains, with Morocco positioned as a key production center for European markets.

In a January 30 interview with Reuters, CFO Adam Karlsson explained that possible US import tariffs are driving the company to reorganize its global supply network. The restructuring comes in response to proposals backed by US President Donald Trump and Treasury Secretary Scott Bessent for a universal tariff on US imports, which could begin at 2.5% and increase monthly.

"For many reasons we need to create a more regionalized supply chain, both for geopolitical reasons, learning through COVID that we need to create more resilience in our supply chain, and also to support responsiveness and the customer offer," Karlsson stated.

The retailer is developing supplier networks in Morocco and Egypt to serve European markets, while simultaneously exploring Central American options for its US and Brazilian operations. This strategic shift is particularly significant given that the US market represented 14% of H&M's total revenues in 2023.

The company's renewed focus on Morocco follows recent changes in its retail presence in the country. In December 2023, H&M's regional operator AlShaya Group implemented a restructuring that led to the closure of the brand's Casablanca location, while maintaining stores in Marrakech and Rabat. At the time, AlShaya Group affirmed its commitment to Morocco despite these retail adjustments.

"If tariffs increase for everyone, there will be a relative position to take," Karlsson noted, highlighting the company's proactive approach to potential trade barriers. This strategic pivot transforms H&M's relationship with Morocco from purely retail operations to potentially deeper supply chain integration, driven by global trade uncertainties and the need for regional resilience.