Apparel officials say the new taxes are squeezing the industry, which is among Turkey's biggest employers, supplying heavyweight European brands such as H&M, Mango, Adidas, Puma and Inditex.

Exporters can technically apply for exemptions from the tax, but industry sources say the exemption regime is costly and time-consuming, and in practice does not work for many companies.

Job cuts could come, sector representatives say, as import costs rise and Turkish producers shed market share to rivals like Bangladesh and Vietnam.

The sector was already fighting soaring inflation, waning demand and lower profit margins due to what exporters see as an over-valued lira, as well as the effects of Turkey's years-long experiment with cutting interest rates as inflation rose, a policy recently revisited.

The price of a Turkish-made t-shirt is now 40% higher for a European shopper than one from Bangladesh, said Seref Fayat, chairman of Turkey's TOBB Clothing and the Apparel Industry Assembly. A couple of years ago the gap was 15-20%, another source said.

"Fashion brands can bear higher prices up to 20%, but anything more leads to market losses", Fayat said.

Timur Bozdemir, president of DF Manhattan Inc, which manufactures women's garments for the European and U.S. markets, said the new tariff will raise the cost of a $10 t-shirt by no more than 50 cents.

He does not expect to lose customers, but said the changes reinforced the need for Turkey's apparel industry to shift from mass production to value-added.

"If we insist on competing with Bangladesh or Vietnam for a $3 t-shirt, no doubt we will lose," he said.