Why Trump’s tariffs on Vietnam are so devastating to Nike, Adidas, and other sneaker companies

On Wednesday, Trump announced a wide ranging series of reciprocal tariffs on imported goods from countries including China and Japan. But near the top of the list was a country you might not have thought about a lot in terms of its status as international power broker: Vietnam.

With a 46% tariff, Vietnam is one of the hardest hit countries on the list. All sorts of goods are made there these days, including furniture and technological hardware. But the most sensitive industry may be apparel and performance footwear—with a special emphasis on footwear. Ninty-nine percent of all footwear sold in the U.S. is imported. And 50% of Nike’s shoes are made in Vietnam, specifically. The country produces a significant number of shoes for the entire industry, including Adidas, On, Reebok, Deckers (which includes Hoka, Ugg, and Teva), and Brooks (the number one running brand in the U.S.). 

When asked how they planned to respond to this policy, none of these brands opted to comment for this story. Stock prices for Nike, Adidas, On Holdings, and Deckers each dropped approximately 15% following the announcement.

“It almost feels intentionally directed at the [performance footwear] industry,” says David Swartz, senior equity analyst, consumer research, for Morningstar, who has called the tariffs “potentially disastrous” to the industry in an investor report published yesterday. (Disclosure: Morningstar and Fast Company share the same owner.) To be clear, Swartz sees no upside to this government decision, noting that “the chances that any of this leads to substantial manufacturing of footwear and apparel in the U.S. are practically zero.” And it’s another reason that he, like many others, simply cannot imagine that they will stick.

Why the focus on Vietnam?

Swartz recognizes that targeting Vietnam likely had less to do with the companies or industry being affected than it did the simple balance sheet math that drove Trump’s tariffs. Vietnam does not import nearly the amount of goods from the U.S. that we do from them. But by any common sense, that imbalance is to be expected.

“The US economy is like 70x that of Vietnam, so it seems pretty obvious to me that Vietnam is going to buy fewer American products than we buy from them, but what do I know?” says Swartz. “I only have a masters degree in economics from Yale, so I don’t know anything.”

While senseless on paper, the tariffs could have lasting repercussions on the industry if they stick. And the world’s biggest performance brands would have little recourse if that happened.

The crux of the problem is that, since the 1990s, apparel and footwear has moved abroad. As Swartz explains, performance companies in particular invested billions of dollars into the roads, ports, factories, and rail lines that make up the complex supply chain feeding Vietnamese infrastructure.  

It’s in everyone’s interest to keep these factories working. Vietnam relies on the business for their economy. Corporations rely on Vietnam to produce goods. Nike, for instance, doesn’t own a single one of its factories globally.

“You can’t just call a factory in India and say can you make 20 million of shoes for me, they don’t have the capacity,” says Swartz. Idle factories don’t exist globally. An unused factory is shut down, and its staff is fired. Furthermore, specialized production methods behind modern footwear don’t exist everywhere. Sewing is simple. But injection molded foam composites, polymer production, and complex fabric weaving are other topics. A modern sneaker may have as many as 100 parts produced in different factories, and if any one component doesn’t arrive in time, everything is slowed down. Building an infrastructure of factories with interdependent specialized production methods—and with workers skilled enough to operate them—can take years.

So what about just shifting production across Asia? The tariffs are high about everywhere, and given the long lead time to set up necessary factories, Swartz doesn’t believe it makes sense of any company to attempt to shift manufacturing to save a few percentage points in tariffs. And shifting the entirety of a business like Nike’s could take years.

So what happens now?

Officially, tariffs will begin on any products not on a boat from Vietnam by April 5th, according to the logistics firm Flexport. They expect consumers will see costs rise on goods as soon as April 9th.

In the short term, shoes are going to keep being made. Swartz believes that the costs of these tariffs will be distributed between the factory, the brand, and consumers. 

“The pain is gonna be spread out. I think certain companies are going to have more negation power than others. Let’s say Nike uses a factory for apparel or footwear, it works with that factory over potentially decades. They can negotiate with them…[saying] ‘we need to reduce what we pay you this year while tariffs are going…The factory is not going to say, ‘we won’t work with Nike anymore. They can’t do that. They would go bankrupt.”

Smaller companies, and retailers like Macys and Kohls that produce many private label goods in Vietnam, could face less flexible factories. Their prices will either have to go up, or the thin margins of our struggling retailers will grow even thinner. Private label brands offer retailers excellent margins, which is why companies like Walmart and Target invest so much into their own lines of appliances, fashion, and home goods. (And yes, each sources private label goods from Vietnam.)

Long term, no matter how things play out, Swartz sees no reality in which the industry caves and moves manufacturing to the U.S. He lists all sorts of reasons, ranging from the price of labor (which he ballparks at $400/month for your average factory employee in Vietnam—a rate no American would take with our cost of living), to our lack of raw materials (90% of the world’s cotton is grown in one region of China), to our pure inability to produce these goods (the U.S. has but a handful of yarn spinning factories needed to produce textiles), to our own discomfort facing the environmental costs of consumerism. 

“Dyeing alone takes giant amounts of water,” notes Swartz. “You couldn’t even get it [here]. If someone said ‘we’re going to start dyeing in Minnesota and we’re gonna drain this lake to get the water,’ I’m pretty sure they’d say ‘no.’” 

But in any case, Swartz imagines that, if tariffs don’t change, we’re going to all see significantly higher prices on shoes and companies will ultimately sell less of them, especially in an economy already likely heading toward a recession.

“It may not be so easy for Nike to sell Lebron shoes if they have to raise the price from $180 to $240. They will sell less volume ultimately,” says Swartz. “It’s basic supply and demand. Increase price, it reduces demand. Economic laws have not been changed.”