The Vomero 18 running shoe, showcased at a Nike store in New York, is characterized by its thick soles, a price of $150, and tongue labels indicating “Made in Vietnam.” This information presents a significant challenge for Nike’s turnaround strategy under CEO Elliott Hill, who introduced the Vomero 18 to attract runners that have shifted to different brands. Vietnam, the central hub for athletic shoe manufacturing, is now facing new US tariffs imposed by President Donald Trump.
Trump’s aim is to encourage manufacturing within the US. However, analysts suggest that the probable outcome will be increased prices for sneakers, given the current lack of domestic factories with the specialized equipment required to produce running shoes and the workforce skilled to operate them.
Nike, headquartered in the US, began manufacturing in Vietnam in 1995 with five contract footwear factories, marking one of the earliest foreign investments in the country, significantly contributing to its exports and economic growth. The company quickly broadened its supplier network, creating numerous jobs due to the availability of cheaper labor. Presently, Nike operates 130 supplier factories in Vietnam, producing shoes, clothing, and equipment, with the country accounting for half of its footwear production. Similarly, German competitor Adidas sources 39 percent of its footwear from Vietnam.
The new tariff of 46 percent, introduced by Trump, adds to the 20 percent duties already levied on US imports of athletic shoes with textile uppers, according to the American Apparel & Footwear Association. Shifting footwear supply chains to other countries could take approximately two years, explained Chris Rogers, head of supply chain research at S&P Global Market Intelligence, as companies typically strategize such transitions over a five-year cycle.
Adam Cochrane, an analyst at Deutsche Bank, proposed that Mexico, Brazil, Turkey, and Egypt could serve as alternative manufacturing centers to Vietnam. However, it would take around 18 to 24 months for such decisions to produce visible changes, due to the duration of existing order contracts with suppliers. Meanwhile, Trump has implemented so-called reciprocal tariffs at a minimum of 10 percent with nearly every trading partner, with significantly higher rates for major footwear producers like China and Indonesia.
David Marcotte, senior vice-president of retail at Kantar, noted the challenge of finding cheaper markets without going imposing tariffs. Nike refrained from providing comments, but in a quarterly report, acknowledged navigating uncertainties and volatility due to geopolitical dynamics, new tariffs, tax regulation, and fluctuating foreign exchange rates.
Elliott Hill was appointed as CEO last year following a slump in sales due to newer brands like On and Hoka gaining market share. Nike’s shares recently dropped to a nearly eight-year low, driven by concerns over the financial impact of Trump’s tariffs.
Dylan Carden, an analyst at William Blair, noted three primary strategies for mitigating costs: negotiating lower charges from suppliers, increasing retail prices, or absorbing the costs themselves. Cochrane estimated that Adidas and Puma would need a 20 percent price hike in the US to retain gross profit margins post-tariff, albeit spreading the increase over time to protect market share and operating profits. He added that Adidas might be better positioned for price increases due to strong brand momentum, in contrast to Puma, which faces challenges rebranding as a premium shoemaker.
Overall, sporting goods manufacturers are expected to reassess their US product lines, potentially phasing out less profitable items. Adidas declined to comment, while Puma stated it has a “multi-country-of-origin strategy” and can produce across various countries.
Vietnam attracted fresh manufacturing investments during Trump’s first term amid a trade war with China, leading firms to relocate production. These suppliers in Vietnam include local companies and those operated by South Korean and Taiwanese groups. Consequently, Vietnam’s trade surplus with the US soared to $123.5 billion last year, ranking third after China and Mexico. The White House utilized these trade figures to determine reciprocal tariff rates.
Cochrane suggested that sneaker brands might reduce order volumes and direct more products to markets in Europe, the Middle East, and China, potentially escalating competition in those regions. In the US, where 99 percent of footwear is imported, Carden predicted the market could resemble the Soviet era, with consumers willing to pay a premium for imported goods.
“We’re behind the Iron Curtain,” Carden commented.
Data analysis was conducted by Clara Murray.
