Trump's tariff effect: How Vietnam turned into Nike's Achilles' heel

US sportswear brand Nike faces a significant impact from Trump's 46 per cent tariff on Vietnamese goods, where half of its shoes are made, potentially leading to price hikes for consumers

Your next pair of sneakers might soon become more expensive. With half its shoes made in Vietnam, top US sportswear brand Nike faces a costly jolt to reality. At first glance, Nike’s footwear — thick soles, sleek cushioning, and over $100 price tag, appear attractive. But stitched into the tongue is a phrase that now threatens the company’s footing: Made in Vietnam. That label has become a major liability after US President Donald Trump slapped a 46 per cent tariff on goods from the Southeast Asian nation this week.

 

The tariffs, announced last week, are part of Trump’s revived push to ‘bring manufacturing back home’ — a populist promise with hard consequences for companies that have spent decades building global supply chains. For Nike, Vietnam hasn’t been just another factory stop: it’s the epicentre of its footwear manufacturing. Roughly 50 per cent of all Nike shoes are made there, the result of a three-decade investment that helped turn Vietnam into the world’s sneaker capital.

 

 

Nike’s shoe production in Vietnam and fresh hurdles

 

Nike began manufacturing in Vietnam in 1995, one of the earliest foreign investors in the country’s post-reform economy. Attracted by low labour costs and a growing industrial base, it quickly expanded its network to 130 supplier factories, producing not just shoes but also clothing and equipment. The scale is enormous — a typical Nike sneaker like the Air Force 1, which retails for $115, costs the company just $18 to produce overseas.

 

But the 46 per cent tariff is layered on top of existing duties of 20 per cent on athletic shoes with textile uppers, according to the American Apparel & Footwear Association. For Nike, that translates to an additional $8.28 in cost per pair — or nearly $66,000 more per standard shipping container, each of which holds about 8,000 pairs.

 

The impact ripples far beyond one shoe model. Nike’s strategy under new CEO Elliott Hill, appointed last year, is focused on winning back runners after market share slipped to upstarts like On and Hoka. The Vomero 18 was supposed to be part of that comeback, according to a report by The Financial Times. 

 

Why Trump’s tariffs will hurt Nike the most

 

Compared to rivals, Nike is uniquely exposed. The US is its biggest market, and it manufactures a greater share of its footwear in Vietnam than most global peers. Investors have taken note: The company’s stock dropped to an eight-year low this week, spooked by the likely dent in margins.

 

Analysts say passing on the cost to consumers could be risky. “Finding a cheaper market without leaving the planet is going to be tough,” quipped David Marcotte, senior vice-president at consultancy Kantar. There simply aren’t enough skilled workers or specialised factories in the US to replace Vietnam’s role in the supply chain — at least not quickly.

 

According to industry analysts, even if Nike were to shift operations, it would take at least 18 to 24 months for meaningful results. “These supply chains move in five-year cycles,” Marcotte noted. “Relocating isn’t plug-and-play.”

 

Nike, Adidas, and Puma – a tale of three brands

 

Nike’s deep entrenchment in the US market — where it sells the majority of its shoes — makes it the most vulnerable to tariff hikes. Its 50 per cent Vietnam sourcing makes cost inflation a near-certainty, with limited short-term escape routes.

 

Adidas, though also heavily reliant on Vietnam — 39 per cent of its footwear is made there — has a broader global spread. Its largest market is Europe, the Middle East, and Africa (EMEA), where it posted 19 per cent revenue growth in Q4FY24. That gives Adidas the flexibility to reroute inventory and offset tariff shocks more effectively.

 

Puma, on the other hand, faces steeper challenges. Though it too produces extensively in Vietnam, its attempts to reposition as a premium brand haven’t caught on. With Asia-Pacific accounting for just 20.8 per cent of its 2024 revenue, and the US market tough to crack at higher prices, analysts expect margin pressure to hit hardest.

 

Can Nike look to India for shifting its footwear manufacturing?

 

With Vietnam under tariff fire and China already out of favour due to earlier trade tensions, brands are hunting for alternatives. India has emerged as a serious contender.

 

For Nike, shifting even a portion of production to India could help soften the blow. The country’s 26 per cent flat tariff on footwear exports is well below Vietnam’s new effective rate, and labour costs remain competitive. Non-leather shoes — which dominate athletic segments — face an average 36 per cent duty from India, compared to up to 60 per cent from Vietnam in some categories.

 

As brands adopt a ‘China+1’ approach, India’s appeal is growing. But infrastructure and scale remain hurdles, and a full pivot would take years.

 

Trump’s tariffs put global supply chains under stress

 

Vietnam’s role in global sneaker production is no accident. The country received a new wave of investment during Trump’s first term, when his trade war with China drove manufacturers to seek alternatives. The result was a dramatic surge in Vietnam’s exports, including a $123.5 billion trade surplus with the US last year — the third largest globally.

 

That figure, ironically, may have helped trigger the very tariffs now threatening it. The Trump administration used trade balances to determine the ‘reciprocal’ rates imposed under the new rules.

 

For now, sneaker companies are scrambling. Analysts expect Adidas and Puma to raise US prices by around 20 per cent to maintain margins — though they might stagger hikes to avoid alienating consumers. Nike, with its heavy US footprint, may find it harder to follow suit.