The Vomero 18 running shoe, showcased at a Nike store in New York, is characterized by its substantial soles, a price of $150, and tongue labels indicating it is “Made in Vietnam.” This poses a significant challenge for Nike’s turnaround strategy under Chief Executive Elliott Hill, who introduced the Vomero 18 to regain customers lost to other brands. Vietnam, which has become the epicenter of athletic shoe manufacturing, faces steep tariffs imposed by U.S. President Donald Trump.
Trump has expressed a desire to repatriate manufacturing to the U.S. However, analysts predict that the unintended consequence will be an increase in trainer prices, as U.S. factories lack the necessary specialized equipment and skilled labor for running shoe production. Nike began its manufacturing venture in Vietnam in 1995, utilizing five contract footwear factories and emerging as an early foreign investor in the nation. The company rapidly grew its supplier base, creating numerous jobs due to the lower labor costs.
Currently, Nike operates 130 supplier-factories in Vietnam, which produce shoes, clothing, and equipment, with the country contributing to half of Nike’s footwear production. Similarly, Adidas sources 39 percent of its shoes from Vietnam. The recently introduced 46 percent tariff by Trump adds to the existing 20 percent duties on U.S. imports of athletic shoes featuring textile uppers, according to the American Apparel & Footwear Association.
Chris Rogers, head of supply chain research at S&P Global Market Intelligence, highlighted that establishing new factories in other countries could take approximately two years, as changes in supply chains are usually planned over a five-year cycle. Adam Cochrane, an analyst at Deutsche Bank, suggested that nations such as Mexico, Brazil, Turkey, and Egypt could serve as alternative manufacturing hubs. However, due to existing long-term supplier contracts, tangible changes might take 18 to 24 months to implement.
Additionally, Trump has applied reciprocal tariffs at a minimum rate of 10 percent to nearly all trading partners, with major footwear hubs like China and Indonesia facing even higher rates. David Marcotte, senior vice-president of retail at Kantar, expressed skepticism about finding cheaper manufacturing markets.
Nike has not publicly commented on the situation but acknowledged in a quarterly report that it is navigating various external factors, including new tariffs and geopolitical dynamics. Nike’s shares have declined considerably due to the tariff implications. Dylan Carden, a William Blair analyst, noted that footwear brands have three main strategies to mitigate cost increases: negotiating lower supplier costs, raising consumer prices, or absorbing the costs themselves.
Cochrane estimated that Adidas and Puma would need to raise U.S. prices by about 20 percent to maintain their profit margins, although price adjustments might be phased in to minimize market share loss. Felix Dennl, an analyst at Metzler bank, stated that Adidas is well-positioned for price hikes due to its brand strength, while Puma may struggle with passing on cost increases, a factor contributing to the recent leadership changes at the company.
Sporting goods producers are expected to evaluate their U.S. product lines, phasing out less profitable items. While Adidas declined to comment, Puma confirmed its strategy involves sourcing from multiple countries.
Vietnam experienced a surge in manufacturing investments during Trump’s first term due to his trade war with Beijing. The country’s trade surplus with the U.S. increased significantly, making it the third largest after China and Mexico. As a result, analysts suggest that brands might need to diversify their order destinations to Europe, the Middle East, and China, potentially leading to increased competition in these markets.
In a U.S. market heavily reliant on imports, Carden warned of a situation reminiscent of the Soviet Union, where premium prices were paid for imported goods. Data analysis for the report was provided by Clara Murray.
