(Bloomberg) -- At Nike Inc. headquarters in Beaverton, Oregon, executives are trying to figure out how to best spread the pain of new tariffs.
Nike, the factories that produce its goods, the wholesalers that sell the goods and ultimately shoppers will all likely share portions of the cost, according to a person familiar with the matter who asked not to be named discussing private conversations.
The backbone of Nike’s supply chain is being threatened by President Donald Trump’s global tariff campaign, straining a decades-long investment just as the world’s largest sneaker company tries to rebound under a new chief executive officer.
Over the past 30 years, Nike has funneled billions of dollars of production into Vietnam, helping turn the southeast Asian nation into a powerhouse for footwear and apparel production. On Wednesday, Trump imposed a 46% tariff on goods from Vietnam — among the steepest of the countries he targeted — that threatens to devastate its manufacturing industries.
The announcement was then thrown into limbo hours later when Trump said he would pause higher tariffs on dozens of non-retaliating countries for 90 days. Nike shares rose 7.2% at 1:30 p.m. in New York after Trump posted about the pause on social media.
Nike has become a symbol of corporate fallout from Trump’s tariff blitz: a famed US brand entangled in an economic calamity that’s wiped trillions from stocks and pushed global supply chains into disarray. Executives have been left with a costly conundrum across Asia, where nearly all Nike sneakers are made.
The timing couldn’t be worse. New CEO Elliott Hill, a longtime Nike executive who came out of retirement in October, is attempting to revive a company weighed down by slumping sales and corporate layoffs. Nike expects further declines in revenue and profitability, and shares have fallen 30% so far this year.
Hill must now navigate rising costs across his supply chain, with the possibility of passing price hikes on to consumers. In March, he told investors that he visited factory partners in Asia “to see how we’re executing,” but has yet to outline a plan to manage tariff fallout. A representative for Nike didn’t immediately respond to a request for comment.
Management’s options are limited, and analysts say it’s impossible for Nike to quickly reorient its supply chain. Vietnam, China and Indonesia — all hard-hit by Trump tariffs — account for 95% of Nike footwear production. The total workforce that manufactures Nike products in those three countries is roughly 850,000 — slightly larger than Apple Inc. supplier Foxconn, according to company disclosures. TD Cowen analyst John Kernan said there’s simply nowhere else with the comparable capacity or labor costs to absorb that volume.
All eyes, then, are on Vietnam — Nike’s most important production base.
Betting on Vietnam
Nike entered Vietnam in 1995 with five contract footwear factories, part of a long-term bet by cofounder Phil Knight. It was a gamble because the industry was still developing and its workforce lacked experience and oversight, but Knight saw opportunity.
“I always vowed that someday Nike would have a factory in or near Saigon,” which is now known as Ho Chi Minh City, Knight said in his memoir.
Nike’s presence was immediately scrutinized. After a labor scandal erupted, Knight flew to Vietnam to confront the crisis. In 1998, he pledged to root out child labor from Nike’s supply chain in a speech in Washington DC.
Since then, Nike’s footprint in Vietnam has only increased, adding more factories as the industry gained infrastructure and manufacturing experience. Rivals like Adidas AG and Puma SE followed, as did newer brands such as Lululemon Athletica Inc., Skechers USA Inc. and Allbirds Inc. Half of all Nike brand sneakers are made in Vietnam now, according to filings.
Vietnam’s footwear and apparel industries were big winners during Trump’s first term. Geopolitical tensions pushed Western brands out of China and they flocked to Vietnam, with its established manufacturing history and infrastructure. Vietnam now ranks among the world’s top exporters of both apparel and footwear, according to the World Bank.
Vietnam’s government has lauded Nike’s investments as vital to their economy’s growth. The nation has been among Asia’s fastest-growing economies in recent years, with gross domestic product up 7.1% last year, surpassing both government projections and estimates from analysts.
That mutual dependence has led to a close relationship between Nike and Vietnam’s government. Officials in Hanoi have hosted Nike executives, including a chief operating officer, in recent years. In 2022, Prime Minister Pham Minh Chinh asked the company for policy recommendations to deepen Vietnam’s integration into global supply chains.
Limited Options
These days, Nike works with over 100 apparel factories, footwear plants and equipment makers in Vietnam, the company has disclosed. Most are clustered around Ho Chi Minh City, where major contractors each employ over 10,000 workers.
Nike could pressure vendors to take on more of the new costs, streamline operations or coordinate with retail partners to raise prices, said Anna Andreeva, an analyst at Piper Sandler. But she warned there’s a ceiling.
“That’s the number one question: How much price increase can the consumer realistically absorb?” Andreeva said.
Executives at Foot Locker, Nike’s biggest retail partner, said last week that they’re in “constant communications” with brands on pricing strategy as they mull how much of these tariff costs will end up being placed on US shoppers.
“We’re going to work through brand by brand,” Foot Locker Chief Executive Officer Mary Dillon said at a JPMorgan event last week. “It’s a combination of ‘What do they take? What does the consumer take?’”
Meanwhile, Vietnam’s government has been working to placate Trump. On Saturday, Vietnam’s leader To Lam asked Trump to delay his tariffs for at least 45 days to allow for negotiations. He offered to cut tariffs on US goods to zero and encouraged Trump to do the same.
Trump said the call was “very productive.” But White House adviser Peter Navarro said Vietnam’s offer wasn’t enough. Vietnam upped the offer on Tuesday, promising to buy more US defense and security products.
US Treasury Secretary Scott Bessent says Vietnam is visiting the US capital on Wednesday to discuss trade.
--With assistance from Matthew Boyle.
(Updates with shares and news of pause on higher tariffs.)
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