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Stocks are plunging today on President Trump's announcement of a 10% blanket tariff on global imports and higher rates on most major trading partners last night.
Unsurprisingly, the news sent broad swaths of the stock market into a tailspin, and among the hardest-hit sectors was footwear and apparel. Nearly all of these products are manufactured outside the U.S., often in Asia or Latin America, and the tariffs are likely to make prices rise. This will squeeze consumers on discretionary products, putting these companies in the difficult position of trying to pass along those costs to consumers or absorbing some of them themselves, thereby cutting into their margins.
On a day when the S&P 500 (SNPINDEX: ^GSPC) was down 5.1% as of 1:18 p.m. ET, footwear stocks were getting shellacked, with several down double digits. Among them were Nike (NYSE: NKE), off 12%; Deckers (NYSE: DECK), down 15.8%; On Holdings (NYSE: ONON), falling 14.9%; and Boot Barn (NYSE: BOOT), down 15.1%.
Are footwear prices going up?
In recent years, footwear companies like Nike have worked hard to diversify out of China into countries like Vietnam, but that strategy seems to have backfired, or at least did not help neutralize the "Liberation Day" tariffs announced on April 2.
The "reciprocal tariffs" are based on a percentage derived from the U.S. trade deficit with individual countries and calculated to balance the trade deficit. As a result, China was hit with a 34% reciprocal tariff, while Vietnam received a 46% reciprocal tariff.
As for individual stocks, Nike's plunge is especially noteworthy, as it's rare for an industry leader and a blue chip stock to fall double digits in a single session. In fiscal 2024, Vietnam, Indonesia, and China accounted for the manufacture of nearly all of Nike brand footwear, at 50%, 27%, and 18%, respectively. Its apparel base is a bit more diversified, with 28% in Vietnam, 16% in China, and 15% in Cambodia.
Bringing that production back to the U.S. is both unrealistic and impractical for Nike. The company had warned that tariffs would impact margins, and acknowledges it as a risk, but this seems to be worse than the market had expected.
Deckers, best known for its HOKA and UGG brands, is in a similar position. The company's manufacturers are primarily located in Asia, and it has supervisory offices in China, Indonesia, and Vietnam. Deckers has already plunged following disappointing guidance in its fiscal third-quarter earnings report, as investors seemed to price in some impact from weakening consumer sentiment and the trade war.