Why Nike is Counting the Cost of Trump’s Trade Tariffs
Countless companies have experienced a distinct shift in their operations in light of US President Donald Trump’s sweeping trade tariffs.
Big-name sportswear brands have been among the hardest hit due to the fact they base a significant proportion of their production in China, Vietnam and Cambodia – the countries most heavily penalised by tariffs.
Nike is the latest to count the costs, projecting them to increase by around US$1bn.
Supply chain shifts
In 2024, Vietnam, China and Cambodia produced almost 60% of all Nike-branded apparel and 95% of all Nike footwear.
These countries are top manufacturers due to cheap labour, but a rise in tariffs means a rise in costs for the brands. As a result, many organisations are looking to either shift manufacturing operations or increase prices – or both.
Kate Leaman, Chief Market Analyst at AvaTrade comments: “Brands are now paying the price for decades of supply chains optimised purely for cost. A shift out of China is under way, but it’s neither cheap nor quick.
“Moving operations to Vietnam, Indonesia or Cambodia takes time, money and hard-earned trust with suppliers.”
At present, China manufactures 16% of Nike footwear which is sold in the US, but leaders predict that will fall significantly due to the new tariffs encouraging brands to manufacture their products elsewhere.
Matthew Friend, CFO at Nike, estimates that footwear production in China will be cut to the high single-digit range by the end of the 2026 fiscal year.
“These tariffs represent a new and meaningful cost headwind,” says Matthew.
“With the new tariff rates in place today, we estimate a gross incremental cost increase to Nike of approximately US$1bn. We intend to fully mitigate the impact of these headwinds over time.”
To mitigate the rise in tariffs, Nike has already started increasing the cost of footwear, with shoes that already cost more than US$100 seeing up to a US$10 rise. Clothing and equipment is seeing an increase in price between US$2 and US$10.
Nike has said it will implement further price increases this year as it makes internal changes to production.
When considering Nike’s potential production move, Kate adds: “Margins will tighten. Supply chains will fragment. Some companies will thrive on agility and brand strength; others forced into costly reinventions – or risk irrelevance.”
The financial impact on Nike
Although Nike’s earnings topped estimates for the last three months, its latest financial report shows the worst quarterly figures for more than three years at US$11.1bn.
After forecasting a smaller drop in revenue than expected, shares in Nike jumped by more than 10%.
Kate comments: “Nike’s latest earnings told two stories at once. Revenue fell, yet profits still topped estimates and the stock surged.
“It’s a paradox we’ll likely see repeated across global brands in the coming quarters – while consumers are still spending, especially on iconic names, the ground beneath multinational businesses is shifting fast.”
Tariff increases will likely continue to hit major US brands unless impacted countries can agree trade deals with Trump.
Countrywide, the CSIS predicts the proposed tariff increases will raise US prices by 7.1% and lower the US GDP by 0.08%.
Other brands to raise concerns include Adidas and Puma. As Vietnam faces a 46% tariff rise, athletic shoe manufacturing may have to move elsewhere.
In April, 76 companies, including Nike and Adidas, signed a letter to Trump asking for a footwear exemption from reciprocal tariffs.
As they await further information on Trump’s trade agreements, brands are exploring avenues to keep costs down – for both themselves and their customers.
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