Why Tariff Uncertainty is Forcing Nike to Raise Prices
Tariff uncertainty, especially in relation to goods made in Asia, has forced a major rethink for retailers big and small when it comes to pricing.
Sportwear giant Nike looks set to become the latest to ask customers to pay more for clothing and footwear, with prices on some items expected to rise in the US from 1 June.
The decision shines a light on the strain global supply chains are currently under. US President Donald Trump imposed a 10% base tariff on goods entering the United States on so-called 'Liberation Day', but much higher levies on countries like Vietnam are still being considered.
Earlier this month, it was announced that the US and China had reached an agreement to mutually reduce tariffs, committing to a 90-day suspension of new trade measures
Nike has stopped short of blaming tariffs for the anticipated pricing shift, stating only that it conducts regular "price adjustments" during its seasonal planning. However, in recent weeks rival firm Adidas issued a warning that US tariffs would push them to raise prices.
Nike's price hike plans
Matt Friend, Chief Financial Officer at Nike, spoke in March about the challenge of navigating "external factors that create uncertainty in the current operating environment", pointing to tariffs and macroeconomic forces affecting consumer confidence.
His comments came during an investor call where Nike laid out how it's managing current market volatility.
From the beginning of June, US consumers will see prices rise by up to US$10 on Nike trainers priced above US$100. Clothing and equipment will also see increases, typically between US$2-10.
However, not all products will be affected. Items such as Nike's Air Force 1 range, shoes priced under US$100, children's gear and Jordan-branded apparel and accessories are excluded from the hike.
"We regularly evaluate our business and make pricing adjustments as part of our seasonal planning," Nike said in a statement.
Asian manufacturing at centre of tariff strain
The source of tariffs pressure lies in Asia, where Nike manufactures nearly all of its products. In its most recent financial year, 50% of Nike’s footwear and 26% of its apparel came from Vietnam.
The remainder of its production spans factories in China, Indonesia and Cambodia — all of which are impacted by US import tariffs.
President Trump wave of “reciprocal” tariffs targeted nations like Vietnam with import duties as high as 46%. Despite a 90-day pause until July, the broader tariff scheme could see import taxes rise to between 32% and 54% for goods from these countries.
Tariffs are not paid by producers abroad but by companies importing goods into the US. Such businesses face a choice: absorb the added cost or pass it on to consumers.
Nike’s latest move suggests a strategy to share that cost with customers, while still protecting certain popular and lower-priced product lines from increases.
Calls grow to diversify supply chains
As supply chains endure continuing shocks, from pandemic disruptions to shifting trade policies, the message from consultants and analysts is clear: diversify sourcing.
Inverto, the supply chain consultancy arm of Boston Consulting Group, warns that businesses need to break their reliance on single-country suppliers.
Matthew Rose, Managing Director at Inverto, puts it plainly: “Relying on a single supplier is like having all your eggs in one basket. Political shifts like tariffs can completely upend the economics of what had once been a very profitable but concentrated multinational supply chain."
He adds that multiple supply chain disruptions since the COVID-19 pandemic have made it clear that single-site, single-country sourcing poses big risks. Instead, companies should adopt a “plus one” strategy — establishing secondary supply sources to offset risks from tariffs and other geopolitical factors.
“Businesses need to make sure they’re prepared for every scenario and can ride out future shocks in one part of their supply chain,” adds Matthew.
Inverto recommends focusing these efforts where they can make the most impact in reducing exposure to trade policy shifts.
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