Sneaker and apparel retailers blindsided by tariffs on Asian factory hubs

Prices of Nike Jordan and Adidas Samba sneakers are likely to rise in the US after President Donald Trump imposed a raft of new tariffs on Vietnam, China, and Indonesia, key manufacturers of sportswear and apparel.

Shares in Nike, Adidas and Puma dropped sharply on Thursday after Vietnam was targeted with a 46 percent tariff rate, Cambodia with 49 percent, Bangladesh with 37 percent and Indonesia with 32 percent, while Trump hiked tariffs on China by an extra 34 percentage points, following the earlier 20 percent tariffs.

Fast-fashion retailers H&M, which sources from China and Bangladesh mainly, and Zara owner Inditex were also hit.

"The April 2 tariffs seem purpose-built to hobble the apparel industry," said Dylan Carden, an analyst at William Blair in Chicago.

The new tariffs would increase the average US import tariff rate on apparel from 14.5 percent in 2024 to 30.6 percent, according to calculations by Sheng Lu, opens new tab, professor of fashion and apparel studies at the University of Delaware.

Based on 2024 import values, the new tariffs would result in a total of US$26 billion (HK$202.8 billion) in duties on apparel, more than double last year's level, Lu said.

In the past years, apparel and sportswear brands have shifted their sourcing away from China due to escalating political tensions between Washington and Beijing and have imported more from countries including Vietnam, Indonesia, and India.

Retailers may not be able to fully offset these tariffs, as countering the impact of the levies on Vietnam alone would require price increases of 10 percent to 12 percent, according to UBS analysts.

"With additional tariffs proposed across other key Asian sourcing hubs, the scenario of shifting production now looks far less viable, narrowing the set of effective mitigation levers available to brands," the UBS analysts added.

The US imported more than US$15 billion in textiles and garments from Vietnam in 2024, which was roughly about 10 percent of Vietnam's total US exports, according to a Jefferies note.

Nike produced half its footwear and roughly 30 percent of its apparel in Vietnam in its 2024 financial year, while Adidas relied on the Asian nation for 39 percent of its footwear and 18 percent of its apparel last year.

Shares of Nike tumbled about 8 percent in premarket trading, while Adidas dropped more than 10 percent to a one-year low. Puma's shares fell 10.7 percent to hit their lowest level since November 2016.

Rival sportswear makers, including Lululemon, Skechers, Under Armour, Hoka maker Deckers and On Holding were all down between 8 percent and 15 percent before the bell on Thursday.

Nike, Adidas and Puma did not reply to requests for comment on the tariffs, while On said it was "constantly monitoring the evolving situation".

REUTERS