The new US tariffs are their last lunge

Nike’s shares have fallen by 14% after the announcement of the New Trump tariffs And they were already coming from a lousy years inertia. Since the historical maximums in the late 2021, Nike’s action has fallen almost 70%. This has only been the last episode … and perhaps the most difficult to correct in the short term.

Why is it important. Nike had been strategically moving away from China … but it has ended up falling into an even greater tariff trap. Decades have been building a production network in Asia to benefit from low labor costs and government incentives. Now this business model is in existential danger.

Stifel analysts They calculate That tariffs, without considering rises of prices or changes in countries of origin, could reduce the benefits per action of Nike this year by $ 1.69. It rains on a wet for a company that until the early post-pandemic years was exemplary.

In figures. The tariff coup to Nike’s supply chain is devastating:

• 46% of Vietnam tariff (produces 50% of Nike footwear).
• 32% of Indonesia tariff (produces 27% of footwear).
• 54% of total tariff to China (the previous 20% + 34% new).

These three countries represent 95% of Nike’s footwear production, leaving the company without viable alternatives to avoid new costs. UBS estimates That to counteract only the impact of tariffs on Vietnam, Nike would need to increase their prices between 10% and 12%.

What has happened. Investors have punished Nike and other companies in the sector that depend on Asian manufacturing. In a single day, Nike’s actions fell by 14%, while their competitors suffered similar falls: adidas (-11%), Puma (-10%), Lululemon (-13%), Skechers (-20%), ON HOLDING (-15%).

Nike is not only suffering from tariffs. The company It had already been dragging competitiveness problems In front of emerging brands such as those of the previous paragraph other such as Hoka, and had announced a restructuring plan with cuts of 2,000 million dollars.

The context. This crisis is not only accentuated by the rise of its rivals in general, but there is a particular code name: Adidas, which has a strategic advantage by having a strong productive presence in Europe (up to 30%), which allows you to export from Germany and reduce your tariff exposure.

Nike, on the contrary, depends almost exclusively on Asia, as we have seen before.

And now what. Nike has few options to mitigate the immediate impact of tariffs.

1. Increase prices: a couple of Air Jordan 1 high could rise from 180 to 198 dollars.
2. Negotiate with suppliers to share the additional cost load.
3. Accelerate automation and reduce its dependence on intensive labor.
4. Pressure to obtain exemptions or modifications of tariff policy.

Thus and all, the strong fall of Nike contextualizes the fear of investors to even the correct application of these measures is sufficient and the brand ends up losing competitiveness if it transfers the costs to the customer.

Deepen. Nike is trapped in a perfect storm:

• Extreme Dependency of Asia (95%) for manufacturing.
• Impossibility of rapid relocation. Relocating manufacturing has not been for years.
• Margins already pressured. Permission fighting the loss of market share and going down prices.
• Double competitive punishment. If you absorb tariffs, you lose margin. If you upload prices, you lose customers.
• No viable alternative countries. At least in the short term.

Nike built his empire under the ‘Just Do’ mantra, but now faces a harsh reality: he can’t do much before an overented tariff policy.

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