The Vomero 18 running shoe, now showcased at a Nike store in New York, features thick soles, a retail price of $150, and prominently displays woven tongue labels stating “Made in Vietnam.” This detail, while seemingly innocuous, is a significant hurdle for Nike as it attempts to navigate a corporate turnaround spearheaded by its CEO, Elliott Hill. The Vomero 18 was launched this year with the intent to recapture the loyalty of runners who have migrated to competing brands. However, with Vietnam emerging as the epicenter of global athletic shoe production, the repercussions of recently imposed tariffs by former President Donald Trump complicate these ambitions.

Trump's administration has made it clear that one of its core objectives is to bring manufacturing jobs back to the United States. Yet analysts caution that this policy could lead to increased prices for athletic footwear, as the U.S. lacks both the necessary factories equipped for specialized running shoe production and the skilled labor force to operate them efficiently. Nike has a long historical commitment to Vietnam, having commenced manufacturing there in 1995 through five contract footwear factories. This early investment not only established Nike as a key player in Vietnam's export landscape but also significantly contributed to the nation's economic development, creating thousands of jobs in the process. Today, Nike operates 130 supplier factories in Vietnam, producing a vast array of footwear, clothing, and equipment, with the country accounting for approximately half of its overall footwear production.

Adidas, the German sportswear giant and one of Nike's primary competitors, also heavily relies on Vietnam, sourcing 39 percent of its shoes from the Southeast Asian nation. Under the recent tariff plan, a staggering 46 percent levy has been layered on top of existing 20 percent duties imposed on U.S. imports of athletic shoes that feature textile uppers, as reported by the American Apparel & Footwear Association. This new regulatory environment raises significant concerns about the future of sneaker prices in the U.S.

While manufacturers could theoretically establish new factories in alternative countries, analysts like Chris Rogers, who heads supply chain research at S&P Global Market Intelligence, note that relocating footwear supply chains is a complex process that typically takes up to two years. Companies usually plan such transitions on a five-year cycle, further complicating the feasibility of rapid adjustments. Deutsche Bank analyst Adam Cochrane has pointed out that potential alternatives for manufacturing hubs could include nations such as Mexico, Brazil, Turkey, and Egypt. However, due to existing long-term contracts with suppliers, any shift in production might take 18 to 24 months before showing tangible results.

Moreover, Trump has initiated reciprocal tariffs at a baseline rate of 10 percent on nearly every trading partner, with footwear manufacturing powerhouses like China and Indonesia facing rates that are now more than triple that amount. David Marcotte, a senior vice-president at Kantar consultancy, expressed skepticism about the viability of finding a cheaper manufacturing market without venturing far from current operations.

Nike has not publicly commented on these tariff developments, but in a recent quarterly report, the company acknowledged the “external factors that create uncertainty and volatility” within its operating environment, which include geopolitical tensions, new tariffs, tax regulations, and fluctuating foreign exchange rates. Hill's appointment as CEO followed a concerning decline in sales, with niche brands such as On and Hoka gaining significant market traction at Nike's expense. This week, the company saw its stock plummet to a nearly eight-year low as investors reacted to the anticipated costs associated with Trump's new tariffs.

According to Dylan Carden, an analyst at William Blair, Nike has three primary strategies to mitigate costs: negotiating lower fees with suppliers, raising prices for consumers, or absorbing the increased costs. Cochrane estimates that Adidas and Puma, another German competitor with substantial manufacturing operations in Vietnam, may need to increase their U.S. prices by about 20 percent to maintain their profit margins in light of the tariffs. However, price hikes may be gradual to prevent significant losses in market share and operating profits. Interestingly, Cochrane suggests that Adidas may be in a better position than Nike due to its lower exposure to the U.S. market.

Felix Dennl, an analyst at Metzler Bank, indicated that Adidas is “well positioned” for implementing price increases thanks to its strong brand momentum across both lifestyle and performance segments. In contrast, Puma may struggle to pass on these increased costs, particularly given its recent challenges in rebranding as a premium shoe producer, which led to the dismissal of its CEO, Arne Freundt, this past Thursday.

Overall, sporting goods manufacturers will likely re-evaluate their product ranges in the U.S., phasing out less profitable items to adjust to the new economic landscape. Adidas declined to comment on the tariff situation, but Puma mentioned that it is employing a multi-country-of-origin strategy, enabling suppliers to produce in various locations as needed.

The influx of manufacturing investments into Vietnam surged during Trump's first term, largely due to the trade war with China that prompted many companies to shift production away from Chinese soil. This strategic shift has led to significant economic benefits for Vietnam, with its trade surplus with the U.S. ballooning to a staggering $123.5 billion last year, making it the third-largest trading partner for the United States after China and Mexico. The White House used these trade balance figures to calculate reciprocal tariff rates for each country.

As the landscape evolves, Cochrane has noted that sneaker brands may need to reduce order volumes and redirect more products to European, Middle Eastern, and Chinese markets, potentially increasing competition in those regions. In the U.S., where an astonishing 99 percent of footwear is imported, Carden highlighted that the market could resemble the economic conditions of the Soviet Union, where Russian citizens would pay foreign visitors extravagant premiums for iconic products like Levi’s jeans. “We’re behind the Iron Curtain,” Carden remarked, illustrating the potential challenges ahead for consumers and brands alike.

This article has brought attention to the complex interplay of tariffs, manufacturing, and consumer prices in the athletic footwear industry, setting the stage for a turbulent period as companies navigate these unprecedented economic challenges.