Key takeaways:

New tariffs on imports from countries like Vietnam and Cambodia have caused significant declines in shares of major footwear brands.
Nike relies heavily on Vietnam for its manufacturing, with around 50% of its footwear produced there.
Investors should consider the potential long-term impacts on profitability for footwear companies affected by these tariffs.

Introduction

Recent developments in U.S. tariff policy have sent shockwaves through the footwear industry, affecting well-known brands like Nike, Crocs, and others. Key points include:

President Trump’s newly announced tariffs target several countries with high footwear production, primarily Vietnam.
These tariffs are seen as part of a larger strategy to reshape trade dynamics and protect domestic industries.
The footwear industry is facing increased costs, which could impact retail prices and profit margins moving forward.

Detailed Analysis

President Trump announced reciprocal tariffs that have inflicted a sharp decline on stocks of prominent footwear brands such as Nike and Crocs. This comes as major shoe producers, particularly those dependent on Vietnamese manufacturing, scramble to address the ramifications of the new policy.

According to reports, the latest tariffs include a staggering 46% tax on footwear imported from Vietnam, a critical hub for many companies in the sneaker and performance shoe market. To put this in perspective, Nike produced about 50% of its footwear in Vietnam in fiscal 2024, alongside significant apparel production. A 7% drop in Nike stock in after-hours trading reflects investor anxiety over these increased costs, which financial analysts predict will significantly impact earnings this year ¹.

Furthermore, analysts highlight that the tariffs are not limited to Vietnam; Cambodian and Indonesian tariffs also present challenges, with rates of up to 49% being applied. Brands like Deckers, which owns Ugg and Hoka, are similarly positioned, with analysts observing their stocks falling approximately 12%. Retail experts suggest that these increased import costs are akin to a hidden tax on consumers, as companies may pass these high tariffs onto end buyers, leading to higher retail prices ².

In preparation for potential fallout, many shoe companies have diversified their supply chains, shifting some production outside of China, particularly into Southeast Asia. However, as illustrated by these developments, the risks associated with tariffs are now broader and more encompassing than previously anticipated, affecting companies that had made efforts to circumvent the economic stresses related to U.S.-China trade tensions.

The implications for investors are clear. With footwear companies heavily reliant on Asian manufacturing, those who invested in these stocks may need to reconsider their positions as retail prices are likely to climb and consumer spending patterns may shift in response to higher prices and potential economic slowdown driven by tariff escalations. Notably, investors should closely monitor upcoming earnings reports to gauge how well companies are managing these challenges, as well as any potential shifts in consumer sentiment that could arise from soaring prices.

Conclusion

The footwear industry is bracing for turbulent times as new tariffs threaten profitability and market competitiveness. The reliance on Vietnam and other Southeast Asian nations has made brands like Nike and Crocs particularly vulnerable, resulting in significant declines in their stock values. Investors will need to evaluate the long-term viability of these stocks and the broader market response to shifting cost structures resulting from these tariffs. As the situation develops, maintaining a close watch on industry earnings and geopolitical developments will be essential for making informed investment decisions.

References

¹ Shoe Companies From Crocs to Nike Pummeled After New Tariffs Outside China. Wall Street Journal. Retrieved April 3, 2025.

² Here’s why apparel stocks like Deckers, Lululemon and Nike are sprinting lower. MarketWatch. Retrieved April 3, 2025.