Have you heard about Nike’s $1 billion tariff bill? The company is estimating at least $1 billion in additional costs relating to tariffs but have a plan in place to minimize the impact to their bottom line. Currently Nike imports 16% of its footwear from China. Their goal will be to reduce that number to the high single digits by the end of next year.
In the scheme of things, 16% doesn’t seem like a lot when you consider approximately 50% of Nike’s manufacturing is done in Vietnam. Yet, when you compare the tariffs the countries pay to the United States, it makes sense. In 2024 China was paying anywhere from 25% to 50% in tariffs to the U.S. depending on the product. In April of this year, China’s tariffs were raised to 145%. They were later reduced to 30% then raised again to 55%. And, if China won’t negotiate favorably, they will be increased again.
Vietnam, on the other hand, was paying 3% on most goods then threatened with a 46% tariff yet recently negotiated a 20% tariff rate. The country also agreed to a 40% tariff on goods that are transshipped. This means they will pay more if they receive goods from another country then play the middleman and ship them on to the United States.
There is a reason Nike’s worth is over $108 billion. They have some smart people at the helm who know how to weave and pivot in difficult times. So, what is Nike’s plan to offset their $1 billion tariff bill? Beyond reducing its imports from China, they plan to increase prices and pass the additional costs on to the consumer.