Berkshire's Brooks Running Stakes Its Future on Southeast Asia Amid Tariff Turbulence

The global footwear industry is at a crossroads as tariffs and trade tensions reshape supply chains. Among the companies navigating this storm is Brooks Running, a Berkshire Hathaway subsidiary, which has doubled down on its Southeast Asia manufacturing base despite looming U.S. tariffs. This strategic bet underscores the delicate balance between long-term partnerships and the immediate financial risks of protectionism.

A Southeast Asia Pivot Rooted in Decades of Trust

Brooks’ commitment to Vietnam and Indonesia is no fleeting decision. The company produces 85% of its shoes in Vietnam and 15% in Indonesia, a setup built over 20 years of collaboration with regional suppliers. CEO Dan Sheridan emphasized this loyalty at Berkshire’s annual shareholder meeting, calling the partnership hubs “critical” to Brooks’ ability to deliver high-performance running shoes at competitive prices. This reliance is not just about cost efficiency: Southeast Asia’s expertise in technical footwear—evidenced by the biomechanically optimized Max series—is unmatched.

Tariffs Threaten to Upend the Calculus

The 46% proposed tariff on Vietnamese imports and 32% on Indonesian goods, set to take effect in 2025, represent a seismic shift. While Brooks had modeled for a 10% tariff—leading to a $10 price hike on its popular Ghost model—the higher rates could break the profit equation. Sheridan warned that a 46% tariff would force prices to levels “the market cannot sustain,” risking demand erosion. For context, Brooks’ $200 Glycero Max shoe, a 70% revenue driver in China, already operates on tight margins.

Navigating the Financial Tightrope

Brooks’ financial health provides some cushion. The company reported a 9% revenue rise to $1.3B in 2024, with a $1.5B target for 2025, driven by North America (80% of revenue) and surging sales in China. Yet the tariff threat is existential. A 46% tariff could reduce Berkshire’s earnings by 1–2%, per CEO Warren Buffett, who has long criticized tariffs as “a tax on the American consumer.”

The broader footwear sector faces similar pain. Peers like Nike and Deckers (owner of Ugg and Hoka) saw stock prices plunge 12–15% after the tariff announcement. For Brooks, the stakes are compounded by its niche focus on running—a category Buffett calls “recession-resistant,” but one that demands affordability to retain market share.

Strategic Mitigation and the “Recession-Proof” Play

Brooks is hedging risks through diversification and innovation. Partnerships with Disney and the Seattle Kraken aim to bolster brand equity without chasing volatile trends. Internally, it’s refining hiring and prioritizing performance-driven designs like the Max series, which leverages biomechanical insights to outpace competitors.

Meanwhile, the company has joined 76 footwear brands in lobbying the White House for tariff exemptions, framing the issue as an “existential threat.” Yet the political landscape is uncertain: Vietnam’s government is already negotiating with U.S. officials to revise the tariff framework.

The Bigger Picture: Tariffs as a Catalyst for Global Supply Chain Shifts

The Brook’s story mirrors industry-wide pressures. Vietnam, which exported $8.28B in footwear to the U.S. in 2024, now risks losing market share to Cambodia, Thailand, and Mexico. Companies like VF Corp. (Vans) and Deckers are accelerating production shifts, but the complexity of retooling supply chains—particularly for specialized running shoes—could limit agility.

Conclusion: A High-Stakes Gamble on Resilience

Brooks’ Southeast Asia strategy is a calculated risk. The company’s long-term supplier relationships, product differentiation, and exposure to growth markets like China give it an edge. Yet the tariff threat remains a Sword of Damocles. If the 46% rate takes hold, Brooks may face a stark choice: absorb costs (harming margins) or raise prices (risking demand).

The numbers tell the story: $1.5B in 2025 revenue hinges on maintaining a delicate equilibrium. Investors should monitor tariff negotiations, consumer price sensitivity in North America, and Brooks’ ability to expand its premium Max series in China. While Buffett’s Berkshire provides financial firepower, the ultimate test lies in whether Brooks can turn its Southeast Asia bet into a sustainable advantage—or become collateral damage in a trade war.

In the end, this is more than a footwear story. It’s a case study in corporate resilience amid geopolitical upheaval—a theme investors will see again and again in 2025 and beyond.