Nike Stock Plummets 13% Amid Trump Tariffs

On Thursday, the stock prices of major footwear retailers, including Nike, experienced a significant decline due to the imposition of retaliatory tariffs by the Trump administration. Nike's stock price dropped by as much as 13%, reaching its lowest point since November 2017. The tariffs, which began on April 5 with a 10% base rate on all imported goods, escalated to higher rates for approximately 60 countries by April 9. Vietnam and Indonesia were particularly affected, with tariffs of 46% and 32% respectively.

Nike, which sources 44% of its products from Vietnam and 21% from Indonesia, was among the hardest hit. The company had initially anticipated that the tariffs would only impact its fourth-quarter profit margins. However, the new tariffs exceeded expectations, leading to a reassessment of the company's financial outlook. Chief Financial Officer Matthew Fried in a previous earnings call had stated that the company expected a 400 to 500 basis point decrease in gross margin for the fourth quarter, including restructuring costs from the previous year.

Other footwear companies, such as Deckers Outdoor Corporation, Crocs, On Running, and Skechers, also saw their stock prices decline by 18%, 17%, 9%, and 20% respectively. These companies, along with Nike, have significant operations in regions facing the highest tariffs. The increased costs are expected to be distributed among suppliers, companies, and consumers, with potential strategies including negotiations with suppliers, cost-cutting measures, and price increases for consumers.

Analysts have noted that the current economic environment makes it more challenging for companies to pass on increased costs to consumers. Jim Duffy, an apparel analyst at Stifel, had previously mentioned that companies now have less room to raise prices compared to when the Trump administration first imposed tariffs in 2018. The complexity of supply chains and the need for difficult pricing and procurement decisions have been highlighted by industry experts.

The impact of these tariffs extends beyond the footwear industry, affecting various sectors including apparel, furniture, and toys. Companies are already considering reducing their reliance on Vietnamese manufacturing. The broader economic implications remain uncertain, with potential impacts on global economic growth and market stability. The Vietnamese government has responded by holding emergency meetings to discuss countermeasures, emphasizing the need for structural adjustments and diversification of markets and supply chains.