Adidas AG and Puma SE plunged amid a shock to their supply chains after President Donald Trump announced new tariffs on crucial shoe and apparel producing countries including Vietnam and Indonesia.
The US imposed a 46 percent reciprocal tariff rate on Vietnamese goods on Wednesday as part of Trumpâs growing trade war with countries around the world. Other new tariffs include 49 percent on Cambodia, 34 percent on China, 32 percent on Indonesia and 36 percent on Thailand.
Adidas shares dropped as much as 11 percent in early Frankfurt trading on Thursday, the most in more than two years. Puma also tumbled 11 percent to the lowest levels since 2016. Hennes & Mauritz AB, which produces some of its clothing in China, fell as much as 5 percent while Pandora A/S, which is reliant on Thailand for production of some of its bracelet charms, dropped as much as 15 percent.
Nike Inc., Adidas and Puma made big bets on Vietnam over the last decade. Today, about half of all Nike shoes and 39 percent of Adidas shoes are made in the country, according to regulatory filings. Vietnam is the largest supplier of footwear for both companies, and shoes produced in the country account for more than $20 billion in combined annual revenue.
âMore tariffs equal more anxiety and uncertainty for American businesses and consumers,â National Retail Federation Executive Vice President of Government Relations David French said. âTariffs are a tax paid by the US importer that will be passed along to the end consumer.â
Nike shares fell 7.3 percent in extended trading Wednesday evening in New York. Lululemon Athletica Inc., which makes 40 percent of its products in Vietnam and 17 percent in Cambodia, tumbled 11 percent in late trading. Shares of Abercrombie & Fitch Co., which gets 35 percent of its merchandise from Vietnam and 22 percent from Cambodia, fell 7.7 percent. Gap Inc., which buys about 27 percent of its goods from Vietnamese factories and 19 percent from Indonesia, slid 9 percent.
Shenzhou International Group Holdings Ltd., which makes products for US brands including Nike in Asia, saw shares tumbling as much as 18 percent in Hong Kong on Thursday, its biggest drop in more than three years, as Trump slapped tariffs on Asian manufacturing hubs including China, Cambodia and Vietnam, where the company operates production facilities.
Tariffs add to the trade turbulence that shoe sellers are trying to navigate. Nike already said it expects its gross margin to decline sharply this quarter, in part due to US tariffs on products from China and Mexico.
âShifting supply chains is not an option given performance footwear requires a very specific skill set and factories,â said Poonam Goyal, an analyst at Bloomberg Intelligence. âI canât see how prices to consumers donât go up.â
Nike and Adidas didnât immediately respond to requests for comment.
Major fashion retailers such as Uniqlo owner Fast Retailing Co. and H&M also count Vietnam as one of their biggest suppliers. The country exported $44 billion in textiles last year, with the US as its largest market, according to the Vietnam Textile and Apparel Association.
The footwear and apparel industries boosted production in Vietnam during Trumpâs first term in the White House as the trade war with China escalated. Vietnam has low labor costs, a skilled workforce already adept at manufacturing shoes and clothes, transportation infrastructure, and was seen as less of a threat to be involved in geopolitical clashes. It also boasted trade agreements with the US and the European Union.
Hints that Vietnam could get entangled in Trumpâs trade wars began in 2019, when Trump said that Vietnam took advantage of the US âeven worse than China.â Retail lobbyists feared that Trump was near enacting tariffs on Vietnam in the last month of his first term, according to people familiar with the matter.
Footwear and textiles are now among Vietnamâs most vital exports, and the industry flourished as brands like Nike and Adidas linked with dozens of sneaker factories. Neither company produces more than 20% of its footwear in China anymore.
Vietnam has been among Asiaâs fastest growing economies. Its gross domestic product grew 7.1 percent last year, surpassing both government projections and estimates from analysts surveyed by Bloomberg.
Just days after Trump re-entered the White House in January, Secretary of State Marco Rubio encouraged senior officials in Vietnam to address trade imbalances. Vietnamâs trade surplus with the US was more than $123 billion last year, according to US Census Bureau data, and officials have said theyâve been urging increased purchases of US products.
Only China and Mexico have larger trade surpluses with the US.
Vietnam Prime Minister Pham Minh Chinh said in January that heâd be willing to visit Trump at Mar-a-Lago to âgolf all day longâ if it helps resolve trade quarrels. Since then, the government has been trying to appease the Trump administration by cutting its own tariffs on US cars, ethanol and liquefied natural gas.
By Kim Bhasin
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