Sat, 05 Apr 2025

Sat, 05 Apr 2025 How might tariffs change the price of Nike's iconic trainers?

What impact will the introduction of hefty tariffs on countries in Asia have on Nike's iconic US trainer?
Nike's iconic Air Jordan 1 trainers, a staple of American basketball culture, may face price hikes due to new US tariffs imposed on goods from Vietnam, Indonesia, and China. The tariffs range from 32% to 54%, and analysts predict that Nike will have to increase prices by 10-15% if they can't mitigate the impact through other means. UBS estimates that a 10-12% price hike is likely for goods produced in Vietnam, where Nike makes half of its shoes. Indonesia and China account for nearly all of the remaining production. Jay Sole, an analyst at UBS, believes that raising prices is one of the few ways to mitigate the impact of tariffs. Nike's profit margin has shrunk from 40% to around 11% due to various business expenses, including selling and administrative costs, interest, and taxes. The company faces a significant challenge in maintaining its competitive edge while absorbing the cost of tariffs. One possible solution for Nike is to downsize its product technology or slow down its design cycle to reduce costs. However, experts caution that such measures may not be enough to offset the impact of tariffs. The tariff war between the US and other countries is likely to continue, with China retaliating with a 34% tariff on US goods. The Trump administration's goal is to encourage companies to manufacture their products in the US, but this would require significant investment and time. Ultimately, analysts believe that Nike will have no choice but to raise prices if the tariff war persists.
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