Nike warns Trump's tariffs could add $1B to costs
What's the story
Nike has warned that the tariffs imposed by US President Donald Trump on key trading partners could add roughly $1 billion to its costs this year. The sportswear giant's executives also said they would reduce their dependence on manufacturing goods in China to mitigate the effects of US trade policies. Last month, Nike announced a price hike for some trainers and clothing in the US from early June, following rival Adidas's warning about potential price increases due to tariffs.
Market response
Nike's shares surge over 10%
Despite the looming tariff-related challenges, Nike's shares surged over 10% in extended trading. This came after the company projected a smaller decline in first-quarter revenue than many analysts had anticipated. However, it should be noted that these were still Nike's worst quarterly figures in over three years. The company's fourth-quarter revenue stood at $11.1 billion—the lowest since Q3 of 2022.
Strategic move
Nike plans to shift some production from China
Nike's Chief Financial Officer Matthew Friend has announced plans to shift some production from China, which has been hit with the biggest tariff increases in comparison to other countries. This is part of a strategy to mitigate the impact of Trump's tariffs. Currently, China accounts for 16% of Nike footwear that ends up in the US market. But this figure will be reduced to a "high single-digit percentage range" by May 2026-end.
Tariff timeline
Trump's 'Liberation Day' tariffs and subsequent pause
On April 2, Trump announced sweeping "Liberation Day" tariffs on most goods from countries around the world. However, later that month, he suspended most of those tariffs to allow for talks with affected countries. The move reduced tariffs to 10%, instead of the far higher rates that goods from many trading partners faced. Now, as the 90-day pause approaches its expiration date on July 9, questions are being raised about Trump's next steps regarding these tariffs.
Future plans
Trump says talks are going well
At a White House event on Thursday, Trump said talks were going well and pointed to an agreement with China. He also hinted at another deal "coming up with India, maybe." However, he added that "We're not going to make deals with everybody." The US president also suggested some countries could be sent a letter thanking them but informing them they would be paying higher tariffs.