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Footwear Expert: Tariffs Hurt Nike In A Different Manner Than You Think

December 4, 2018 4:25 pm
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Nike Inc (NYSE:NKE), the world’s largest footwear brand, might be one of the companies least affected by potential future tariffs.

Self-proclaimed "Tariff Man" President Donald Trump and Chinese President Xi Jinping agreed to a temporary trade truce Saturday, with the U.S. agreeing to maintain a 10-percent tariff on $200 billion in Chinese goods and forego an increase to 25 percent.

Majority Of Manufacturing In Vietnam, Indonesia

The decision sent Nike shares up 4 percent Monday, but one footwear expert said the investor reaction is misdirected.

“Nike is one of the most diversified sneaker companies in terms of their manufacturing and where they manufacture products. They make one-third of their products in China, [but] the majority of their products are made in Vietnam or Indonesia, and those countries are not subject to tariffs,” NPD Group analyst Matt Powell told Benzinga.

“Nike is not 100-percent immune to tariffs, but they are less impacted than a smaller company that may be making all of their shoes in China."

Even with the temporary truce, Powell said he's skeptical that negotiations will end with a positive resolution that prevents additional tariffs.

'Americans Will Have Less Disposable Income'

Tariffs are taxes on the American people, and no tariff has resulted in products being made in the U.S., Powell said.

If anything, Nike will be indirectly affected by diminished purchasing power on the part of American consumers due to tariffs, he said.

One study puts the impact of tariffs at $2,400 per household in 2019 in the form of higher prices.

"All that will happen is Americans will have less disposable income and it means they will be buying less,” Powell said.

Following the broader markets lower, Nike shares closed Tuesday down 2.76 percent at $75.79

Related Links:

A Post-Sneaker World: How 'Small' Footwear Brands Are Beating The Giants

Micro-Influencers: A Growing Component Of Apparel Brand Strategy

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