Tariffs: Why Nike Faces a Procurement and Supply Rethink

With the onset of trade tariffs imposed by US President Donald Trump and his administration, major sportswear brands are facing the prospect of significant shifts in their procurement strategies.

Tariffs are predominantly impacting production in countries such as China, Vietnam and Cambodia, integral to the manufacturing processes of such companies.

Nike, for example, anticipates a US$1bn increase in production costs, forcing the brand to re-evaluate its existing procurement strategies.

Procurement adjustments in play

In 2024, Nike sourced nearly 60% of its apparel and 95% of its footwear from nations including Vietnam, China and Cambodia, known for their cost-efficient labour markets. However, the tariffs are leading businesses to rethink their supply chain locations and the potential to pass costs onto consumers.

Kate Leaman, Chief Market Analyst at AvaTrade, comments: “Brands are now paying the price for decades of supply chains optimised purely for cost. A shift out of China is under way, but it’s neither cheap nor quick.

“Moving operations to Vietnam, Indonesia or Cambodia takes time, money and hard-earned trust with suppliers.”

Currently, 16% of Nike’s US footwear originates from China, but that figure is expected to dwindle in response to broader industry moves toward diverse production bases.

Nike CFO Matthew Friend has offered insight into the adjustments, predicting that the share of China-produced footwear will drop to single digits by fiscal 2026.

"These tariffs represent a new and meaningful cost headwind,” said Matthew, meaning future production changes are essential to counter the forecasted US$1bn cost rise.

In response, Nike has begun increasing prices on its products. Footwear priced at more than US$100 has seen hikes of up to US$10, while other goods have risen by US$2 to US$10. As Nike continues to improve production efficiencies, further pricing adjustments may occur.

Kate continues: “Margins will tighten. Supply chains will fragment. Some companies will thrive on agility and brand strength; others may face costly overhauls—or risk becoming obsolete.”

This stark reality will likely prompt procurement teams to work proactively in securing more resilient and adaptable supply networks.

The financial impact on Nike

Nike’s earnings report for the latest financial quarter showed a mixed performance, with revenues of US$11.1bn—the lowest in over three years—even as profits exceeded predictions, leading to a 10% stock increase.

Kate summarises: “Nike’s latest earnings told two stories at once. Revenue fell, yet profits still topped estimates, and the stock surged.

"It’s a paradox we’ll likely see repeated across global brands in the coming quarters—while consumers are still spending, especially on iconic names, the ground beneath multinational businesses is shifting fast.”

Policy change and supply chain restructuring remain crucial as sportwear companies look to maintain their market positions. Without favourable trade agreements, tariff implementations are set to persistently challenge prominent American brands, compelling them to recalibrate procurement practices.

The Center for Strategic and International Studies (CSIS) forecasts that tariffs could trigger a 7.1% increase in US prices while slightly reducing GDP by 0.08%.

Industry-wide challenges

Other giants in the sector, such as Adidas and Puma, have conveyed similar concerns. With Vietnam facing a tariff surge nearing 46%, stakeholders are pondering the relocation of production facilities to alternative regions.

In an effort to curtail tariff effects, 76 companies, including Nike and Adidas, formally appealed to President Trump in April, advocating for tariff exemptions for footwear.

As trade policies continue to evolve, brands remain focused on strategies to uphold cost-effective procurement, impacting both their operations and consumers.

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