Economist Peter Schiff issued a stark warning on Thursday, claiming that Nike Inc. (NYSE: NKE) will not be shifting its production to the United States despite the newly imposed tariffs. Schiff predicts that the footwear giant will face higher prices and lower domestic sales, as shifting production to the U.S. would increase operational costs far beyond the impact of the 40% tariffs.
Schiff’s Analysis: Higher Costs, Fewer Sales
“Nike won’t build factories in the U.S. to make sneakers,” Schiff wrote on X (formerly Twitter). “That would add more cost than the 40% tariffs. The result will be fewer sneakers sold in the U.S. at much higher prices.”
When asked whether Nike might absorb some of the tariff costs by setting up factories in the U.S., Schiff dismissed the idea. Instead, he argued that Nike would pivot to international markets: “They will eventually sell more sneakers to consumers in other countries instead, as they buy what Americans can no longer afford.”
Nike Faces Impact from Trump’s Tariff Announcements
Schiff’s comments come amid a steep drop in Nike’s stock, which plummeted 14.44% on Thursday after President Donald Trump announced new reciprocal tariffs that directly impact Nike’s supply chain. Vietnam, where Nike produces nearly 50% of its footwear, faces a 46% increase in tariffs, exacerbating the company’s challenges.
Goldman Sachs has flagged Nike among the retailers most exposed to the new tariffs. These include a 34% tariff on goods from China and a 32% tariff on products from Indonesia—both key manufacturing locations for Nike.
Tariffs Ripple Across the Market
The broader market saw significant turbulence following the tariff announcement, with Wall Street losing about $2 trillion in market value. Consumer discretionary stocks, including Nike’s competitors, were particularly hard-hit. Lululemon Athletica Inc. (NASDAQ: LULU) fell 9.28%, while Adidas, with significant exposure to Vietnamese manufacturing, also suffered steep declines.
Analysts caution that companies will need to adjust their pricing strategies, renegotiate contracts with vendors, and find ways to optimize costs in order to maintain their margins. Dan Ives, an analyst at Wedbush Securities, called the tariffs “worse than the worst-case scenario,” expressing particular concern about how tariffs on China and Taiwan could disrupt supply chains and reduce demand.
Nike’s Struggles Amid the Tariff Impact
Nike’s challenges are compounded by its struggling growth. The company is falling behind competitors like Lululemon, Columbia Sportswear (NASDAQ: COLM), Under Armour (NYSE: UAA), Skechers (NYSE: SKX), VF Corp (NYSE: VFC), and On Holding AG (NYSE: ONON), all of which are showing more positive momentum. According to Benzinga’s Edge Stock Ranking, Nike is facing a bearish trend across both short- and long-term periods, with analysts projecting continued difficulties in the face of increased costs and tariff-related challenges.
Conclusion
Peter Schiff’s warning underscores the significant impact that tariffs are having on Nike’s global operations. With shifting production costs and ongoing challenges in key markets like China and Vietnam, Nike’s ability to navigate the changing trade landscape remains in question. As the broader market reacts to these new tariff measures, the company will need to adjust its pricing and production strategies to remain competitive in an increasingly uncertain economic environment.
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