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In May 2015, President Barack Obama gave a big speech about dropping trade barriers with other countries. He delivered it on a sunny day at Nike’s World HQ in Oregon.
“Sometimes, when we talk about trade, we think of Nike,” Obama said. He made his pitch for trade contracts with Asian countries, which he described as “the most standard and most progressive trade contract in history.”
President Donald Trump canceled the deal, known as the Trans-Pacific Partnership, within two years.
Now, as Trump sets up more trade barriers in his second administration, Nike will once again become the central stage for conversations about globalization. This is a familiar place for a company that has roots in importing Japanese truck shoes and making sneakers temporarily in the US.
Last month, Trump announced cleaning fees that would prevent imports from the country where most Nike sneakers and apparel are made. A closer look at Nike’s large supply chain provides a case study of the potential ripple effects of an escalating world trade war, showing how vulnerable factory workers can be narrowed down.
Some taxation on imports has long been a feature of the international garment trade, and Nike has decades of experience navigating these tariffs. The company has not spoken about how it will handle the current round under Trump, but it is one of 76 companies that signed a letter to the president last week, warning about the disastrous consequences of footwear companies unless there is a tariff relief.
In response to questions about how tariffs affect factory workers, Nike said in a statement it is “committed to ethical and responsible manufacturing.”
“We are building long-term relationships with contract manufacturing suppliers because we know that having trust and mutual respect supports our ability to create products more responsibly, accelerate innovation and provide services that are more suitable for our customers,” the statement said.
Where does Nike make sneakers and clothes?
Nike does not own or operate overseas factories that manufacture products. Instead, it works with 532 contract manufacturers employing around 1.2 million workers, according to the online Nike Map.
No country is more important to Nike’s manufacturing than Vietnam, where the brand works in 131 factories, where it employs nearly 460,000 workers. According to the company’s annual report, half of Nike’s sneakers were made in Vietnam last year.
Nike’s second largest production base is Indonesia, with 45 contracted factories employing over 280,000 workers.
The company has been moving production from China for the past decade. In 2012, it will operate in 120 Chinese contract factories employing over 100,000 workers from over 350,000 workers. Some of the footwear and apparel made by Nike in China are sold to Chinese consumers and are not subject to customs duties.
Are customs duties affecting Nike?
yes. On April 2, Trump announced “mutual” tariffs, including 46% in Vietnam, 32% in Indonesia and 34% in China. The next trading day, Nike’s shares fell 14%, wiping out its shareholder value of $14 billion.
A week later, the president suspends most of the 90-day tariffs, but remains a 145% tariff on imports from China and a 10% extra charge on most imports from other countries.
Needham & Co. veteran industry analyst Tom Nikic calculated that if the company does not make any changes to current pricing or production, tariffs will almost wipe out Nike’s profits.
“My math will reduce their revenues by about 95%,” he said in an email.
Will Nike squeeze factories for better deals?
“Almost certainly,” said Jason Judd, executive director of Cornell’s Institute of Global Labor. “The default for a brand or retailer facing tariffs or other shocks is to press a supplier for a discount.”
“The Covid shock is a great example,” Judd added. “We know from talking to our suppliers that Covid Shock means cancelling the order and renegotiating more than the price.”
The Workers’ Rights Consortium, a labor monitoring group, is estimated to have cancelled $40 billion orders during the pandemic.
When Trump announced the tariffs during its initial control, Nike’s chief executive said he would find savings in the supply chain.
Nike’s Chief Financial Officer Andy Campion said in 2019 that “we can operate many levers, from sourcing to other levers.”
How do tariffs affect Nike factory workers?
Factory workers will probably feel the impact directly.
Dara O’Rourke, an associate professor at the University of California, Berkeley, said he is studying wages at the Nike factory, saying tariffs could become “a giant hammer.”
“You could see this kind of pressure, as managers tell workers. “You’ll either keep the line or lose your job.”
According to Thulsi Narayanasamy, director of international advocacy at the Workers’ Rights Consortium, workers may be asked to make more sneakers and t-shirts per shift, and to work longer hours.
This kind of pressure can be seen as managers tell workers.
– Dara O’Rourke, Associate Professor at the University of California, Berkeley
“When suppliers are narrowed down and workers have unreasonable production targets, they should not drink water and take food breaks,” she said in an email. She added that in these situations, the tissue has consistently heard about “women suffering from urinary tract infections, repeated strain injuries, kidney stones, and having problems returning due to rapid and repetitive movements over 12 hours a day.”
Narayanasamy said there are options for brands like Nike. “Pressing costs that can be reasonably absorbed to suppliers can quickly hurt millions of factory workers.”
In its statement, Nike said it has set clear labor expectations for supplier factories in its code of conduct and code leadership standards.
Foreign clothing workers could face or work with Farrow without pay, Cornell’s Judd said. It happened throughout the industry during the pandemic.
In 2021, the Workers’ Rights Consortium identified 31 clothing factories, three of which worked at Nike. The consortium said it did not pay $39.8 million in retirement benefits to 37,637 workers who lost their jobs during the pandemic.
Nike previously objected to the wages of workers in three factories designated in the Labor Group’s report. Nike said in a statement that the factory is also responsible for retirement benefits.
“Manufacturers are financially obligated to pay workers’ retirements, social security and other segregation benefits to affected employees in accordance with local laws and the Nike Code of Conduct,” the company said. “And if a closure or sale occurs, Nike will work closely with suppliers to implement responsible exits.”
Will customs duties force Nike to force manufacturing back to the US?
“It’s not much thought to think about this as bringing back work to the US, so it’s the most wonderful thing I can say,” said O’Rourke of Berkeley.
The production of footwear and apparel remains labor-intensive. Sneakers require adhesive and stitching. T-shirts require sewing. Most efforts to automate shoe production are flops.
That’s part of the reason why Nike makes most of its products in countries with low wages. Propublica reported this month at its former Nike factory in Cambodia. There, most employees earned minimum wages.
The centre Ngin Megradei worked for three years at a Cambodian clothing factory that produces baby clothes for Nike and other brands. She told Propoblica she couldn’t afford the clothes she made. Credit: Sarahbeth Maney/Propublica
Nike also uses a huge factory filled with equipment that is difficult to move to new locations. They are often located near materials companies that make the rubber, nylon and polyester needed to make sneakers.
“A complete production system cannot be easily moved,” says O’Rourke.
Instead of bringing work back to the US, industry watchers hope that apparel companies will continue to manufacture products in low-wage countries, but manufacturing will move to low-duty targets.
It further harms workers in Vietnam, Indonesia, China and other countries, with relatively high tariff rates and many Nike manufacturing jobs. In Indonesia, for example, one union expects that as many as 50,000 workers could lose their jobs if full Trump tariffs were enacted.
As the number of people looking for jobs increases, wages in those countries decrease.
“The gate line to find work will be longer,” Judd said. “That means employers of all sorts can start paying less for new workers as unemployment rates have jumped.”
What does tariff mean for Nike prices?
Estimates vary and vary depending on how much Nike passes on the cost to consumers.
Decades after Nike promised to reform the sweatshop, the workers at the factory were still fainting
If a 46% tariff in Vietnam becomes effective, the price of $155 sneakers made in Vietnam will rise to $220, according to American footwear distributors and retailers, a trade group that counts Nike as members.
This example, unique to Nike, assumes that the importer will pass almost all the tariff costs to its customers. Adidas CEO Bjørn Gulden last week said “higher tariffs will ultimately cause price increases,” but the athletic footwear brand has not provided details.
However, Nike is in a recession and discounts many of its sneakers to promote sales.
Nike could absorb more tariff costs to avoid price hikes abruptly.
“It’s going to be difficult for Nike to raise prices,” investment bank UBS wrote in a research note recently.
