‘Tariff tantrum’ will squeeze Oregon’s sneaker business

The Wall Street firm Jefferies likened it to a “tariff tantrum.” And it’s one with big implications for Oregon. On Wednesday, President Donald Trump announced sweeping tariffs designed to spur domestic manufacturing and targeted at countries that make most of the sneakers and T-shirts in American closets.

The announcement body slammed the sportswear industry, one of Oregon’s economic engines, and one without an easy answer to Trump’s steep new surcharges on products imported from Asian countries. By Thursday afternoon, Nike’s shares were down 14%, erasing $14 billion in shareholder wealth, much of it in the retirement accounts of the company’s more than 10,000 local employees. Shares of Columbia Sportswear were down 13%, wiping out another $500 million.



The shares of Adidas, Under Armour and Lululemon, which maintain sizable Portland offices, also took big hits, falling 12%, 18% and 10%, respectively. The tariffs will have sweeping impacts on Oregon’s trade dependent economy, extending far beyond any one industry. If they had been in effect last year, the $28.

2 billion in imported goods shipped directly to Oregon would have cost an additional $7.5 billion, according to a Business Oregon calculation. Consumers may bear the brunt of those increased costs.

Other industries will likely face new retaliatory tariffs, fees and even boycotts in other countries, cutting into their sales abroad. “Tariffs are taxes on imported goods, and the tariffs announced yesterday represent a dramatic increase in such taxes,” said Portland State economics professor Rajiv Sharma, in an email. “Oregon’s economy is highly integrated into global markets through a range of industries including high-tech, agriculture, footwear/apparel and others.

” But the tariffs will hit particularly hard in Oregon’s robust sportswear industry. Prosper Portland, the city’s economic development arm, estimates there are 800 athletic and outdoor and companies in Oregon, many with manufacturing roots in China, Vietnam, Indonesia and Cambodia, countries subject to new surcharges of 34%, 46%, 32% and 49%, respectively. “Essentially, most of the Asian countries where most apparel and footwear are made will see incremental tariffs as high as 50% in some cases,” veteran footwear analyst Tom Nikic, of Needham & Co.

, wrote on Thursday. Business as usual isn’t an option. If Nike made no changes to its pricing or supply chain to account for the new tariffs, Nikic estimates its profits would drop around 95%.

In the short term, analysts expect Nike and other brands will eat some of the increased costs and pass some to consumers. While much could change if the emerging trade war escalates or cools off, Jefferies estimates the U.S.

profits for companies like Nike will drop 25% to 33%. New tariffs on Vietnam alone will increase the cost of sneakers by at least 10%, according to a UBS analysis cited by Reuters . As costs go up, sales will likely slow, which could mean layoffs and fewer new jobs.

“If there’s uncertainty, and there’s been plenty of it, companies are less likely to build that new factory,” said Blaine Dickason, analyst at the Portland investment firm Ferguson Wellman. “They’re less likely to add another shift. They’re less likely to make that investment.

” The businesses that support Portland’s sportswear companies also will be impacted. “We’ve got hundreds of small businesses that rely on the Nikes and Adidases of the world,” said Stephen Green, executive director of Better Portland, which advocates for local businesses. Green warned that small businesses have less cushion to absorb the increased costs.

“I worry about what it’s going to cost us in the short term for businesses not named Apple, Microsoft, Google and Nike,” he said. Adding to the problems for the industry giants, there isn’t an easy way around the tariffs. When Phil Knight co-founded what became Nike in the 1960s, only 4% of the shoes in the U.

S. were made outside the country, Business Insider reported in 2014 . Knight flipped the model, buying shoes made in low-wage countries in Asia and importing them, a strategy that became the industry norm.

The Footwear Distributors & Retailers of America estimates 99% of the shoes now sold in United States are imported , with China, Vietnam, Indonesia and Cambodia the biggest producers. One of the goals of Trump’s tariffs is to spark domestic manufacturing, but experts don’t expect that to happen. “It is not feasible given labor cost and regulations for any brand to have a factory building shoes at scale in the U.

S.,” industry analyst Matt Powell, a senior adviser for BCE Consulting, said in an email. “Even if it made economic sense, we are 3-5 years out in terms of building factories, acquiring machinery and training workers.

And the shoes would still be 50-100% more expensive than today.” The finicky work of assembling a sneaker is still dominated by factories staffed by hundreds of thousands of humans at sewing machines and cutting and gluing stations. Attempts to cut costs through automation have largely flopped, even with the backing of the industry’s biggest hitters.

In 2015, Nike partnered with Flextronics on an effort to automate footwear manufacturing, starting with a factory in Mexico. Three years later, they pulled the plug . In 2017, Adidas said it would open small, automated factories in Atlanta and Germany.

Two years later, they shuttered them . After Trump sparked a trade war with China during his first presidency, many sportswear companies moved manufacturing out of the country. Nike made 29% of its footwear in China before Trump first took office.

By last year, that had dropped to 18%. The percentage of Nike sneakers made in Vietnam, meanwhile, increased from 44% to 50%. But this latest round of tariffs, targeting virtually all U.

S. trade partners, will be much harder to duck. They include surcharges on Vietnam, Indonesia and Cambodia, countries that absorbed the business that moved out of China.

“(Companies) that worked hard over the years to reduce reliance on China by leaning into countries like Vietnam just learned there really isn’t a place to hide that isn’t the U.S.,” BMO Capital Markets analyst Simeon Siegel wrote to investors on Thursday.

Like other analysts, Siegel cautions investors not to draw final conclusions after this week’s announcement, given the see-saw nature of previous Trump tariff announcements. “(It’s) not yet clear if this is intended as the final offer or an ongoing negotiating tactic,” he wrote. “It feels both late and still-too-early to quantify company-level impacts with any degree of confidence.

” – Matthew Kish covers business, including the sportswear and banking industries. Reach him at 503-221-4386, [email protected] or @matthewkish.

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