Trump tariffs on Vietnam could raise prices for shoes, furniture, toys

Retailers and types have turned to Vietnam to fabricate items from sneakers to couches whereas transferring some or all manufacturing out of China.

For years, China’s southern neighbor turned a well-liked different for firms attempting to keep away from the crossfire of U.S. commerce tensions with Beijing. Now, as President Donald Trump expands his tariff targets, they will now not steer clear.

Trump mentioned he’ll put a 46% obligation on imports from Vietnam as a part of a brand new wave of world levies introduced Wednesday. That would quickly increase prices for main firms within the attire, furnishings and toy area, and a few of them could cross these will increase to customers within the type of worth hikes. The tariffs on Vietnam take impact on April 9.

China exported extra items to the U.S. than some other nation for greater than twenty years, however Mexico surpassed China as the highest supply in 2023. China is now the second largest provider to the U.S., accounting for $438.9 billion price of products in 2024, in keeping with authorities information from the Workplace of the U.S. Commerce Consultant.

For firms which have regarded to diversify the international locations they depend on for manufacturing and cut back dangers from commerce conflicts with China, Vietnam has additionally change into a well-liked place to go. Imports from Vietnam grew to $136.6 billion in 2024, up about 19% from 2023, in keeping with the Workplace of the U.S. Commerce Consultant.

However, imports from China rose solely 2.8% from 2023 to 2024, in keeping with authorities information. Imports from China dropped about 18% final yr when in comparison with 2022, when the U.S. introduced in $536.3 billion in items from the nation.

The duties will hit firms at a time when many customers have change into value-conscious and selective about spending on account of persistent inflation and considerations concerning the economic system. Whereas it’s unclear now which firms will increase costs as a result of tariffs, companies could also be reluctant to shoulder the upper prices as they forecast lackluster spending within the months forward.

Some family names will really feel the pinch from Vietnam tariffs. Nike producers about half of its footwear in China and Vietnam, with about 25% coming from Vietnam. Trump will put a 34% tariff on high of current 20% duties on imports from China, for an obvious fee of 54%, a White Home official informed CNBC.

The tariffs could be yet one more headwind for the sneaker and athletic attire large, which already delivered a disappointing forecast for the present quarter. That steering, which initiatives a double-digit share gross sales decline within the three-month interval, included the estimated affect from tariffs on imports from China and Mexico.

Expanded tariffs might stall or sluggish Nike’s efforts to revive its model and enhance gross sales below its new CEO Elliott Hill, an organization veteran who took the helm final fall.

Nike shares dropped greater than 6% in prolonged buying and selling Wednesday. Adidas and different main footwear gamers additionally rely closely on Vietnam.

The 2 firms didn’t instantly reply to CNBC’s request for remark.

Practically a 3rd of footwear imports within the U.S. got here from Vietnam in 2023, the latest full-year information accessible, in keeping with the Footwear Distributors and Retailers of America, an trade commerce group.

Steve Madden, for instance, mentioned on an earnings name in early November that it might slash its imports to the U.S. from China by as a lot as 45% over the subsequent yr. The footwear maker made that announcement simply days after Trump’s presidential victory, following his marketing campaign path guarantees to impose steep tariffs on international locations like China.

But one of many nations Steve Madden has accelerated its transfer to is Vietnam, together with Cambodia, Mexico and Brazil, CEO Edward Rosenfeld mentioned on the time on the earnings name.

Vietnam was the second largest nation for suppliers of Ugg and Hoka guardian firm Deckers Manufacturers as of this month. The corporate has 68 provide chain companions in Vietnam, which is surpassed solely by its 125 suppliers in China. Deckers shares dropped practically 9% in prolonged buying and selling. The corporate didn’t instantly reply to a request for remark.

VF Company, which is made up of footwear, attire and equipment manufacturers together with The North Face, Timberland, Vans and Jansport, has a heavy reliance on China and Vietnam, too. About 38% of its suppliers are in China and 17% are in Vietnam, including as much as 55% of publicity throughout the 2 international locations, in keeping with a producing disclosure from December.

The corporate’s shares dropped greater than 8% in prolonged buying and selling Wednesday. VF declined to remark, citing its quiet interval earlier than its upcoming earnings report.

The furnishings trade has additionally ramped up its reliance on Vietnam.

In 2023, 26.5% of U.S. furnishings imports got here from the nation, shut behind the 29% coming from China,  in keeping with information from the Dwelling Furnishings Affiliation, a commerce group that lobbies on behalf of house items retailers. The group cited funding banking agency Mann, Armistead & Epperson – one of many furnishings trade’s high sources for information.

Taken collectively, meaning about 56% of U.S. furnishings imports come from each areas mixed.

On an earnings name in February, Wayfair CEO Niraj Shah mentioned the shift to international locations exterior of China has been “a rising development” since Trump enacted tariffs throughout his first administration.

He mentioned locations like Cambodia, Indonesia, Thailand, the Philippines and Vietnam “have grown as locations the place people have factories and the place our items are coming from.”

Wayfair’s inventory plunged about 12% in prolonged buying and selling. In an announcement, Wayfair mentioned it’s “intently monitoring the evolving commerce panorama.” The corporate added it’s “well-positioned to proceed providing clients the absolute best mixture of worth, assortment, and expertise.”

Toymakers have additionally leaned on Vietnam to make extra merchandise that is imported and offered to children and adults throughout the U.S. Hasbro, SpinMaster, Mattel and Crayola are among the many firms that work with GFT Group, one of many largest toy producers within the Southeast Asia.

Along with long-established manufacturing amenities in China, GFT presently has 5 manufacturing amenities in northern Vietnam that make use of over 15,000 employees.

On a name in early March, Funko Chief Monetary Officer Yves LePendeven mentioned the corporate, which is thought for its big-eyed plastic collectibles referred to as Pops, was working arduous to regulate what it might within the yr forward. That features attempting to offset tariffs by “renegotiating manufacturing unit prices, accelerating our shift in manufacturing to different sourcing international locations, and implementing pricing changes,” he mentioned.

On the decision, he mentioned a few third of Funko’s international product purchases come from China. He did not title the international locations that Funko was transferring manufacturing to, however it’s a buyer of GFT Group.

These toymakers didn’t instantly reply to CNBC’s requests for remark.

Curtis McGill is the co-founder of Hey Buddy Hey Pal, a toy firm that focuses on Easter egg adorning kits. He mentioned he expects the 46% tariffs to lift toy prices within the U.S., however added firms will possible be negotiating with suppliers in Vietnam to attempt to mitigate these hikes.

“A number of producers and the precise toy firms have been already having conversations with manufacturing crops having to to assist in some regards, as a result of the toy firms are getting stress to try to preserve costs on this facet from the retailers,” McGill mentioned.

For firms, together with attire makers, the brand new tariff insurance policies have raised questions on whether or not — and the place — to doubtlessly transfer their manufacturing. Final month, an investor requested American Eagle Outfitters about its publicity to Vietnam on its most up-to-date earnings name.

Chief Monetary Officer Michael Mathias mentioned the denims and attire model’s manufacturing is comparable in Vietnam and China, with “high-teens to twenty%” of manufacturing in every of these international locations. He mentioned the corporate goals to trim that again to single-digits by the again half of the yr.

American Eagle shares dipped greater than 5% on Wednesday. The corporate didn’t instantly reply to CNBC’s request for remark.

But each Mathias and American Eagle CEO Jay Schottenstein mentioned on the corporate’s final earnings name that will probably be essential to remain versatile, whereas ready to see how tariffs would play out and which international locations could be focused.

Schottenstein referred to eight years in the past throughout the first Trump administration, when American Eagle additionally confronted challenges and had to determine a brand new plan.

Schottenstein mentioned there’s one other shift coming, however “no one is aware of what the story is but.”

“I would not be dashing,” he mentioned. “You go rush, the place am I dashing to? I do not know the place I am dashing to.”

Peter Baum is the chief monetary officer and chief operation officer of Baum Essex, a New York-based producer with licenses to make merchandise for manufacturers like Nautica, Betsey Johnson and Steve Madden. Throughout the first Trump administration in 2019, Baum moved factories from from China to the Philippines, Cambodia, Vietnam and India.

He informed CNBC on Wednesday that the reciprocal tariffs would do large injury to his firm.

“That is the way you begin a worldwide despair. After 80 years and 5 generations Trump simply put us out of enterprise,” Baum mentioned.

— CNBC’s Sarah Whitten, Jason Gewirtz and Eamon Javers contributed to this report.