What do Trump's Air Jordan Tariffs mean at Nike 1s

Nike Air Jordan 1 is somehow the emblematic American shoe. This is a popular line for sneakers of a large American brand, created four decades ago for the legend of home basketball at home, Michael Jordan.

But although Nike sells the bigger part of its products in the US, almost all its shoes are made in Asia – A region aimed at President Donald Trump's tariffs He blames the Americans' “detachment”.

Nike's shares fell 14% on the day after the rates were announced, concerning the concerns about the impact they could have on the company's supply chain.

So, what will all of this for the price of Nike's shoe?

It depends on how much of the increase in costs Nike decides to hand over to customers, if any, and how long they think that tariffs will actually be available.

The goods from Vietnam, Indonesia and China face some of the most serious taxes on imports in the United States – between 32% to 54%.

The hopes remain that Trump may be ready to negotiate these rates lower. On Friday, he said he had a “very productive” call with Vietnam leader, helping Nike shares to restore some position after his steep Thursday.

But most analysts believe that the prices of the company will have to rise.

Swiss Bank UBS estimates that there will be an increase of 10% to 12% of the prices of the goods that come from Vietnam – where Nike produces half of its shoes.

In the meantime, Indonesia and China represent almost the entire balance of shoe production.

“It is our opinion that given how extensive the list of tariffs is, the industry will realize that there are several ways to mitigate the medium -term impact, except to raise prices,” said UBS analyst Jay Sole in a note.

David Swarz, a senior Morningstar stock analyzer, agrees that a price increase is likely, but says any major price increase would reduce demand.

“This is a very competitive industry. I guess it would be difficult for Nike to raise prices by much more than 10-15%. I don't think it can compensate most of the tariff,” he says.

Many other Western brands such as H&M, Adidas, Gap and Lululemon will face the same difficulty.

Nike is now facing a narrow bottom row.

He had about $ 51 billion ($ 39.6 billion) in sales in his last fiscal year. The cost of making products, including delivery, third -party profits and warehouse fees, consumed only about 55% of the revenue, which gives it a healthy gross profit margin of over 40%.

But this profit is withdrawn after you have added the price of other business operations. One third of its revenue, for example, is consumed by sale and administrative expenses.

By the time you report interest and taxes, Nike's profit margin has shrunk to approximately 11%.

This is in all its products as they do not break down the costs separately for its different items.

Rahul Cee, which has created the Sole Review shoes website, says there are other ways that Nike can maintain low retail prices.

G -N CEE, who has trained as a shoe designer and worked for Nike and Vans in India, says one way can be a decrease in the level of technology in the shoe.

“So instead of using high-efficiency foams and construction, stick to the injection EVA (ethylene-vita acetate),” he says.

Another option would be instead of presenting a new design every one to two years to refresh the design cycle every three to four years.

Simeon Seagal, managing director of BMO Capital Markets, says most companies have viewed a message on Wednesday as “still far from the final conclusion.”

“I don't think many people believe that these numbers are still shaped,” he says.

Theoretically, Nike is such a big brand that he must be able to set prices without reaching their sales, he says, but adds: “Do they have the question at the moment and do they have it in offering their product?”

Even before the message, Nike was faced with sales, which limited his ability to command a full price for his shoes.

Matthew friend's main finance also cited tariffs as an example of development that affect consumer confidence.

And Nike relies largely for US consumers, with the market contributing to approximately $ 21.5 billion from its sales – almost everything it sells in its largest North America market.

Attitudes in the United States are a “significant concern” about Nike, as it directly affects the search for its shoes, says Shen Lou, a professor of fashion and clothing at the University of Delaware.

But in the end, he says companies may be forced to cross the price of users' taxes.

“Nike is very likely to raise prices if the Tariff War continues. There is no way for brands to bear a 30% to 50% increase in supply costs.”

He adds: “How US trading partners respond against reciprocal tariff policy will also have a great impact.”

China already hit with its own tariff with 34%S

Part of the justification behind Trump's tariff policy is because he wants more companies to produce their goods in the United States.

However, Prof. Lou does not see Nike or other companies significantly reshape their supply chain soon “because of the complexity associated with shoe production.”

This includes the time it takes to “look at a long list of factors when you decide where to deliver your products – quality, costs, market speed and various risks to comply with social and environment.”

Matt Powers of the Powers Advisory Group says the lack of American textile mills will make “difficult and expensive (for Nike) to rotate production back in the US.”

G -N Powers added: “This transition, if persecuted, will take years and will require significant investment.”

Nike did not answer BBC's requests for a comment on this article.

We also contacted 30 suppliers in Asia, but no one answered.

Additional reporting from Natalie Sherman in New York