cnn.com - Nike earnings tariffs

Nike is forecasting it will have to pay $1 billion in additional costs because of President Donald Trump’s tariffs, the activewear giant announced Thursday.

The tariffs “represent a new and meaningful cost headwind,” said Matthew Friend, Nike’s chief financial officer on a call with analysts, adding that the company will “fully mitigate” the cost by reducing its supply chain reliance on China – and by passing the costs onto customers with price increases.

Although China “remains important to our global source base,” he said, the company is reducing the imports of footwear to the United States from about 16% to the “high-single-digit range by the end of fiscal 2026,” with the supply coming from other countries.
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If we take the above at face value, Nike is gaming the system to the maximum of their ability by shifting the US sourcing away from China (and presumably sending their Chinese-built shoes to other countries). Even so, the incremental taxes which will be paid by US consumers will be a billion bucks. As we can assume that US-built sneakers are a non-factor, and we can assume that their competitors are in the same bind, there is no incentive for Nike to eat the incremental costs and the net result is that their customer baased will foot the higher costs required to cover the tariff taxes.

So, there has been little impact from the tariffs at the retail level so far as most companies stuffed their warehouses ahead of time, but by the end of the summer, one would expect most manufactured products to rise in price across the board. I think it is this delayed time frame which is causing the Fed to be reluctant to reduce interest rates.

Jeff