What does Trump’s tariff mean for Nike’s Air Jordan 1s

Nike Air Jordan 1 is, in some respects, the iconic American shoe. It is a popular shoe line by a large American brand, created four decades ago for local basketball legend Michael Jordan.

But although Nike sells most of her products in the United States, almost all of her shoes are made in Asia – An area targeted by President Donald Trump’s tariff Salvo against the foreign countries accused of “tearing” the Americans.

NIKE shares decreased by 14 % the day following the announcement of definitions, on fears of the effect it could make on the company’s supply chain.

So what does all this mean for the price of Nike shoes?

This depends on the amount of the cost that Nike decides to transfer to customers, if any, and the time they believe that the definitions will actually work.

Goods from Vietnam, Indonesia and China face some American import taxes – between 32 % to 54 %.

Hopes remain that Trump is ready to negotiate these prices less. On Friday, he said he had received a “very fruitful” call with the Vietnam leader, which helped Nike to restore some of the land after their sharp waterfalls on Thursday.

But most analysts believe that the company’s prices should rise.

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

Meanwhile, Indonesia and China are almost a balance of shoe production.

“Our point of view is that, given the spread of the list of definitions, the industry will realize that there are few ways to alleviate the influence in the medium term other than raising prices,” said Jay Sol, an UBS analyst in a note.

David Surawz, chief stock analyst in Mooringstar, agrees that the high prices are possible but say that any significant increase in prices will reduce the demand.

“This is a very competitive industry,” he says. “

You will face many other western brands such as H&M, Adidas, GAP and LululeMon the same dilemma.

Nike is already facing a narrow bottom extract.

She had about 51 billion dollars (39.6 billion pounds) in sales in the last fiscal year. The cost of making products, including shipping, third -party profits and warehouse fees, consumes only about 55 % of revenues, giving them a healthy profit margin of more than 40 %.

But this profit gets to get rid of it by adding the cost of other commercial operations. For example, a third of its revenues are consumed through sale and administrative expenditures.

By the time you deal with interest and taxes, the Nike profit margin shrinks to about 11 %.

This is through all its products, because it does not break the costs separately for its different elements.

“There are other ways that NIKE will keep retailers low,” says Rahul CEE, who created Running Shoe Review Sole Review, says there are other ways that NIKE will keep retail prices.

One way can be the translation of the technology level in the shoe.

He says: “Instead of using high -performance middle loud foams, sticking to the injection of Eva (ethylene vinyl acetate).”

Another option is instead of highlighting a new design, each to two years, to update the design cycle every three to four years.

Simon Siegel, Managing Director of BMO Capital Markets, says that most companies were looking at Wednesday’s advertisement that they are “still out of the final conclusion.”

“I don’t think many people think these numbers are engraved in the stone so far,” he says.

In theory, Nike is so much that it should be able to offer prices without reaching their sales, but he adds: “Do they now have the question and do they have by offering their products another?”

Even before the announcement, Nike was facing a stagnation in sales that confused her ability to get a full price for her shoes.

Matthew Friend’s finance head was also martyred as definitions, as an example of developments that affected consumer confidence.

Nike relies heavily on American consumers, as the market has contributed in approximately $ 21.5 billion of its sales – almost everything he sells in its largest market in North America.

Shing Lu, a professor of fashion and clothing studies at Dilayer University, says feelings in the United States are a “great concern” of Nike because it directly affects the demand for her shoes.

But in the end he says that companies may have to pass the cost of fees to consumers.

“Nike is very likely to raise prices if the tariff war continues. There is no way to trademarks to accommodate resource costs by 30 % to 50 %.”

“How commercial partners in the United States interact against the policy of mutual tariffs will have a major impact,” he added.

China has already returned with a tariff of 34 % of itself.

Part of the logical basis behind the TROMP tariff policy is that it wants more companies to manufacture its goods in the United States.

However, Professor Le Nike, or other companies, does not see the supply chain significantly any time “due to the complexity involved in the manufacture of shoes.”

That time includes “considering a long list of factors when locating the source of its products – quality, costs, speed to the market and various risk of social and environmental compliance.”

Matt Power’s consulting group says that the lack of American textile factories will make “difficult and expensive (nick) to produce production to the United States.”

“This transition, if it is followed, will take years and require a great investment,” added Mr. Bowers.

Nike did not respond to the BBC requests to comment on this article.

We also contacted 30 resources in Asia, but none of them responded.

Additional reports by Natalie Sherman in New York