Shares of Nike (NKE) looked less smart today as concerns grew over the implications of the U.S. and Vietnam trade deal.
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Shipping Doubts
The deal struck earlier this week sets tariffs on Vietnamese imports at 20%, which is less than half of the 46% rate proposed back in April. As a result, this lower rate initially eased the fears that had been growing for months due to potential cost spikes in supply chains.
Nike has already shifted production from China to countries like Vietnam and Cambodia in anticipation of higher tariffs as well as other geopolitical concerns. Vietnam produced roughly half of Nike’s footwear in Fiscal 2024.
However, some industry experts, after fully digesting the deal terms, have raised fears around the 40% levy on so-called ‘transshipping’ from third countries through Vietnam.
Garment and shoe factories in Vietnam rely heavily on yarns, polyester fabrics, and trims like buttons and zippers imported from China. It is not clear whether such products assembled in Vietnam from Chinese inputs would be vulnerable to the transshipment tariff.
Greater Uncertainty
Sheng Lu, professor of fashion and apparel studies at the University of Delaware, said: “Strictly speaking, transshipment is illegal, whereas using foreign components in compliance with rules of origin requirements is common practice. Confusing these two distinct practices will only create greater uncertainty and risk further supply chain disruption.”
Lila Landis, a customs compliance consultant based in Fort Worth, Texas, told Reuters: “With this new change and with the potential for this transshipment tariff, I think it’s going to cause a lot of importers to really question, is Vietnam really a good alternative option?”
Is NKE a Good Stock to Buy Now?
On TipRanks, NKE has a Moderate Buy consensus based on 17 Buy and 13 Hold ratings. Its highest price target is $120. NKE stock’s consensus price target is $76.70 implying a 0.41% upside.
