Vietnam becomes tariff canary as Nike (NYSE: NKE) and Lululemon (NASDAQ: LULU) hold their breath
Vietnam spent years positioning itself as a key manufacturing hub for American companies looking to diversify supply chains into countries seen as having less geopolitical risk, but it’s now fighting for survival after being hit with one of the highest initial “reciprocal tariff” rates by the US earlier this month. Shares of big sportswear brands like Nike (NYSE: NKE), Lululemon Athletica (NASDAQ: LULU) and On Holding (NYSE: ONON) are hanging in the balance.
The Southeast Asian country accounts for 29.8% of all footwear imported in the US, and that means all those sneakers favored by American shoppers could get more expensive unless officials there can work out a deal with the administration of President Donald Trump. They’ve now got 90 days to do so after a pause was announced on Wednesday.
“Vietnam is ready to negotiate with the US side to reach a bilateral agreement,” the country’s government said in a statement after the tariffs were announced on April 2, choosing dialogue over retaliation and pledging to resolve non-tariff trade issues related to monetary policy and exchange rates. General Secretary To Lam was one of the first leaders to speak with Trump about the issue, and he said the country is willing to go all the way to 0% tariffs if the US returns the favor.
While other countries like Argentina are also seeking free trade agreements with the US, Vietnam’s progress—or lack of it—in the coming weeks will likely have more of an immediate impact on the many big American companies that have been developing manufacturing capacity in the country for years. Nike—already struggling to turn its business around—makes 95% of its shoes in Vietnam, China and Indonesia, and it can’t just change that overnight. Shares declined as much as 18% over the dramatic past week, only to climb 11% after the pause was announced.
Stocks swing with tariff winds
Lululemon—which makes almost 90% of its merchandise in Vietnam, Cambodia, Sri Lanka, Indonesia and Bangladesh—also saw a volatile week as shares declined 12% before making a partial recovery. On Holding, the maker of the popular On Running brand, was trading at a monthly high on Wednesday, suggesting that the market is hoping that a deal can be reached. Companies may still try to expand US capacity, but that takes years and comes with higher labor costs. Made in America running shoes from New Balance, for example, retail for nearly $200 compared to imported models that go for half that price.
“We are willing to cooperate with our allies and with our trading partners who did not retaliate,” Treasury Secretary Scott Bessent said Wednesday, adding that discussions for “bespoke” agreements had already started with 75 countries. “It wasn’t a hard message. Don’t retaliate, things will turn out well.”
“We have a meeting with Vietnam today,” Bessent continued. “And we have one of the largest trade deficits with them so I’m hoping it will move in a good direction.”
Vietnam’s race to start talks with American officials shows just how much its survival is at stake. The US, after all, accounts for nearly a third of its exports and is a market the country simply can’t afford to lose. Its eager-to-please tone, combined with its very large trade surplus, means Washington’s forthcoming engagement with the country will provide insight into the broader trade strategy. If the US really wants to make deals, Vietnam looks like one of the surest starting points. If talks falter, that could suggest trouble down the road for other countries, and all the companies holding their collective breath.
