Nike and other major sportswear brands are facing a potential setback as US President Donald Trump is expected to announce new tariffs on imports from Vietnam, a move that could further challenge Nike’s efforts to revive its brand and reverse its declining sales.

The tariff announcement is anticipated to come on Wednesday, as part of a broader push by the US to encourage domestic production and boost exports of US-made goods. Vietnam, with a $123.5 billion trade surplus with the United States, is likely to be a key target of these new tariffs.

As one of the largest sportswear manufacturers in the world, Nike heavily relies on Vietnam for its production. The company produced 50% of its footwear and 28% of its apparel in Vietnam during its 2024 financial year, according to its annual report. Increased tariffs would force Nike to either absorb the additional costs or raise prices on products that are already facing heavy discounts to clear out inventory.

Rival Adidas, which also sources a significant portion of its products from Vietnam, could be impacted, though to a lesser extent. Adidas sourced 39% of its footwear and 18% of its apparel from Vietnam in 2024.

The average US tariff rate on footwear from Vietnam stands at 13.6%, while apparel faces a higher rate of 18.8%, according to trade data analyzed by Sheng Lu, a professor of fashion and apparel studies at the University of Delaware.

“If tariffs are extended to Vietnam, Nike could face significant challenges,” said David Swartz, a Morningstar analyst.

Nike and Adidas are far from the only brands affected. Vietnam has become a crucial manufacturing hub for high-tech running shoes, sportswear, and outdoor apparel as companies look to reduce reliance on China. Other sportswear brands like Lululemon, Columbia Sportswear, and Amer Sports, which owns Salomon and Arc’Teryx, also count Vietnam as their top production country.

For Nike, the potential tariff increase comes at a critical time, as the brand struggles to regain market share against fresher and more innovative competitors like On and Hoka. In its latest quarterly earnings call, Nike’s CFO Matt Friend warned that the company’s revenue is expected to continue its downward trend in the upcoming quarter, partly due to existing tariffs.

Mari Shor, senior equities analyst at Columbia Threadneedle Investments, which holds Nike shares, noted that while current tariffs were factored into the company’s outlook, the new tariffs could worsen the situation. “What if it gets worse?” Shor said.

Smaller, newer sportswear brands, such as the fast-growing On, are even more vulnerable to tariff increases. On sources 90% of its shoes and 60% of its apparel and accessories from Vietnam. With shoes already priced between $130 and $330 a pair, On’s Chief Operating Officer Samuel Wenger explained that tariffs are one of the many factors the company considers when setting prices. “Our premium brand gives us the ability to adapt our pricing thoughtfully,” Wenger told Reuters.

According to Beth Goldstein, a footwear industry analyst at market research firm Circana, average US prices for sneakers have already risen by 25% since 2019, driven in part by rising production costs.

While former Commerce Secretary Wilbur Ross suggests that President Trump has strong relations with Vietnam and may avoid imposing overly harsh tariffs, he acknowledges that any increase in apparel costs would be noticed by US consumers, who frequently purchase clothing.

With tariffs on the horizon, Nike and other sportswear brands face a challenging road ahead, especially as they work to maintain competitive pricing while navigating the shifting landscape of global trade.