Goodbye to the dream of Nike factories in the US: economic experts say benefits do not outweigh the costs of shifting production
Major US companies are already making clear that they will not shift production to the US, even as steep tariffs on their imports go into effect.
President Donald Trump has argued that the tariffs he is imposing on some of the United States’ closest trading partners will motivate companies to invest domestically. The White House has made clear that one of the ways these taxes can be avoided is by shifting their production to the US, but already, some businesses are finding that such a dramatic change would lead to much higher costs, far and above what they will be paying in tariffs.
Tariffs might not be enough to increase domestic manufacturing in some sectors
Economists and business leaders have expressed concerns over the uncertainty surrounding the duration of the tariffs, which has prevented them from announcing significant adjustments to their production processes and locations. After decades of outsourcing to economies where wages can be paid at far lower rates compared to US workers, companies have to compare the losses they would incur by moving their production back, compared to what they would save on tariffs.
The day after the tariffs were announced, economist Peter Schiff, a critic of the president’s strategy, cited Nike as an example of a country that will likely not move their production to the US, at least in the short term. Schiff says it would cost Nike 40 percent more than the tariffs to “build factories” in the US. The economist also noted that the US is not the only consumer market Nike is focused on and that investing in production in the US could lower their competitiveness “in other countries that don’t impose tariffs.”
Nike won't build factories in the U.S. to make sneakers. That would add more cost than the 40% tariffs. Plus, they need to stay competitive selling to customers in other countries that don't impose tariffs. The result will be fewer sneakers sold in the U.S. at much higher prices.
— Peter Schiff (@PeterSchiff) April 3, 2025
For companies like Nike, the savings don’t outweigh the profits they are able to generate by keeping their manufacturing overseas.
Nike has made substantial investments in Vietnam in recent years, a nation that is significantly affected by Trump’s tariffs. As of August 2024, Vietnam was Nike’s largest manufacturer in terms of the number of products produced in the country. Due to the formula applied by the White House to determine tariff levels for imports from various countries, Vietnam will face a 46 percent tax on its goods. This high tariff rate is explained by the fact that Vietnam exports considerably more to the US than it imports.
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