Nike braces for $1B tariff with big supply chain moves
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Nike is staring down a $1 billion increase in tariff costs that threatens to squeeze margins and test its vast global supply chain. Facing an average US customs tax rate in the mid-teens for imported footwear, the company is executing a comprehensive four-part plan to fully offset this steep tariff burden by the end of its fiscal 2026.
Executive Vice President and Chief Financial Officer Matthew Friend laid out the company’s approach during a June earnings call, outlining how Nike plans to adjust sourcing, work closely with partners, pass some costs to consumers, and trim internal expenses to keep its growth on track.
Shifting manufacturing away from China
A major pillar of Nike’s mitigation plan is to reduce its reliance on Chinese manufacturing. At present, roughly 16 percent of Nike’s footwear imports come from China, a country heavily targeted by current US tariffs on finished goods. By the close of fiscal 2026, which began June 1, Nike intends to cut this share to the high single-digit range.
To accomplish this, Nike will diversify its production network further into countries with lower tariff exposure. This mirrors a wider trend in the apparel and footwear industry, where companies are reevaluating long-standing sourcing strategies to spread risk across multiple manufacturing hubs.
Shifting manufacturing capacity comes with its own challenges, from supplier vetting to ensuring quality standards and maintaining delivery timelines. Still, Nike’s supply chain scale allows it to negotiate capacity with large contract manufacturers in countries such as Vietnam, Indonesia, and other emerging sourcing locations in Southeast Asia.
Collaborating with suppliers and retail partners
While rebalancing sourcing footprints is key, Nike is also counting on close collaboration with its suppliers and retail partners to spread out the costs tied to tariffs. The company is actively negotiating new terms that address the structural cost increase caused by these duties.
Such negotiations often involve agreeing on shared responsibilities for raw material sourcing, production scheduling, and transportation expenses. By striking these deals, Nike aims to shield its customers from feeling the full weight of higher prices at once.
According to Friend, these supplier and partner arrangements will be phased in throughout fiscal 2026, aligning with seasonal sales peaks such as back-to-school and the holiday retail rush.
Implementing targeted price increases
Despite efforts to keep prices stable, Nike plans what it calls a “surgical price increase” in the US starting in fall 2025. This measured uptick is designed to protect brand positioning while offsetting part of the $1 billion hit.
Price increases across the retail landscape are a sensitive move, especially for a brand with mass-market reach. Nike’s approach is to time the hikes carefully and tie them to higher-value product lines to minimize pushback from consumers.
Analysts expect that higher price tags on select premium models will help Nike maintain healthy margins without denting its share of the US footwear market.
Evaluating corporate cost reductions
Alongside external measures, Nike is looking inward for cost-cutting opportunities. While Friend did not provide extensive details, he confirmed that the company will review internal expenses that can be trimmed or realigned to cushion the tariff blow.
Potential areas include operational efficiencies, logistics streamlining, and tighter control over overhead. Though small in isolation, incremental savings across its vast operations can add up to meaningful offsets when a $1 billion challenge looms.
Industry context and competitor strategies
Nike’s approach is not unique in the apparel and footwear industry. Several brands are rethinking supply chain structures to minimize the effects of rising tariffs and shifting trade dynamics.
Ralph Lauren, for instance, has expanded production into lower-tariff countries while working closely with suppliers to adjust order volumes and lead times. Canada Goose is refining its in-house production while integrating third-party capacity to maintain flexibility amid unpredictable tariff shifts and changing consumer demand.
Industry observers note that such moves are not simply reactive but form part of broader supply chain resilience strategies that have accelerated since the pandemic exposed vulnerabilities in global sourcing models.
Nike expects the brunt of the tariff impact to be felt in the first quarter of fiscal 2026, with an estimated 100-basis-point drag on gross margin for that period. For the full fiscal year, the impact is projected to moderate slightly to 75 basis points, helped by the rollout of mitigation measures.