The duties will not bring Nike's production to the US, but will rise prices and reduce sales.
Thursday a well-known American economist and financial commentator Peter Schiff published a informing regarding the possible economical effects of imposing fresh duties on imported goods, including Nike products. In his opinion, attempts to force abroad giants to return from production to the United States will neglect and, alternatively of bringing the expected increase in employment, will lead to an increase in prices and a simplification in the availability of products to American consumers.
– Nike will not build factories in the US to produce shoes. This would increase costs more than 40% of the duty," Schiff wrote on platform X. – As a result, less shoes will be sold in the US at importantly higher prices.
Schiff's comment refers to the latest government decision to impose additional duties on goods from China and another countries that are accused of unfair commercial practices and the usage of inexpensive labour. 1 of the unofficial objectives of this policy is to get companies like Nike to decision production back to the United States and rebuild the country's industrial base.
However, according to Schiff, specified a plan is economically unrealistic. The production of sports footwear is highly automated, but inactive requires dense work – in many cases manual. For this reason, Nike and another companies in the manufacture have been placing their plants in low-cost countries specified as Vietnam, Indonesia or before China. The cost of production in the US would be many times higher, which Schiff felt would make the full operation unprofitable.
When asked if Nike could absorb tariff costs while investing in home production, Schiff firmly rejected that possibility. Instead, it foresees that the company will gradually reduce its offer on the US marketplace and increase its sales on abroad markets, where consumers will have more purchasing power compared to comparatively cheaper footwear.
– In the end, they will sale more sports shoes to consumers in another countries, due to the fact that they buy what Americans can no longer afford," Schiff stressed.
What does this mean for American consumers?
For an average American customer, this means above all higher prices and little choice. If Schiff's predictions work, the American marketplace may start to feel the consequences of a protectionist policy: not so much the increase in home production as the decline in competitiveness and availability of products.
At the same time, this may mean that companies specified as Nike will start moving their marketing and distribution strategy to another continents – peculiarly Asia, South America and Europe, where there is inactive a advanced request for their products and little barriers to trade.
For many global companies, it will be much easier and cheaper to adapt to fresh realities by changing the marketplace than by costly relocation of production. Trump's politics will hit an American company, funny.
Konrad Smuniewski
