Photo: Employees at the Maxport factory, which produces activewear for a variety of textile brands, located in Hanoi.

Nhac Nguyen | AFP | Getty Images

Retailers and brands are increasingly turning to Vietnam for manufacturing, ranging from sneakers to furniture, as they shift some or all production away from China.

For years, Vietnam emerged as a favored alternative for companies looking to evade the fallout from U.S. trade tensions with China. However, with President Donald Trump broadening tariffs, this has become more complex.

Trump announced a 46% duty on imports from Vietnam as part of a new global tariff initiative. This impending increase could significantly affect major corporations in the apparel, furniture, and toy industries, potentially leading them to pass these costs onto consumers through price hikes. The tariffs are set to take effect on April 9.

For over twenty years, China has led in exporting goods to the U.S., but as of 2023, Mexico has surpassed China as the top exporter. Now, China stands as the second largest supplier to the U.S., with $438.9 billion in goods exchanged in 2024, according to the Office of the U.S. Trade Representative.

Businesses seeking to diversify their production locations and minimize risks tied to trade disputes with China have increasingly turned to Vietnam, where imports rose to $136.6 billion in 2024—a 19% increase over 2023, according to government statistics.

In contrast, imports from China experienced a modest growth of only 2.8% between 2023 and 2024. The previous year, imports from China had already dipped by approximately 18%, compared to a peak of $536.3 billion in 2022.

The new tariffs threaten to impact companies at a time when consumers are becoming increasingly cautious about spending due to ongoing inflation and economic uncertainties. Although it's currently unclear which companies will raise their prices due to the tariffs, many may hesitate to absorb these additional costs amid forecasts of sluggish consumer spending ahead.

Companies Likely to be Affected by Vietnam Tariffs

Photo: A worker at the Maxport factory, producing activewear for diverse textile brands, based in Hanoi.

Nhac Nguyen | AFP | Getty Images

Several well-known companies are expected to be significantly impacted by the tariffs imposed on Vietnam. Nike produces around half of its footwear in China and Vietnam, with approximately 25% sourced from Vietnam. With Trump set to impose a 34% tariff in addition to existing 20% tariffs on imports from China, the effective rate could reach up to 54%—as conveyed by a White House official to CNBC.

This tariff increase presents another challenge for Nike, which has already issued a disappointing sales forecast for the current quarter, predicting a double-digit sales decline. This estimation already factored in the toll of tariffs on imports from China and Mexico.

The intensified tariffs may hinder Nike’s efforts to revitalize its brand and boost sales under the leadership of new CEO Elliott Hill, who took charge last fall.

Nike’s shares fell by more than 6% during after-hours trading on Wednesday. Adidas and other significant footwear brands heavily depend on Vietnam as well.

Both companies did not reply immediately to CNBC's requests for comment.

According to the Footwear Distributors and Retailers of America, nearly one-third of footwear imports to the U.S. in 2023 originated from Vietnam, the latest full-year statistics available.

Brands such as Steve Madden noted during a November earnings call that it plans to decrease its imports from China by up to 45% in the upcoming year, shortly after Trump’s election victory, which was followed by his campaign promises to impose heavy tariffs on countries like China.

Steve Madden is among companies swiftly shifting production to Vietnam, as well as Cambodia, Mexico, and Brazil, as stated by CEO Edward Rosenfeld during that earnings call.

As of this month, Vietnam ranked as the second largest supplier for the parent company of Ugg and Hoka, Deckers Brands, with 68 partners in Vietnam, only trailing its 125 partners in China. Following the tariff announcement, Deckers shares dropped nearly 9% in after-hours trading. The company did not respond immediately to requests for comment.

The label 'Made in Vietnam' on a Puma Training shirt.

Bloomberg | Getty Images

VF Corporation, which encompasses brands like The North Face, Timberland, Vans, and Jansport, also significantly depends on both China and Vietnam for its supply chain. Approximately 38% of its suppliers are based in China, while 17% are located in Vietnam, together constituting over half of its sourcing from the two nations, according to a December manufacturing disclosure.

Shares of VF Corporation dropped more than 8% in after-hours trading on Wednesday. The company declined to provide comments, citing its quiet period leading up to its forthcoming earnings report.

The furniture industry is similarly increasing its dependence on Vietnam.

In 2023, 26.5% of U.S. imports of furniture came from Vietnam, closely trailing the 29% share from China, according to data from the Home Furnishings Association. This information was supported by investment banking firm Mann, Armistead & Epperson—one of the leading data sources for the industry.

Combined, these figures indicate that around 56% of U.S. furniture imports originate from these two regions.

During a February earnings call, Wayfair CEO Niraj Shah noted that the trend of shifting manufacturing out of China has been "increasing" since Trump enacted tariffs during his initial term.

He cited countries like Cambodia, Indonesia, Thailand, the Philippines, and Vietnam as emerging locations for manufacturing and goods sourcing.

Wayfair’s stock plummeted about 12% during after-hours trading. The furniture retailer had no immediate comments for CNBC.

Toy manufacturers have also shifted more production to Vietnam for their goods sold across the U.S. Companies like Hasbro, SpinMaster, Mattel, and Crayola work with GFT Group, one of the largest toy manufacturers in Southeast Asia.

Besides established manufacturing facilities in China, GFT currently operates five factories in northern Vietnam, employing over 15,000 workers.

During a call in March, Funko CFO Yves LePendeven stated that the company, recognized for its popular Pops collectibles, is actively working to mitigate the impact of tariffs. This includes renegotiating factory costs, accelerating production shifts to alternative sourcing countries, and making pricing adjustments.

LePendeven mentioned that approximately one-third of Funko's global product purchases come from China, but did not specify other countries to which production is being moved, although Funko is a customer of GFT Group.

The toy manufacturers have not yet responded to CNBC's requests for comments.

Future Manufacturing Directions

With the introduction of new tariff policies, companies, especially in the apparel sector, face significant uncertainty about whether—and where—to relocate their manufacturing. Recently, an investor inquired from American Eagle Outfitters regarding its exposure to Vietnam during its recent earnings call.

CFO Michael Mathias mentioned that the company's production in Vietnam and China is similar, with approximately 18% to 20% sourced from each country. He indicated the intention to reduce that percentage to single digits by the latter half of the year.

American Eagle shares fell over 5% on Wednesday. The company did not immediately respond to CNBC's requests for comment.

Both Mathias and American Eagle CEO Jay Schottenstein emphasized the importance of flexibility while waiting to assess how tariffs will unfold and which countries will be affected.

Schottenstein recalled challenges faced eight years ago during Trump’s first presidency, where they had to devise new strategies.

He suggested that another shift is on the horizon, but stated, "nobody knows what the outcome will be yet."

"I wouldn't rush," he advised. "If you rush, where are you rushing to? I don't know where to go in a hurry."

Peter Baum, CFO and COO of Baum Essex, a New York-based manufacturer licensed to produce for brands like Nautica and Steve Madden, shared that during Trump’s first administration in 2019, he relocated factories from China to the Philippines, Cambodia, Vietnam, and India.

He expressed to CNBC that the new reciprocal tariffs could severely harm his business, stating, "This is how you start a global depression. After 80 years and five generations, Trump has put us out of business."

— Contributions from CNBC's Sarah Whitten, Jason Gewirtz, and Eamon Javers.

Retailers are increasingly turning to Vietnam to manufacture a wide range of goods, from activewear and furniture to toys, as they seek to diversify their supply chains and mitigate risks associated with U.S.-China trade tensions. However, this trend faces a significant setback following President Trump's announcement of a 46% tariff on imports from Vietnam, set to take effect on April 9. This new wave of tariffs not only disrupts the balance achieved by companies switching production from China to Vietnam but also heightens costs for major corporations, likely leading to increased prices for consumers.

Historically, China has maintained its position as the United States' largest source of goods for over two decades, but in 2023, Mexico surpassed it, with China now accounting for about $438.9 billion worth of exports to the U.S. Meanwhile, imports from Vietnam reached $136.6 billion in 2024—a 19% increase from the previous year—while imports from China saw a mere 2.8% increase during the same period.

As businesses align their strategies to avoid the complications stemming from U.S.-China relations, Vietnam emerged as a favorable alternative. Major players in footwear and apparel, like Nike and Adidas, have increasingly relied on Vietnamese production. Nike, which manufactures a substantial portion of its footwear in Vietnam, stands to be significantly affected by the new tariffs, which compound existing duties levied on imports from China—totaling a staggering effective rate of 54%. Companies like Adidas and VF Corporation, which owns brands such as The North Face and Vans, echo this vulnerability. Many are feeling the financial impact, with stock prices declining sharply upon news of the impending tariffs.

Consumer goods industries—including furniture and toys—are also deeply tied to Vietnam's manufacturing capabilities. In 2023, nearly 27% of U.S. furniture imports originated from Vietnam, closely trailing China's share of 29%. Companies like Wayfair have noted a growing trend towards sourcing from countries outside of China, and the impending tariffs could further complicate efforts to pivot toward more diversified production.

Toy manufacturers, including Hasbro and Mattel, have also ramped up their operations in Vietnam, taking advantage of the country's growing manufacturing base. Despite this reliance on Vietnam, companies are poised to counteract the new tariff pressures through various strategies, such as renegotiating factory costs and adjusting pricing to absorb increased expenses. Nonetheless, many firms express concern over the unpredictability of these tariffs and the direction of their supply chains.

Amidst this uncertain landscape, companies are left pondering the viability of their manufacturing strategies. Whether by moving production to other countries or cutting back on their reliance on Vietnam, industry leaders like American Eagle Outfitters emphasize the importance of remaining flexible in response to fluctuating tariff policies. Historical shifts in manufacturing during previous tariff episodes highlight the complexity and necessity of establishing resilient practices.

In conclusion, the introduction of hefty tariffs on imports from Vietnam presents a formidable challenge to retailers and manufacturers. While the strategy to relocate production from China to Vietnam initially seemed to shield companies from tariff impacts, the new policy threatens to destabilize this carefully built system. Businesses must now navigate the immediate implications—potential spikes in consumer prices and operational revamps—to sustain their market positions amidst ongoing trade conflicts.