Nike’s shares rose on Friday, after Donald Trump hinted at a possible deal with Vietnam that would reduce the recently announced tariffs.
Stocks were up around 5% late in the morning. Nike’s stock price has fallen by around 20 percent since January.
Nike’s shares plummeted on Thursday after Trump announced a tariff of 46% on Vietnamese imports.
New duties will be implemented next week, and this has caused concern for businesses with strong manufacturing links to Southeast Asia.
Nike, which manufactures approximately 25% of its shoes in Vietnam, is among those most affected.
Trump: Negotiations on the table
In a recent post to his Truth Social social media platform, the president seemed to allay some of these concerns by saying that he and To Lam, general secretary of Vietnam’s ruling Communist Party, had “a very productive call”.
Trump said: “Just finished a productive phone call with To Lam the General Secretary of Communist Party of Vietnam who informed me that Vietnam is willing to reduce their tariffs to ZERO if the US can reach an agreement.”
He added, “I expressed my gratitude on behalf of the country and that I was looking forward to meeting him in the future.”
Trump’s comments have opened up the possibility of negotiations which could help to soften the impact of the tariff.
Although no agreement was announced in writing, both parties seem to be open to exploring a possible compromise.
What does Nike have to gain from this?
Nike is in serious trouble, as the new tariffs imposed by President Donald Trump threaten to strain its already strained outlook.
This giant sneaker company, who manufactures half its athletic footwear in China, and the other half in Vietnam (about 25% of which comes from Vietnam), is now imposing a tariff on Chinese imports that will add 34% to the current 20%. The effective rate would then be 54%.
In its most recent guidance, the company projected that sales would drop by double digits for this quarter.
This forecast includes the effect of tariffs on imports from China and Mexico.
These expanded duties are coming at a time when Nike is trying to stabilise its brand under the new CEO Elliott Hill who took over last year.
Hill, an experienced executive of the company, faces increased cost pressure as he attempts to guide it through a turnaround.
Possible negotiations with Vietnam may help to relieve the pressure on global shoe giant.
The post Why Nike shares buck the trend on Friday with a 5 percent gain may change as new information becomes available.
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