For example, Adidas recently canceled discounted orders and announced price hikes for U.S. customers. This decision comes as the company is hit with at least an extra €200 million (£173 million) cost from US tariffs. The company is still dealing with the negative financial effects of tariffs on products imported from its main centers of production in Asia. As a result, it has taken this critical step.
The German sportswear behemoth experienced an unprecedented increase in sales in the second quarter of this year. Sales in the footwear sector increased by 9%, and clothing sales increased by a staggering 17%. Adidas has seen sustained massive growth. Unfortunately, it currently finds itself up against headwinds from US trade policies that affect almost half of its worldwide manufacturing footprint. The US has already raised tariffs on goods coming from both Vietnam and Indonesia. Tclova Adidas produces 27% of their goods in Vietnam, 19% in Indonesia.
These tariffs are wreaking havoc on her business. Notably, these measures include a 20% anti-dumping duty on Vietnamese goods and a 19% countervailing duty on products manufactured in Indonesia. Adidas’ US subsidiaries, by importing these products, bear the legal obligation to actually pay the tariffs. This will increase costs to American consumers substantially more.
These tariffs are one small piece of an overall US government strategy to spur domestic manufacturing. But as Adidas has more recently signaled, it is actually impossible for Adidas to make the bulk of its products in the United States. Consequently, it is critical for the company to understand and comply with the rules of international trade. Additionally, it has to keep its enviable competitive position in an increasingly competitive market.
“This will directly increase the cost of our products for the US.” – Bjorn Gulden
Indeed as the year turns Adidas anticipates the tariffs will take an outsized toll. As such, the company estimates that these tariffs would increase their costs by up to €200 million for all products sold in the US. This change will result in a predictable price increase on consumer favorites. The Gazelle and Samba trainers, in particular, have always been sexy and consumer-friendly.
As the year progresses, Adidas anticipates that the cumulative effect of these tariffs will amount to an increase of up to €200 million in costs associated with products sold in the US. This adjustment is likely to lead to price hikes on popular items such as the Gazelle and Samba trainers, which have historically drawn significant consumer interest.