Just over two weeks ago, Nike and Adidas, along with seventy-odd other footwear brands, put their names to a letter penned by the industry group the Footwear Distributors and Retailers of America (FDRA) and addressed to the President of the United States.
The letter—somewhat of a plea, really—argued that footwear brands should be exempt from the 46 percent “reciprocal” tariff the president announced back in April, which would apply to goods shipped from Vietnam to the US.
“American footwear businesses and families face an existential threat from such substantial cost increases,” the letter read.
“Hundreds of businesses face the prospect of closure,” it went on to say. “Tens of thousands of jobs are at stake.”
Indeed, though it felt very much like the FDRA were talking specifically about US businesses and jobs, it could just as easily have been talking about Vietnam’s footwear industry, which relies heavily on those same businesses.
In fact, Vietnam shipped US$8.3 billion worth of footwear to the United States last year, according to data from its General Department of Customs.
This was about a third of Vietnam’s US$22.9 billion in total footwear exports, and almost double the US$4.5 billion it shipped to the US in 2016, at the start of Trump’s first presidency, a term marked by trade conflict with China.
Incidentally, that first “trade war” (though what, relative to now, looks more like a skirmish) between the US and China saw footwear brands, already shifting their business out of China, hasten their efforts, with Vietnam’s relatively low wages and close-by location making the country a popular destination.
As a result, foreign footwear manufacturers significantly expanded their footprint becoming an integral part of the economy—one heavily tethered to the US shoe market and subsequently vulnerable to a fall in US demand.
It’s not just the footwear industry that is exposed either. Entire ecosystems have grown up and around these manufacturing operations with textile input suppliers, printing and packaging firms, and logistics and warehousing services all benefiting from assisting in the manufacture of shoes for the American market.
That’s not to mention the restaurants that feed the thousands of workers these operations employ or the retail stores that clothe them or the accommodation services that house them.
It’s also worth noting that much of this activity is geographically concentrated, too.
Dong Nai, for example, northwest of Ho Chi Minh City, counts 29 factories producing shoes for Nike that employ some 168,629 workers, according to the company’s most recent supplier list.
For Dong Nai, which has a population of around three million people, that’s about five percent of its population employed in footwear manufacturing for Nike alone.
If the fall in demand were to lead to job losses, this could have significant financial repercussions for the province’s budget, not to mention the social implications.
That said, many of these factory workers come from other provinces to which they would likely return. Indeed, this was what happened during the COVID pandemic.
But that temporary exodus created longer-term labour challenges. When travel restrictions were lifted, it took months to lure workers back to the factories, disrupting production schedules and straining capacity.
Moreover, to meet labour needs more sustainably, Vietnam’s footwear hubs have built dedicated vocational pipelines. Training schools throughout the region have been developed specifically to supply the industry with skilled stitchers, sole assemblers, and quality-control technicians.
A drop in enrollments now could mean labour shortages in the future. At the same time, enrolling students in training for jobs that may not exist when they graduate can be costly and damaging to morale.
Of course, it has been suggested that these tariffs are only temporary, with reports that there are negotiations underway to try to secure some form of exemption or reduction from the Trump administration.
But whereas any outcome of these trade negotiations might help a little, the reality may be that the damage has already been done – the broader message of the Trump administration seems to be that nowhere, other than the US, for manufacturing, is safe.
In this context, risk mitigation moving forward may entail greater diversification but will likely be more focused on the flexibility to triage production across different locations in response to tariffs, if or when they change.
And this is already somewhat doable. South Korea’s Chang Shin and TKG Taekwang, for example, two of Nike’s biggest footwear manufacturers, both have factories in Vietnam and factories in Indonesia, the latter facing a somewhat more manageable tariff of just 32 percent.
But whereas this might benefit these foreign firms and brands, for shoe makers in Vietnam it means ongoing uncertainty in production demand, and that carries over into the labour market and those extended footwear manufacturing ecosystems.
So, where does that leave Vietnam’s footwear manufacturing industry?
Undoubtedly, Vietnam will keep making shoes, but likely not quite as many.
That said, an influx of skilled shoemaking labour onto the market, combined with excess capacity at contract manufacturers already experienced in meeting international standards, could appeal to firms outside the US. Moreover, input costs may also soften as demand falls.
That is to say, “existential” is a strong word. However, few sectors in Vietnam are likely to feel the effects of the Trump administration’s “reciprocal” tariffs quite as acutely as footwear, given the industry’s concentrated structure and the expansive ecosystem built around it.
In this light, how Vietnam responds will be worth watching for insight into the resilience of its manufacturing industries and how adaptable it might actually be in the increasingly politicised global trade landscape.