The recent tariff changes imposed by the Trump administration are set to reshape the landscape of the global footwear industry, particularly benefiting India as a manufacturing hub. With the announcement of a 26% tariff on imports from India—lower than those faced by competitors like Vietnam and Cambodia—experts predict a rapid shift in production for major brands such as Nike, Adidas, and Puma.

Tariff Impact on Competitors

The tariffs on footwear imports from India are significantly lower compared to those imposed on its competitors. Countries like Vietnam and Cambodia face tariffs upwards of 46% and 49%, respectively, while Bangladesh and Indonesia see rates of 37% and 32%. This disparity is poised to make Indian products more appealing in the U.S. market.

• Nike shares fell by 10%, marking their lowest point since 2017.
• Adidas saw an 11% drop, and Puma experienced a 10% decline due to anticipated price hikes on sneakers.

Analysts from UBS suggest that U.S. retailers may need to increase prices by 10-12% to counterbalance the impact of these tariffs, especially concerning products manufactured in Vietnam.

Shift in Production Trends

In fiscal year 2024, a staggering 50% of Nike’s footwear and 39% of Adidas’ footwear were sourced from Vietnam, which currently faces an average tariff of 13.6%. The new tariff structure could elevate duties on certain non-leather footwear items from Vietnam to as high as 60%, while India’s tariffs are expected to stabilize around 36%. In addition, tariffs on Chinese imports will rise by 34% on top of the previously imposed 20%, leading to a total of 54%.

Industry insiders, like J. Rafiq Ahmed of Kothari Industrial Corp. Ltd, share that the trend towards India as a manufacturing location is already in motion. "Major brands are actively relocating production to India as part of their China+1 strategy, and the new tariffs will only accelerate this shift," he stated.

Tamil Nadu: The New Manufacturing Hub

Tamil Nadu has emerged as a significant player in the non-leather footwear sector, producing for global brands such as Nike, Puma, and Reebok. Notably, non-leather footwear represents 86% of global usage, making this region an attractive option for manufacturers.

• Taiwanese firms, including Feng Tay and Pou Chen Corp, are establishing facilities in Tamil Nadu, with investments estimated at around ₹18,000 crore.
• A noteworthy example is the JR One Kothari factory in Perambalur, which has already produced over 2 million Crocs for both domestic and international markets since its opening in November.

Furthermore, KICL has committed to investing ₹5,000 crore in collaboration with the Tamil Nadu government to manufacture Adidas footwear.

Competitive Advantages for India

Experts emphasize that India’s competitive labor costs—averaging $0.90 per hour—position it favorably against China ($3), Vietnam ($2), and Indonesia ($1.50). "While brands can only pass on limited price increases to consumers, these tariffs are substantial," one industry expert noted. "The most viable solution is to reduce production costs, and India is well-positioned to take advantage of this shift."

As the global footwear market evolves, India stands to gain significantly from these developments, paving the way for increased investment and production capabilities. Brands are not only looking for cost-effective solutions but are also eager to ensure competitive pricing in a rapidly changing landscape.