The retail industry is sighing at ease after it appears to avoid the worst-case scenario of Vietnam’s tariffs.
However, some executives believe Donald Trump’s interim trading chairman has announced on Wednesday that it is still bad for businesses, which could have a calm impact on consumer spending.
“That’s much better news than where we were on liberation day,” a CEO of a popular consumer brand told CNBC after Trump said tariffs on Vietnam’s imports were 20%, falling 20% from the 46% collection he proposed on April 2nd, and then stopped. The new rate will be twice the 10% obligation currently being implemented.
Another executive called the news “bad” but agreed that a 20% tariff was better than the 46% obligation originally imposed, but the proposed rate was unrealistic.
“I think Trump needs ‘positive’ news,” the third executive said. “I think things will evolve. Let’s see if this is crucial.”
Trump’s announcement on Wednesday came days before the sudden 90-day suspension of tariffs he proposed next week in April, and for his administration to scramble to seek agreements with dozens of trading partners. Still, he had not said when the deal with Vietnam would be effective or whether both parties agreed to the tariff rate.
In the months leading up to Trump’s April 2 tariff rollout and his announcement on Wednesday, retail executives in the apparel and footwear industry revealed that Vietnam’s imports could face tariffs that are almost as high as the cumulative 55% mandatory for China’s imports.
Including some of America’s top retailers over the past decade gap, American Eagle and NikeAll reduced dependence on China to protect itself from both high tariffs and regional geopolitical turbulence.
Many people have evacuated to Vietnam. It is known that factories owned by Chinese companies produce products at the same quality and price as in China. They also began manufacturing in other countries in Southeast Asia, including Cambodia, Bangladesh and Malaysia. These countries faced tariffs of 49%, 37% and 24% respectively, based on Trump’s April plan, but are currently subject to a 10% obligation.
According to the American Apparel & Footwear Association, Vietnam is currently the second largest supplier of footwear, apparel and accessories for sale to the US market. According to another industry trade group, American footwear distributors and retailers, it has become an important part of the footwear supply chain at the pace to become the largest shoe supplier for the US in 2025.
If Trump’s proposed 46% tariff on Vietnam came into effect, that would have been pointless for much of the industry’s job to leave China. Some companies are relieved that the interim transaction will set collection at 20%, and the announcement agreement is also a sign that Cambodia, Malaysia and Bangladesh can reach a similar framework.
“20% is a sigh of relief,” said Sonia Lapinsky, partner and managing director at Alixpartners, who advises fashion brands. “There’s a positive and optimism that this is easy to manage. At least there is. This isn’t business, it’s great. But there’s a real meaning to this, right?”
Most companies have many tools to offset the impact of tariffs, such as working with suppliers to share costs. However, many people, including Nike, plan to raise prices to avoid a big profit margin hit. It is still unclear how these hikes will affect consumer spending as supply chains take longer.
Alixpartners previously created a pricing model for CNBC. This examined how prices for Vietnamese sweaters and shoes would rise under Trump’s proposed tariffs if retailers don’t hand the costs to suppliers and shoppers. A 10% tax could increase the cost of a $95 men’s shoes from $7.42 to $102.42. The increase in costs is even greater as a 20% obligation is introduced.
Many executives worry that tariff hikes of this magnitude will be bad for businesses and consumers. Paul Cosaro, CEO of Picnic Time, is a supplier of top retailers target, Coles and Macy’sIf Clock returned in April and Trump said there was a 20% tariff on Vietnam’s imports, he said, “No one would have been happy.”
“There could be a 46% tariff threat, you’re back at 20 times and that sounds better, but that’s more money coming out of consumer pockets at the end of the day, and less money to spend on picnic baskets, coolers, etc,” Cosarro said.
“It’s not good for consumers. In the end, it’s just raising prices. I don’t think that’s good news.”
