Adidas To Increase Prices Amid Rising US Tariffs Impacting Bottom Line

Adidas is bracing for significant financial strain due to rising US tariffs, leading to price increases for American consumers.

In a recent announcement, Adidas chief executive Bjorn Gulden revealed that the company will have to implement price hikes for its products in the United States due to increased costs driven by US tariffs. The financial burden is expected to reach approximately €200 million (£173 million) as a consequence of tariffs imposed on goods imported from Asia.

The tariffs stem from a trade deal struck earlier this month in which the US government agreed to a 20% tariff on imports from Vietnam—responsible for 27% of Adidas' products—and a 19% tariff on those from Indonesia, which accounts for 19% of its manufacturing. Adidas, which has around half of its products made in these countries, cannot feasibly shift production to the US, making them reliant on imported goods, thus increasing the cost for American consumers.

Gulden expressed uncertainty about how these price adjustments would affect customer demand, especially if the tariffs contribute significantly to inflation in retail. He noted that while the company has already felt the impact of tariff changes, further increases this year could heavily affect product pricing.

Despite the looming financial challenges, Adidas has reported a strong sales performance, with a 7.3% rise in sales, totaling €12.1 billion in the first half of the year, alongside a pre-tax profit surge from €549 million to €1 billion. In particular, footwear sales saw a 9% increase between April and June, while clothing revenue jumped by 17%, indicating resilient consumer interest amidst economic pressures.

Adidas is not the only sportswear company feeling the pinch. Nike has also indicated it will raise prices in response to similar tariff impacts, projecting an increase of around $1 billion (£730 million) in costs.

The broader context reveals a contentious trade environment; US tariffs, initiated during the Trump administration, aim to encourage domestic manufacturing by increasing costs for foreign imports. Mercedes-Benz and Porsche have reported significant profit declines attributed to these levies, and UK-based Aston Martin has warned of marginal profits due to the ongoing tariff situation.

As Adidas and other companies navigate these turbulent waters, the outlook remains uncertain for businesses and consumers alike, with potential price increases set to ripple across the market.