Blanket taxes being levied on goods imported into the U.S. are hammering sports stocks whose supply chain extends outside the country.
Shares of apparel brands Nike, On Holding and Under Armour all plunged at the start of trading in New York Thursday as traders rushed to adjust to worldwide tariffs imposed by President Donald Trump. Nike fell 14%, sneaker maker On surrendered 16% and Under Armour plunged 20%. Each company has significant operations in Vietnam, which will see a 46% tariff on goods sent in to the U.S. The existing tariffs on Vietnamese goods are about 14% to 18%, according to research by University of Delaware professor Sheng Lu cited by Reuters.
Other sporting goods company shares were also down on Thursday’s New York trading. Amer Sports—the parent of Wilson, Salomon and Louisville Slugger—fell 13% lower, while Topgolf Callaway Brands was off 11%.
The market plunge comes despite Trump’s pledges during campaign season to levy heavy taxes on foreign goods. Tariffs are taxes on goods when they land in the U.S., paid by the American importer. While the importer and manufacturer could opt to absorb the cost, they almost always are passed onto consumers as higher prices. Usually domestic competitors raise their prices as well to grab additional profits. Tariffs are common on specific items in various countries, usually to protect domestic industries—the U.S. for example, has long had a heavy tax on Canadian milk imports to protect small, northeast farms.
However, broad-based tariffs have become less common over the years. Trump is calling his blanket taxes “reciprocal tariffs” to narrow the gap with tariffs he says other countries unfairly impose on U.S. products. While studies show other countries do have higher average tariff rates than the U.S., the Trump taxes are far higher than those. Studies by investment banks including J.P. Morgan and Evercore say Trump’s new tariffs are higher than the infamous Smoot–Hawley tariffs, credited with worsening the Great Depression.
Company executives and Wall Street analysts on recent earnings calls and presentations have been expecting that just China would be the target of tariffs. Companies like Nike had assured investors that they had tweaked the supply chain into the U.S. to minimize China-sourced product. In Nike’s case, it said less than 3% of its goods sold in the U.S. came from China. But the company makes almost half of its product in Vietnam, and the vast majority of the balance in other countries that are also subject to higher levies. Adidas and Puma are reported to have similar levels of manufacturing in Asia. On Holding says 90% of its footwear and 60% of its apparel are made in Vietnam.
Sports stocks aren’t the only ones trading lower Thursday; tariffs are routing the whole stock market, given the interconnectedness of supply chains and world trade. Stocks also fare more poorly in inflationary environments as other assets, such as bonds and commodity futures, appear more attractive to investors. The S&P 500 closed 4.8% lower while the technology stock-heavy Nasdaq Composite Index was down 6%.
Beyond the supply chain repricing of stocks, the markets are worried that higher prices for American consumers resulting from tariffs will push the economy into recession. Higher costs to consumers and a potential recession are a longer-term danger to sports stocks that are shielded from most supply chain concerns.
“If tariffs stay in effect as announced, foreign sellers will likely absorb some of the cost, as will American importers,” Comerica chief economist Bill Adams said Thursday. “But even so the increase will likely cause a 3% to 5% cumulative incremental increase in consumer prices above the trend rate of inflation over the next year.”
Reflecting that possibility, every sports betting stock was also sharply lower in early trading, led to the downside by Penn National Gaming’s 10% plunge. Shift4 Payments, the largest processor of sports arena transactions, closed down 8%, ticket seller Vivid Seats was off 10%, and ESPN parent Walt Disney was 9% lower. Of the 40 stocks in the Sportico Sports Stocks Index, just one finished the day higher than where it finished Wednesday—Canada’s Rogers Communications.
This story was updated after Thursday’s market close.
