Vietnam-US Tariff Talks Spark 7.23% Gain for Gap, 3% Rebound for Nike

Negotiations between the United States and Vietnam have sparked a wave of optimism among companies with manufacturing operations in the country. This development follows a hint from U.S. President Donald Trump that discussions are underway to reduce tariffs on Vietnamese imports, a move that has significantly boosted market confidence.

On Thursday, Trump announced a 46% tariff on Vietnamese imports, leading to a sharp decline in the stock prices of several global companies. Vietnam's benchmark index VNI dropped by 6.68% at the close of trading. Companies with substantial manufacturing presence in Vietnam, particularly those in the apparel and footwear sectors, were hit the hardest. Nike's stock plummeted by 14%, while on holding and Skechers both saw declines exceeding 10%.

However, the situation began to stabilize on Friday. Nike's stock rebounded with a 3% increase, while On Holding and Skechers rose by 5.2% and 2.5%, respectively. This recovery was largely attributed to the positive news of potential tariff reductions, which eased investor concerns about the financial impact on these companies.

Vietnam's Communist Party General Secretary Nguyen Phu Trong expressed the country's willingness to engage in negotiations with the U.S., proposing a reduction of import tariffs to 0% and requesting reciprocal measures from the U.S. Analysts, however, remain skeptical about the feasibility of achieving significant cost reductions under the current tariff policies.

The potential for reduced tariffs has had a positive impact on the stock prices of various international brands with manufacturing operations in Vietnam. gap, for instance, saw its stock price rise by 7.23%. The company's CEO, Richard Dickson, had previously highlighted Vietnam as its largest supplier, followed by India and Indonesia. Similarly, Nike's annual report indicated that half of its footwear and a quarter of its apparel are produced in Vietnam.

The positive sentiment extended beyond the apparel and footwear sectors. Home furnishing brands also experienced a rebound. Wayfair, which had seen a 19% drop on Thursday, closed Friday with a 3.8% increase. SharkNinja's stock rose by 0.86%, and RH Company, which had initially seen a 17% decline, managed to narrow its loss to 2.5%.

The negotiations between the U.S. and Vietnam are seen as a critical step in mitigating the economic impact of tariffs on both countries. Vietnam's trade surplus with the U.S. exceeds $123 billion, making the U.S. its largest export market. Since Trump's return to the White House, the Vietnamese government has been actively seeking ways to appease the U.S. administration, particularly in areas such as automotive products, where tariff exemptions have been sought.

The ongoing discussions and potential for tariff reductions have provided a much-needed boost to companies with significant investments in Vietnam. As negotiations continue, the market remains optimistic about the potential for a favorable outcome that could stabilize stock prices and foster a more predictable business environment.

Ask Aime: How will the reduction of tariffs on Vietnamese imports impact Nike and On Holding?