MW These companies tried to dodge China tariffs during Trump's first term. Now they're feeling the burn in Vietnam.

By James Rogers

Trump hit Vietnam with a 46% tariff on 'liberation day.' These names all have exposure.

From home goods and furniture to soft toys, sneakers and athletic apparel, a slew of U.S. companies have tapped into Vietnam in recent years in an attempt to reduce their reliance on China. They're now taking a hit after Trump hit the Southeast Asian country with a hefty 46% tariff in his "liberation day" announcement that targeted nations around the world.

The new tariffs did not exactly come out of the blue. Trump had launched a trade war on China during his first stint in the White House, a move that prompted many companies to rethink their supply chains. When tensions soared between the Biden White House and China, their decision to shift product sourcing away from China looked more prudent.

Williams-Sonoma Inc. has reduced the number of products it sources from China by more than half since Trump's first term.

Set against this backdrop, home-goods retailer Williams-Sonoma Inc. (WSM) has reduced the number of products it sources from China by more than half since Trump's first term.

CEO Laura Alber basically boasted in a post-earnings call with analysts in mid-March, according to a FactSet transcript, that the San Francisco-based retailer, whose brands include Pottery Barn and West Elm along with its Williams-Sonoma stores, had trimmed China exposure to 23% from about 50% in 2018.

In a 10-K annual report filed with the SEC last week, Williams-Sonoma said only about 18% of its products were produced in the U.S. in fiscal 2024. With exposure to China cut to 23%, the company's sourcing from Vietnam has increased to 14%, while exposure to India was 16% and the rest of the world was 29%.

Opinion: How Trump's 'liberation day' tariffs could miss their No. 1 target

With markets reeling from the previous afternoon's revelation of Trump's wide-ranging tariff agenda, Williams-Sonoma shares tumbled 15.9% on Thursday, the biggest one-day selloff in about 41/2 years. That compared with the S&P 500 index's SPX 4.8% decline.

Furniture retailer Lovesac Co. (LOVE) has also tapped into Vietnam. Speaking during the Oppenheimer Consumer Growth and e-commerce conference in 2022, the company's CEO, Shawn David Nelson, explained that Lovesac has diversified its production beyond China to Vietnam, Malaysia and Indonesia, according to a FactSet transcript.

D.A. Davidson analyst Michael Baker pegged Lovesac's exposure to Vietnam at 49%, up from 29% just two years ago. In contrast, Baker said China now accounts for 19% of Lovesac's product costs, down from 46% two years ago.

Lovesac has not responded to a MarketWatch request for comment.

Shares of Lovesac sank 15.6% to close at an 18-month low.

Baker noted that Build-A-Bear Workshop Inc. $(BBW.SI)$, which sells teddy bears and other soft toys, was another company that specifically mentioned diversifying into Vietnam.

In its latest 10-K filing with the SEC last year, the company said that, prior to 2020, over 90% of merchandise it received annually was produced in China. "However, our efforts to diversify our supply chain reduced China sourcing to 63% of merchandise received as production shifted primarily to Vietnam, which provided 29% of our merchandise in 2023."

The stock dove 11.8% on Thursday, it biggest one-day decline since it slid 13.9% on May 30, 2024.

Another consumer category feeling tariff pressure is footwear.

"We expect the footwear category to face the most scrutiny given new Vietnam tariffs of 46%, and China tariffs increasing to 54%," wrote Raymond James analyst Rick Patel, in a note released Thursday. "While China risk was well known, new Vietnam tariffs are a significant negative as most footwear brands source 40-90% from the country."

Related: Lululemon stock falls as Trump's tariffs put it in the 'bullseye.' This analyst still says buy.

Nike Inc. $(NKE)$ is a prime example of the shift to Vietnam.

In 2016 contract factories in Vietnam, China and Indonesia manufactured approximately 44%, 29% and 21%, respectively, of total Nike-brand footwear, according to that year's annual report from the sportswear giant. By 2024, factories in Vietnam and Indonesia were manufacturing approximately 50% and 27%, respectively, of Nike footwear, while China exposure had dropped to 18%.

Shares of Nike took a 14.4% hit Thursday, to pace the Dow Jones Industrial Average's DJIA decliners. The stock ended the session at its lowest price since Nov. 7, 2017.

Yoga-wear maker Lululemon Athletica Inc. $(LULU)$ manufactured 40% of its products in Vietnam during the fiscal year ended Feb. 2, which Raymond James analyst Patel said puts the company among the most exposed names in its sector.

In total, about 68% of its products were made in Southeast Asia, compared with 53% during the year ended Jan. 28, 2018.

Lululemon's stock dropped 9.6% to close Thursday at a seven-month low.

Read on: RH's stock plummets 40% - and is 'fully at the mercy' of tariffs, analyst says

-James Rogers

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April 03, 2025 17:26 ET (21:26 GMT)

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