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Trump’s tariffs challenge Asia production model for sports goods makers

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Run for your life. Source: Reuters

Things are going splendidly at Puma. The shirts, shorts and sneakers with the puma silhouette have never been more popular. Chief Executive Björn Gulden has every reason to be satisfied.

But the Norwegian is anxious. When he presented the sports group’s quarterly figures earlier this week, he warned more clearly than ever of the global risks for his company. Like so many managers in industry, Mr. Gulden fears that US President Trump will start a global trade war with import duties on clothing and sporting goods from China. This could endanger Puma’s immensely important US business. Even more threatening: The reactions of other countries could disrupt the entire business model of sporting goods manufacturers in the longer term, and that of clothing makers as well.

Adidas, Nike, and Puma all manufacture their products in huge factories in the Far East. Many apparel makers also purchase a large part of their goods in Asia. It is a concept that has worked well in a world order that is fairly stable. But now it is falling into disarray.

It is risky to maintain the status quo.

Regardless of how far Mr. Trump will actually pursue his protectionism plans, manufacturers should immediately begin to move production closer to consumers. It is risky to maintain the status quo.

Up to now, the plants in Asia have been unrivaled in price. But modern factory automation now also makes it possible to manufacture economically in industrialized countries. With techniques such as 3D printing, the companies can also offer highly individualized goods.

For decades there was too little pressure to seriously consider relocating production back to Europe or America. Nike founder Phil Knight once revolutionized the industry by being the first to focus on mass production in the Far East. Now we are facing another revolution. Today, the advantage lies with whoever produces close to the buyers.

Joachim Hofer is a Handelsblatt correspondent in Munich. To contact the author: hofer@handelsblatt.com.

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