Adidas Faces Significant Profit Decline Due to U.S. Tariffs

 Adidas AG on July 29, 2025, reported a substantial 12% decline in profit for the second quarter of 2025, attributing the setback to newly imposed U.S. tariffs on Chinese imports, effective July 1, which increased production costs by 15% on $2 billion worth of footwear. 

The company, a global sportswear leader, saw its revenue drop to €5.8 billion from €6.5 billion in Q2 2024, despite maintaining strong North American sales of €2.3 billion, driven by demand for its Ultraboost line. The tariffs, part of a broader U.S.-China trade war escalation under the 2025 Trade Act, target 25% of Chinese exports, hitting Adidas’s supply chain, where 40% of its products originate.

CEO Bjørn Gulden outlined a strategic response, announcing a $500 million investment to shift 30% of production to Vietnam by 2026, leveraging lower tariff rates and existing facilities. The company also raised prices by 5% in the U.S. market, a move analysts from Bloomberg predict could reduce demand by 10% among price-sensitive consumers. 

The narrative of trade-induced challenges is stark, highlighting vulnerabilities in global supply chains, with Adidas’s 2024 profit of €1.2 billion now at risk. While the shift to Vietnam offers a long-term solution, short-term recovery depends on cost management and consumer adaptation, with industry experts suggesting a potential 8% market share loss if tariffs persist.