Retailers Navigate China Exit Amid Tariff Challenges

Retail brands are accelerating their move out of China at a pace exceeding market expectations, according to industry analyst Anna Andreeva, Managing Director at Piper Sandler. The strategic shift comes as companies adapt to potential 30% tariffs, which, while significant, remain “much better than 145%,” Andreeva noted in a recent CNBC interview.

“The move out of China is happening faster than folks would have expected even a month ago. So that’s a big positive,” Andreeva explained. She highlighted that brands are demonstrating unexpected effectiveness in negotiations with partners and vendors, creating additional leverage in the challenging trade environment.

However, consumer demand remains the critical unknown variable. “What’s uncertain is what’s going to happen with demand. Are all consumers going to be able to absorb the price increases?” Andreeva questioned. She emphasized that pricing adjustments appear to be “the last resort” for most companies, though this approach carries particular risk for brands targeting mass and value retail channels.

Despite the industry-wide pivot away from Chinese manufacturing, Andreeva maintains a bullish outlook on Nike—a company with significant Chinese manufacturing exposure. This seemingly counterintuitive recommendation stems from Nike’s limited vulnerability to tariffs on Chinese goods sold in the American market.

“When you think about China for Nike, you have to think about what’s sold in the US, and that percentage is pretty manageable. It’s about low single digits that actually is attributable to the US,” Andreeva clarified. This relatively limited exposure helps explain why “Nike stock was up pretty nicely yesterday and is up off the lows.”

Beyond tariff considerations, Andreeva points to several positive developments at Nike, including leadership changes and strategic adjustments. “There’s a new CEO at Nike… They’re going more into the wholesale channel and they’re accelerating some of the newness there. Definitely some green shoots with the product,” she observed. The anticipated “Nike Skims” collaboration represents another potential catalyst that has generated analyst excitement.

Andreeva’s optimism about Nike centers on “positive rate of change” indicators, suggesting that even “less bad” sales performance could drive stock appreciation in coming quarters. She noted that Nike has “shown some progress moving through classics inventories and inventories overall,” while profitability appears to have “reached troughs” in the current fiscal year.

The retail landscape faces additional complexity with recent administrative changes to “de minimis” import rules, which could affect competitive dynamics between established U.S. retailers and platforms like Shein and Temu. Andreeva noted that certain platforms like Etsy remain largely insulated from China-related trade tensions, as “there’s very little that comes from China for them.”

As retailers navigate this evolving trade environment, their ability to diversify manufacturing bases, manage cost pressures, and maintain ♛pricing power will likely determine winners and losers in the competitive retail landscape.