President Donald Trump sees tariffs as a way to bring more manufacturing to the United States. But Nike and other sneaker companies have tried to move production out of Asia before. WSJ’s Jon Emont describes the cautionary tale of Nike’s attempt to make tens of millions of sneakers using high-tech manufacturing in Guadalajara, Mexico. Annie Minoff hosts. Further Listening: -A Tariff Loophole Just Closed. What That Means for Online Shopping. -China Unleashes a Trade War Arsenal Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: Why are most sneakers made in Asia?
Most of those shoes are made in Asia, in three countries, Vietnam, Indonesia, and China.
And it's been this way for now about 20 years.
That's my colleague, John Emont.
whether it's Adidas or Nike or Under Armour, they're making their shoes in these three countries. And they're kind of the Goldilocks countries for shoes.
Chapter 2: How could tariffs change sneaker manufacturing?
That's the way most modern shoemaking is done. Shoes are crafted in factories in Asia by tens of thousands of laborers making relatively low wages. And those shoes are then shipped and sold all over the world. But President Trump would like to change that.
Donald Trump has introduced tariffs on Asian countries, including the three Asian shoemakers we discussed, Vietnam, Indonesia, and China. And the stated purpose of that is to bring back manufacturing to the United States.
Though some of Trump's tariffs have been paused, shoe companies are still facing pressure to move production back home. but actually making shoes in North America would be incredibly tough to pull off. And shoemakers know that from experience.
Chapter 3: Have shoe companies tried North American production before?
It's interesting to know that Nike, as well as other big shoemakers like Adidas, like Under Armour, have actually tried this recently, and they all failed.
Welcome to The Journal, our show about money, business, and power. I'm Annie Minoff. It's Thursday, May 8th. Coming up on the show, what happened when Nike tried to make shoes closer to home? My colleague John is not what you would call a sneakerhead.
I'm mainly a my wife found a sale and there's a hole in my shoe, so we really have to get that sorted out guy, I suppose.
You're a my wife found a sale guy. Nice. But ever since John moved to Singapore, he's been learning more about the business side of the sneaker game.
Since I've lived out in Asia, I've been really interested in shoe production. You know, all our shoes are made here.
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Chapter 4: What challenges do shoemakers face in North America?
Why is that?
couple of things. These sneakers there, it's not like garment making. It's not like making a t-shirt. To make a t-shirt, you just need sewing machines and you need people who are skilled enough to sort of make the t-shirts. And actually, you can find that just about everywhere. A secret t-shirt could be made in one of 40 countries, probably. With shoes, it's different.
That's because shoes are complicated. A single shoe can incorporate a range of materials, from squishy foams to flexible plastics.
And critically, it's also labor intensive. So there are only a couple of countries where you have this cheap labor force that's willing to do a lot of the manual work. And it is skilled labor. So you do need to be trained and you do need to be willing to do it. And you do need to be sort of dexterous and things.
For years, shoemakers thrived in Asia. But about a decade ago, several sneaker companies, Adidas, Under Armour, and Nike, all tried to make shoes in a new place and in a new way. all three shoe companies decided to bring some production to North America.
Could we just rethink how shoes are made? Just because they've always been made this way, do they have to be?
One reason to try something different, wages were rising in Asia.
The idea that, you know, you could just rely on cheap labor from these countries, you know, forever, was starting to come into question. And then there was all these new advances in automation.
For a long time, setting up factories in North America was cost prohibitive.
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Chapter 5: Why did Nike choose Mexico for their factory?
Labor is just more expensive in North America, and it's also not as readily available as in East Asia. So if your goal is to make shoes in North America and make them be price competitive with the shoes you're producing out of Asia, then you really need to automate it, and that means robots.
Of all the shoe companies, Nike's automation effort was the biggest. In 2015, the company set up a factory, not in the United States, but close by, in Guadalajara, Mexico. Wages in Mexico are higher than in most of Southeast Asia, but they're lower than in the U.S. Plus, it would be faster to ship shoes from Mexico to Nike's American customers. And what was Nike's goal?
Like, how much manufacturing did they want to shift back to North America?
They wanted tens of millions of shoes produced there by the year 2023.
That's ambitious.
Yeah, it was definitely ambitious.
According to John's reporting, some within Nike hoped that the Mexican factory would serve as a stepping stone.
Many of the people involved in the project did hope that once they got this solved, once they figured out how to make a heavily automated shoe, that then some production could be moved into the United States proper.
To help them set up that Guadalajara factory, Nike partnered with a company called Flex.
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Chapter 6: Who is Flex and what role did they play in Nike's plan?
My name is Tom Fletcher. I was responsible for the strategic business unit inside Flex.
Tom would go on to work on the Nike factory. So you'd built complicated stuff in North America before?
We had built complicated stuff in North America. Complicated stuff that pushed us to create process, to create automation, to solve problems differently.
And so going into this project of trying to build shoes in North America, how are you feeling? Did it seem doable?
We were incredibly excited. We were excited to learn. We were excited for the challenge.
Tough but possible?
Absolutely tough but possible. If we can survive Apple, we can figure out Nike, for sure. Candidly speaking, I had probably a little bit of arrogance going in, knowing the kind of problems we'd solved before, thinking we'll go over here, we'll take a look, we'll figure out how to automate, we'll do our thing.
Tom's main challenge was to figure out how to replace humans with robots. His goal was to have fewer than 3,000 workers. To start, he flew to China, Indonesia, and Vietnam to tour Nike's factories there. And he saw firsthand the scale of the human labor that Nike was used to.
One of the first things I noticed when I went into the factories in Asia is the number of toothbrushes they use specifically to glue the shoes. Huh, like you'd put glue on the toothbrush and kind of... Yeah, and you'd swab it all around and you'd stick it together and you'd press that thing down and boom, the shoe goes down the line. All right.
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