China is the world’s factory for cars, toys and computers. But not sneakers. China is losing that title to Vietnam’s Ho Chi Minh City.
Factories that ring the fast-paced city churn out foam soles, squishy insoles, cotton laces and mesh fabric. The parts are ferried by trucks to warehouses to be assembled into shoes. Then at nearby ports, shipping containers are stuffed with boxes for Nike, Adidas, Saucony and Brooks Sports and sent down the Dong Nai River to the sea.
For the business world, quitting China is hard to do, with its hold on raw materials and its factory prowess that has powered profits and kept consumers happy. The sneaker industry is showing how it can be done. Big brands still have huge factories in China that now mostly make shoes that are sold in China. But Vietnam has overtaken China as the No. 1 source of sneakers sold to the world by Nike, Adidas and Brooks and others.
The emerging centrality of Vietnam to the business of making sneakers hit home on April 3. After President Trump threatened Vietnam with a 46 percent tariff, the stock prices of Nike and Adidas came crashing down. The two countries have since announced an initial trade pact that lowered the new tariffs to 20 percent.
The uncertainty that Mr. Trump’s tariffs have caused over costs is forcing a reckoning in the industry. Nike said global tariffs would lead to around $1 billion in extra costs this year. To blunt the impact, it is scaling down production further in China, where tariffs are now higher than they are in Vietnam. But some companies, worried about being too dependent on any one country, are also debating whether to move work out of Vietnam.
China opened its economy. Then Vietnam did, too.
The industry began hopscotching across Asia in pursuit of lower costs and wages in the 1970s. That is when brands like Nike, a newcomer at the time, turned to factories in South Korea and Taiwan to ramp up as sneaker culture took hold in the United States. Factories in East Asia could make shoes cheap, fast and on a huge scale.
China opened its economy to foreign companies in the 1980s, and with it access to hundreds of thousands of workers. Suddenly, China was cheaper and more attractive. The South Korean and Taiwanese companies working for global sneaker brands quickly moved much of their factories to China.
But quietly Vietnam was making its own disruptive changes to a Communist-controlled economy, and by the early 2000s, China’s neighbor to the south was on everyone’s radar.
“It was like the opening up of China,” said Tony Le, an American sneaker executive who moved to Ho Chi Minh City from Portland, Ore., with Brooks in 2019. “This was now the opening up of Vietnam.”
Mr. Le, who had fled Vietnam in 1976 at the age of three after the end of the Vietnam War, long believed his home country’s time would come. He spent two months in China in 1997, working as a trainee for Adidas, and was awed by China’s size. Taiwanese companies like Pou Chen, which had tens of thousands of workers in China, had built factories that were like “little towns,” he said.
In the mid-2000s, Mr. Le was working for Nike as it started using Vietnamese factories to make basic shoe products.
“Deep down, I was rooting for the country to get into this industry,” Mr. Le said.
It didn’t take long. In the 2010s, Chinese workers were demanding higher wages and its companies were becoming adept at making copy cat products, often infringing on foreign copyrights. Global brands were compelled to look to diversify.
Vietnam offered a government that welcomed foreign investment and the best kind of demographics: a growing population of young people looking for work. By the time of Mr. Trump’s first presidency in 2017, factories in Vietnam were grinding out running shoes, even as brands deepened their presence in China for the local consumer market. After Mr. Trump confronted China on trade in 2018, other multinational companies across industries followed the footwear industry into Vietnam.
For the most part, though, sneaker companies were still reliant on China for raw materials and components like rubber and insoles.
Everything changed in 2020, when China shut its borders near the start of the Covid-19 outbreak. Business leaders with factories that were shut down realized how dependent they were on China. It was not a difficult choice for shoe executives to start shifting resources into Vietnam.
“It’s a much more localized supply chain than other industries,” said Bob Shorrock, a longtime executive in the sporting goods industry. “There is a need for speed to market, and the long term partners have already made investments in the supply chain.”
A supply chain with ‘little reliance on China.’
Consider the journey of the shoe last, a mold shaped like a foot and used to pull a shoe into shape.
Long before a sneaker is placed on a store shelf, and before it is stitched and glued together, it needs a last. Jones & Vining, a Boston-based company that has been making lasts for 90 years, followed clients like Puma, Nike and Adidas to Vietnam in 2011. It now has 500 workers in the country, cranking out 500,000 lasts each year, as well as 20 million pairs of insoles and 120 million pairs of footbeds. About 70 percent of what the factory makes is supplied to other shoe factories nearby.
At a Jones & Vining factory, an hour’s drive from Ho Chi Minh City, workers fill metal molds with hot, gooey and brightly colored liquid to make foam insoles and foot beds. At a different station, bits of plastic swirl inside a machine that shaves a mound into the shape of a foot.
Each morning, not long after the sun rises, half a dozen trucks are loaded and sent to factories nearby.
The initial trade deal between Vietnam and the United States that was announced in July has left many questions unanswered. One of the biggest questions involves goods that are transshipped. The Trump administration wants to slow the flow of goods onto American shores that start in China and pass through countries like Vietnam. It said it would impose a 40 percent tariff on such imports but has not said how it would define what qualifies.
Shoe production in Vietnam has “very little reliance on China,” said Jim Salzano, the chief executive of Jones & Vining. But some materials still come from China, despite the build out of the Vietnamese supply chain.
On most days, trucks crawl along the highway that connects the country’s shoe factories to Ho Chi Minh City and its ports. They pass dozens of lots filled with diggers and dirt movers for rent and yards with stacks of shipping containers.
Selling sticky rice cakes on the side of the road, Pham Kieu Diem, 47, recalled when rice fields surrounded the whole area.
“There were no factories and only one or two houses in the long stretch here,” she said.
In July 1995, a factory known as Viet Vinh was erected on some former rice fields. “I remember that date, because I was among the first workers who worked there,” Ms. Diem said.
She was 17 at the time and stayed on for 19 years. “I didn’t know how to make shoes, and I had never worn sneakers before,” she said. Ms. Diem had dropped out of school in ninth grade to help her family grow rice and beans.
“The money we got — me and my two sisters — we saved and bought some land,” Ms. Diem said. “We built a house on it so it helped with our income and changed our life for the better.”
Alexandra Stevenson is the Shanghai bureau chief for The Times, reporting on China’s economy and society.
Tung Ngo is a Times reporter and researcher based in Hanoi, Vietnam.
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