The Journal. - Made in America? Shoe Companies Already Tried That.

Episode Date: May 8, 2025

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

Americans love their sneakers. These are blue Adidas Campus O's. I'm literally obsessed with these. Let me grab the 740 V2s and the 1130. This is a pair of Nike Air mags. I just want some good looking Jordan 11s. 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. That's the way most modern shoe making 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 shoe makers 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. 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 sneaker head. I mainly am. 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. 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. Why is that? A couple of things. These sneakers, they're, 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. So your 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 need to be willing to do it, and you do need to be dextrous 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 could just rely on cheap labor from these countries 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. 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 hope 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. Flex is a contract manufacturer, so they make things for other companies. And what they're mainly known for making is electronics.

So one of their biggest projects ahead of the Nike project was working with Apple to make MacBook Pros in Austin, Texas. One of the people who worked on that Apple project was Tom Fletcher. 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 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're 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 used 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. My whole mantra to the team was, we're getting rid of all the toothbrushes. But getting rid of all those toothbrushes and all those workers wasn't as simple as Tom imagined. That's after the break. you could pause or rewind. Well, life doesn't always give you time to change the outcome, but pre-diabetes does. Take the one-minute risk test today at doiheprediabetes.org, brought to you by the Ad Council and its pre-diabetes awareness partners.

By 2016, Nike and Flex had set up a sneaker factory in Guadalajara, Mexico. But it didn't take long for the project to run into problems. It became clear how challenging this effort was going to be pretty soon after they started. That's our colleague John again. You know, there are all sorts of challenges to automating shoe production. All the materials you're dealing with are squishy and they sort of change dimensions with the temperature, with the humidity. And these are things that humans are very adept at quickly dealing with. But machines need precision and if the sole of the shoe is a little different from the

last hole of the shoe, well, a machine might just put the glue in the wrong place, whereas a human worker would just quickly adapt. And stuff like that just took a while to sort out. The project's success hinged on Nike's ability to cut costs, including by replacing humans with machines. But that was turning out to be easier said than done. For example, an early challenge was getting robots to attach the Nike swoosh to the side of the shoe.

Here's Tom from Flex. We spent a lot of time trying to create a process where we could much more easily adhere the Swoosh to the side of the shoe. What we talk about in electronic manufacturing is pick and place. Robot picks it up, robot puts it down, robot puts it in place, we move along. It took Tom and his team eight months to figure out an automated way to add the Nike Swoosh to one specific shoe model. Challenge was they were about to change the way they were gonna build that shoe.

And the next generation of that shoe had a painted on Swoosh, it didn't have a cut in place Swoosh. So everything we had just done didn't count for the new version. And suddenly they had to figure it all out again. You know Nike is producing tons of different new types of shoes all the time. So again a human workforce is pretty adaptable. Okay, we're now doing things this way.

Okay. Now the swoosh is slightly to the right. Fine. Exactly. But these things can be tricky. And the other thing you have to remember about shoes is that, you know, they come in, you know, more than a dozen sizes. They often come in different colors, and there are often, you know, little distinctions.

So you need machines that can sort of adapt to all of that, too. And that's tricky. You can't fail, right? It has to work every single time. Another problem was fashion. At Nike, design was king, and the company didn't want to be limited by what robots could handle. One of the chief challenges of the project was that you had a company that was in certain ways spoiled, like a lot of American companies. They're very design-oriented, they're trying to push boundaries, and so what they're used

to doing is having these very creative designers say, we want this shoe. You know, it has these properties, it uses these materials, it is different from other shoes in these ways. And then they tell their extremely skilled Asian shoe manufacturing partners, make the shoe and they can do it. Robots are a lot less accommodating. All of these challenges added up.

So in 2019, Nike packed up from the Mexico facility and went back to focusing on making shoes in Asia. According to Tom, the factory never hit its targets. The company produced fewer than 200,000 pairs of shoes in its Mexico factory and never reduced the workforce there below 3,000 people. It was just one of those decisions where it was costing everybody too much money. They also never achieved Tom's goal of automating all those toothbrushes out of the production line.

Was it a surprise that robots weren't better at shoe making? I think robots can't make shoes, first of all. I think the challenge is that balance between manufacturability and design. If design is lead dog and there's no even an intent to collaborate at all, I think that's a very challenging environment for technology to keep up with. Nike wasn't the only shoe company to throw in the towel.

Adidas and Under Armour had set up similar projects around the same time. And they actually did set them up in the US. Adidas in Atlanta and Under Armour in Baltimore. Under Armour called their effort Project Glory. Did they have better luck? Not really. The Adidas Speed Factory, which is what they called it, they shipped the equipment to Asia. So, the technology was moved to Asia. And with the Project Glory with Under Armour,

that's the one that there is least information about. They just stopped mentioning it. So, they mentioned it in 2015, Project Glory and proudly doing investors and haven't heard about it since and now they make the vast bulk of their shoes in these Asian countries. Adidas, Under Armour and Nike declined to comment on their past reshoring efforts. All three companies refocused on Asia. And that might have been the end of the story. Except...

— Tariff. — Tariff. — Tariff. — I am a tariff man. To me, the most beautiful word in the dictionary is tariff. Tom from Flex said that when he first heard about the tariffs, including on Vietnam, Indonesia, and China, he had to laugh. Oh, it was funny because I heard it and I reached out to my counterpart on the Nike site and I just texted him. I said, wouldn't it be nice to have a near short capability right now?

And I tell you, five seconds after I texted him, he said, I'm thinking the exact same thing. So a big goal of these tariffs, according to Trump, is to bring manufacturing back to America. How hard is that going to be? What's that going to take to happen? Well, I've done it twice, right? I brought an Apple product into Austin, Texas.

I tried to get Nike back into Guadalajara, Mexico. It takes a long time and it takes deep pockets. Representatives from Nike and Under Armour said that the companies are working out responses to tariffs. John says we shouldn't expect North American-made sneakers to become the norm anytime soon. It's really hard to imagine a quick shift out of Asia. In fact, it's pretty impossible. I think with the Nike example, the clearest thing when it shows you is that actually robots

can't make everything so that you will need a lot of laborers, you will need a lot of skilled laborers and good luck finding them in the United States, right? You know, you can find them, but you're going to have to pay them, you know, pretty well. And that's definitely going to be expensive and very, very difficult. That's all for today, Thursday, May 8th. The Journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us on Spotify

or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.