Welcome to the 84th edition of our Newsletter EdGenie's 📜 Sunday Scroll...

Every Sunday I send out actionable tips, tricks and real-world application insights from my 15 year experience coaching students to achieve As and A*s in their Economics A Levels via EdGenie.

Hey Genies, 👋

Here's exactly what you need to be doing this Easter break.

Firstly, join my Easter Revision Course. 🌟

(No-brainer, right?)

Now let’s get tactical. 🎯

Many of you have covered the course content but still have gaps.

This means you need to reverse-engineer your learning through question practice as time is of the essence. 🔄

Here’s exactly what I want you to do every week:

🏃‍♂️ Nike’s New Launch Faces Trouble: Nike launched the Vomero 18 to regain market share but is now hit by steep U.S. tariffs on Vietnamese-made goods.

🇻🇳 Vietnam – The Shoe Capital: Vietnam has become a global hub for trainer manufacturing due to cheap labour and skilled workers.

💸 Tariffs Bite Hard: President Trump imposed a 46% tariff on Vietnamese footwear, on top of existing 20% duties, raising costs significantly.

🏭 Long Supply Chains, Slow Shifts: Relocating production takes up to two years; firms can't easily or quickly move supply chains elsewhere.

📈 Consumer Prices May Rise: Companies may either absorb the cost, raise prices, or negotiate lower supplier rates—most likely leading to costlier shoes for U.S. consumers.

 🌍 Global Options Limited: Alternatives like Mexico, Turkey, or Brazil are being considered, but most are also impacted by new U.S. tariffs.

 📉 Nike and Puma Hit Hard: Nike’s share price fell; Puma struggles to raise prices due to weaker brand power, unlike Adidas, which may fare better.

 📊 Vietnam’s Trade Surplus Under Fire: Vietnam’s large trade surplus with the U.S. drew attention; tariffs are based on “reciprocal” trade imbalance figures.

 🔄 Market Rerouting Likely: Brands may divert stock to other regions (Europe, Middle East, China) to avoid U.S. tariffs, raising competition abroad.

 🧩 Global Supply Chain Tensions: The article illustrates how interconnected and fragile global supply chains are in the face of trade policy shifts.

Q. Explain how offshoring to Vietnam by firms like Nike illustrates the concept of comparative advantage.
A. Comparative advantage occurs when a country can produce a good at a lower opportunity cost than others. Vietnam offers lower labour costs and a skilled workforce in footwear manufacturing, making it attractive for firms like Nike. By offshoring production there, Nike minimises costs and maximises efficiency. This allows the U.S. to focus on higher value-added activities like design and marketing. Such global specialisation improves world resource allocation. It also reflects the gains from trade when countries specialise according to their comparative advantage.

Q. Analyse the likely impact of the 46% U.S. tariff on Vietnamese footwear imports on consumer surplus in the U.S.A.
A 46% tariff raises the price of imported footwear, leading to higher retail prices for consumers. As a result, consumer surplus—the difference between what consumers are willing to pay and what they actually pay—will fall. Some consumers may be priced out of the market or switch to lower-quality substitutes. This causes a loss in allocative efficiency. While domestic producers may benefit marginally, the overall effect is a deadweight welfare loss. The incidence of the tariff largely falls on U.S. consumers due to inelastic demand for branded trainers.

Q. Evaluate how protectionist policies like tariffs affect global supply chains and economic efficiency.
A. Protectionist policies disrupt global supply chains by increasing production costs and causing firms to reconsider their sourcing strategies. Tariffs reduce trade volumes and may lead firms to shift operations to less efficient producers. This misallocates resources, reducing global productive and allocative efficiency. In the long term, supply chains become more fragmented and less cost-effective. However, protectionism may boost domestic employment in specific industries if firms relocate back. Still, this often comes at the expense of higher prices and reduced consumer choice.

Q. To what extent does Nike’s situation illustrate the challenges firms face when operating in a globalised economy?
A. Nike’s reliance on global supply chains highlights key globalisation challenges—vulnerability to political decisions like tariffs, exchange rate volatility, and shifting demand. While globalisation allows cost minimisation and market expansion, it exposes firms to external shocks beyond their control. Sudden tariff impositions can damage profits and complicate strategic planning. Firms must also navigate ethical concerns and labour standards across jurisdictions. Despite these issues, globalisation remains essential for competitive pricing and innovation. Nike’s case reflects the need for flexible, resilient supply chain strategies.

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