Swiss sportswear brand On (ON) may see improved profit margins if proposed US tariff reductions on athletic footwear and apparel are implemented. The potential cut could lower import costs for the company, which sources a significant portion of its production from Asia.
- On (ON) faces a proposed 4.5% US tariff rate on sportswear imports, down from 7.5%
- Tariff reduction could improve On’s gross margin by 1.2% to 1.8% on US-bound products
- 18% of On’s revenue comes from the US market, with performance footwear comprising over 60% of US sales
- On’s production is diversified across Vietnam, China, and Turkey, enabling swift supply chain adjustments
- Consumer discretionary ETF (XLY) rose 0.3% on the news, with minimal impact on USD index
On, the Zurich-based athletic footwear and apparel manufacturer, is positioning itself to benefit from a proposed reduction in US tariffs on imported sportswear. The company, which trades under the ticker ON on the Nasdaq, currently faces a 7.5% tariff on its footwear imports into the United States. A proposed adjustment by US trade authorities could lower this rate to 4.5%, marking a 40% reduction in the import duty burden. The move is part of a broader review of Section 301 tariffs, which were initially imposed in 2018 on Chinese goods. While the full scope of the review includes various consumer goods, sportswear has emerged as a key category where tariffs are under reconsideration. For On, which generates approximately 18% of its annual revenue from the US market, the potential tariff cut could translate into a 1.2% to 1.8% improvement in gross margin on affected product lines. The impact would be most pronounced on On's higher-margin performance footwear, which accounts for over 60% of its US sales. With production facilities in Vietnam, China, and Turkey, the company’s supply chain structure allows it to quickly adjust sourcing patterns if tariff changes are finalized. Analysts note that while the benefit is not transformative, it provides a tailwind in a highly competitive market where margin preservation is critical. The broader market reaction remains muted, with the consumer discretionary sector ETF (XLY) showing a 0.3% gain following the announcement. The US dollar (USD) index held steady, indicating no immediate currency market shifts. The potential for reduced trade friction could encourage other European apparel makers to reassess their US import strategies, but On remains the most directly exposed.