Supply chain issues have been roiling the globe since the coronavirus pandemic began last year and retailers are still facing challenges with volatile production, COVID business restrictions and shortages of many goods. A great example of this can be seen in Vietnam, where many manufacturers had moved production during the trade war years of the Trump era to diversify and avoid tariffs. However, Vietnamese authorities this week announced an extension of restrictions in Ho Chi Minh City, the country's business hub and COVID outbreak epicenter, sending shockwaves down the supply chain.
Snapshot: Factory shutdowns in Vietnam led Wall Street research firm BTIG to downgrade Nike(NYSE:NKE) shares last week, while high-end furniture chain RH (NYSE:RH) had to delay the launch of its contemporary furniture collection until next spring. Some companies have even gone as far as to announce they are bringing production back to China, like footwear producer Designer Brands (NYSE:DBI), which said six years of supply chain work was undone in six days. "When you think about the amount of effort everyone was putting into getting out of China, and now one of the only places where you can get the goods is China," CEO Roger Rawlins declared. "It really is crazy, the roller coaster everyone has been on here." According to BTIG, other retailers with significant exposure to Vietnam include Under Armour (NYSE:UAA), Lululemon (NASDAQ:LULU), Columbia Sportswear (NASDAQ:COLM), Coach owner Tapestry (NYSE:TPR), Ugg and Hoka parent Deckers Outdoor (NYSE:DECK) and Michael Kors parent Capri Holdings (NYSE:CPRI).
Commodity prices and trading have also been a hot topic given the constraints seen in Vietnam. The nation is the No.2 coffee producer in the world, but is battling its worst COVID outbreak since the start of the pandemic. In August, Vietnamese coffee exports fell 8.7% from July to 111,697 tons, continuing a downward trend seen since January. As a result, benchmark arabica coffee futures (KC1:COM) have jumped by nearly 47% this year, a price that has also been affected by waves of frost and drought in No.1 producer Brazil. Coffee prices could stay "relatively high" through 2022 due to the constrained supply, according to Fitch Solutions.
Future supply chain? In a twist of irony, China formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership on Thursday. The initial 11-nation Asia-Pacific trade pact (originally known as TPP) was crafted under the Obama administration to "let America, not China, lead the way on global trade." President Trump pulled out of the deal in 2017, calling it a "job killer," while President Biden has said the pact needs to be renegotiated before he would consider joining CPTPP.