Gap Inc. faced a significant stock decline, with shares dropping about 15% following its announcement about the financial impact of U.S. tariffs. The company revealed that the tariffs imposed during President Trump's administration could affect its annual operating income by around $250 million to $300 million. As Reuters reported, this stark revelation caused concern among investors, leading to the sharp fall in share prices.

To mitigate the impact, Gap has devised a plan to offset more than half of these costs, although it has not included the impact of these tariffs in their fiscal forecasts. The company’s decision to exclude the tariff impact from its forecasts was a significant factor contributing to investor anxiety. Despite these concerns, Gap still projects a promising future, maintaining its 2025 outlook which anticipates 1% to 2% sales growth and an 8% to 10% increase in operating income.

In response to the tariffs, CEO Richard Dickson has highlighted steps to reduce Gap’s dependency on merchandise from China. By the end of 2025, the company aims for less than 3% of its merchandise to be sourced from China, ensuring no single country accounts for more than 25% of their sourcing by 2026. Meanwhile, Gap's recent quarterly performance was strong, with revenue hitting $3.46 billion and earnings per share at 51 cents, boosted by robust demand from Old Navy and the Gap brand.