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Leatherbiz Market Intelligence executive summary: •
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Under the current circumstances, with the tariffs that are being announced, there is almost no clarity, for now or for the foreseeable future The biggest problem for everyone involved is that US policy is completely unpredictable at the moment The political situation is currently offering plenty of excuses for the difficulties in the leather pipeline, but nobody should make the mistake of seeking to present this as the sole cause of those problems Leather use is declining because there is no longer enough demand Manufacturers of many products have little interest in using leather because it places additional production demands on them Many brands and manufacturers have also given in to a popular view in recent years that they should distance themselves from leather The leather industry has bowed down far too easily to this pressure As a result, we are now faced with a situation in which the total amount of raw material available is much greater than the market for the products that can be made from it Not so long ago, one of the biggest problems in the leather industry was ensuring a reliable supply of raw materials We do not need to apologise for leather as a material It would be appropriate not to expend too much energy inwards, and focus efforts more proactively on a modern strategy to make the material popular with consumers again.
MARKET INTELLIGENCE
T
he leather pipeline is struggling to come to terms with the fact that the end of the first quarter marks the beginning of a long period of calm and fewer events. This was not unusual even in years when the leather business was still dynamic and characterised by sufficient demand. This dynamism is certainly not in evidence in 2025 and has been missing for much longer. In these times of completely unpredictable political decisions, who is supposed to pursue any kind of far-reaching entrepreneurial strategy? Just consider the large number of investments that were either made or planned in the era of functioning globalisation and virtually unrestricted free trade. Under the current circumstances and the tariffs currently being announced, almost nothing is as it was. Above all, it is completely unclear how things will continue in the foreseeable future. The consequences of these actions for the economy are certainly many times more complicated than the currently very simplistic views of many political leaders. While the tariffs on Mexico and China are certainly of great importance to US consumers
and companies, export-dependent companies in Europe are of course very strongly affected by the tariffs that have now been imposed on their exports to the US. In any case, tariffs of 25% will have to be accommodated in any calculation, even if some luxury brands have announced corresponding price increases, they will hardly be able to offset the 25% level immediately. Ferrari has announced that it will increase its prices in the US by 10% with immediate effect. If you take into account the very high contribution margin that some brands have at their disposal and combine this with the very high pricing power that they also have, then for the absolute luxury sector it is a burden on the margin, but not yet a really big business problem. The situation is of course different for companies that are heavily dependent on the export market in the US, but whose margins are significantly lower than the new tariffs of 25%. Investors are now analysing very closely how high the share of turnover of these companies in the US is and what opportunities they have to pass on the tariffs to buyers. Of course, this also affects a whole host of other supply chains, particularly those of US
companies with production facilities in Mexico. Even though customs duties may only account for a small proportion of the total cost of a product, it could still be an unmanageable burden for suppliers in the tariff-burdened countries. This plays a particularly important role in the automotive industry and therefore also applies to supply chains in the leather industry. It becomes particularly complex for products that cross borders in both directions several times during their manufacture and production chain. In the case of other consumer goods, exporters in China are particularly affected. Many manufacturers have already made the decision to relocate their production to other countries in south-east Asia and the Indian subcontinent. It remains to be seen whether this will work, as the government in Washington DC has already announced that it will be looking very closely at this kind of ‘evasion’ and circumvention and will be scrutinising very carefully whether suppliers from Vietnam, Thailand, India, Pakistan and many others are actually Chinese companies. The biggest problem for everyone involved, however, is that US policy is completely unpredictable at the moment. It often gives the impression that there is no willingness or ability to really analyse the possible effects of many decisions in detail. It seems many politicians no longer want to concern themselves with minor details and would rather play big-country monopoly than think about the consequences of their actions. Even if big politics is currently offering plenty of excuses for the difficulties in the leather pipeline, nobody should make the mistake of seeking to present this as the sole cause of the many problems. Firstly, the real and fundamental problems lie much further back and secondly, they reach much deeper into the difficulties of the leather industry. Even though we have already discussed this many times in the past, it is important to emphasise again and again where the essential problems lie. In addition to the regional problems, which have been caused by political decisions in Europe in recent years, the core problem remains unsolved. The raw material as a by-product of meat production is declining in its material use as leather because there is no longer enough demand. Manufacturers of many consumer goods have little interest in using the material because it places additional demands on them in the manufacture of their products that they do not want to have to deal with. In addition to the requirements arising from the use of leather as a material, many brands and manufacturers