The 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 have also given in to the global mainstream in recent years, which has made it seem sensible to distance themselves from leather, especially in western markets.

The leather industry has bowed down far too easily to the supposed pressure and demands of brands and industrial clients. The pressure led leather manufacturers to aim at meeting factually untenable requirements with regard to traceability and carbon footprint, for example. This has led to an inflation of certifications and requirements that have increasingly restricted the creativity and use of hides and skins in the consumer product industry.

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. It wasn't so long ago that one of the biggest problems in the leather industry was ensuring a reliable supply of raw materials. This is no longer a high-priority criterion, unless you limit your supply base by imposing requirements that the industry does not have to fulfil.

How long has the leather industry complained that it has not been seen as the user and refiner of a by-product, or as it has so often been called, a waste product? The conflict between the meat producer and the leather manufacturer essentially lay in the fact that the one saw his product as a high-quality raw material and the other was of the opinion that he was producing a high-quality material from a necessary evil. In fact, nothing has changed at all, but today the conditions are completely different and once again the leather industry has more problems with the situation than the meat industry.

One of the biggest problems remains the fact that people are not prepared to recognise the mistakes of the past and that justifications and excuses dominate much of the discussion. People are still more afraid of the fringe phenomena, with all their supposedly unavoidable restrictions, than actually taking care of what has always been the core task of a leather manufacturer throughout history: to produce a valuable and useful material from the raw material, which wins finished product manufacturers and consumers over with its properties. Those who have been around a little longer should remember what the relationship between the use of capital and labour between production and technical development and non-productive departments in a leather factory looked like in the past and what the daily reality is in many companies today. It may remind you a little of the administration in many nations. As crazy as it may seem, unfortunately the feeling creeps over you that this has ultimately prepared the ground for many recent developments.

Only when these undesirable developments are corrected will it be possible to bring the large amount of raw material that is currently not being utilised back into the chain. In this discussion, many people are focusing far too much on the industrial chain for the production of bovine hides. Sheep, goats, yak, kangaroo, buffalo, pigs and others are also part of the raw material base for the leather industry. However, in many discussions, they are not taken into account at all, especially because of the many restrictions (such as excessive traceability) that are imposed on them. Everything always revolves around the dubious and superficial assessment of bovine meat production, which ultimately affects everyone.

It is almost grotesque that the leather industry as a whole is often guided in its decisions by the assumption that the world’s population can be fed without animal proteins. So, if it is no longer a question of whether, but more a question of where, what and how much food is produced, then the production and use of leather in the pipeline can be taken care of again without restrictions, at least as long as there are no alternatives with higher added-value in the long term.

We would also like to emphasise that there is still more than enough public opinion to support a renaissance for leather. If you look at the big technology companies, then it should not go unnoticed by anyone that, alongside Elon Musk (perhaps not the best example at the moment), the head of Nvidia, Jenson Huang, among others, does not miss the opportunity to appear in a leather jacket. This is what he wears at his public appearances, almost without exception. High-tech meets and respects natural and sustainable products. What more could you want?

The market for splits is cooling off a bit. On the one hand, this may be due to the same seasonal reality that we have to expect for the leather market as a whole in the second and third quarters. On the other hand, it is of course impossible to ignore the fact that prices for cattle hides are continuing to fall, which will naturally have an impact on the market for splits sooner or later. The situation for splits for the protein industry continues to vary greatly from region to region. While we are hearing about falling prices in China, the levels in Europe are still disproportionately high. Here, too, strategic decisions will have to be made sooner or later, because in the end it is still the economic results that determine the market. Specialities and special applications are one thing, but for standard items, raw material prices and production costs are ultimately the decisive parameters.

Raw materials for sheepskin leather continue to develop individually. On the one hand, there is still a very good and stable demand for skins that can be used as fur substitutes. This mainly concerns small skins with very fine wool. In addition, the season is now playing a role again. In Europe, the slaughter of young lambs is due in the next few months, and these light and dense-wool skins, which are only available in a certain period, must now be priced and discussed. Since there are only a few alternatives for certain end products, and the collection and processing costs are of decisive importance, negotiations on prices will certainly not be easy. There are many indications that prices will certainly not be below last year’s. A large number of skins are no longer being harvested for the leather industry and in many cases are being disposed of.

We assume that overriding political issues will continue to determine business in the coming weeks. Many supply chains need to be analysed and checked for possible impacts. This also applies to sectors that are not yet in the spotlight, such as tariffs on raw materials from the US, which are not only conceivable as counter-measures, but could also quickly redefine the flow of goods.

The supply chain for leather is already being planned again for the winter months. It is likely that we will then be able to gain insights into the current political influences.

At the same time, we will continue to follow with great interest whether the leather industry will be able to emerge from its defensive position and once again actively and confidently stand up for itself. From our point of view, it remains the case that 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.

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