The circumstances that have kept the global economy on tenterhooks since Donald Trump took office for the second time in January are having a greater impact on the situation in the leather industry than events and changes that are developing within the industry itself.

This has accelerated again since April 9 with the imposition of new tariff levels by the US. This means we are now having to focus more on macroeconomics and international politics than on developments along the leather supply chain. In fact, not much has actually changed in the basic parameters of the leather supply chain since the beginning of January. There is still not enough demand to keep all leather factories busy.

We celebrated World Leather Day on April 26. Of course, any activity that endeavours to improve the image of leather and revive understanding for the material is praiseworthy. But if you use the search engines to look up World Leather Day 2025, you will realise that even after several years, it is still an event for the industry itself. 

One more general comment. At the moment, the European Commission is boasting about its adaptation to the EUDR and claims that the change will achieve a 30% reduction in bureaucracy costs for those affected in the EU. Of course, these are once again grand announcements and headlines intended to cover up failure in the matter. A poorly crafted law will not be improved by making a few cosmetic changes and then claiming that these will cut red tape by 30%. 

As far as the leather industry is concerned, we can only refer to a letter from a large number of associations, which was addressed to Commission president, Ursula von der Leyen, at the beginning of April. The problem with the deforestation regulation lies essentially in the fact that a basically good intention is implemented completely free of any expertise. Anyone who has taken a closer look at the facts will realise that the wishes, ideologies and arguments of NGOs can be found throughout the text of the regulation, which is probably due to the fact that the origin and the time of this regulation were still shaped by a social mainstream that was more concerned with ideology than with objective facts.

The core statements in the letter to Ursula von der Leyen regarding the leather supply chain deserve support. The Commission should remove hides, skins and leather from the scope of the regulation on the basis that they are not a driver of deforestation. It should remove sheepskin and goatskin products from any list of products for consideration for inclusion during the review process.

It is also explained in detail in the letter that this is not just about the economic interests of an industry. It is also the case that including these products in the first place was nonsensical. We don’t need to go into the details again, but one of the main problems with the regulation is simply that different products and regions have been mixed together in a common regulatory cocktail, which is neither correct nor applicable for large parts of the leather supply chain.

However, anyone familiar with EU bureaucracy will know that, in the best of all cases, further cosmetic corrections can possibly be expected. Of course, it would be a miracle if the leather industry were exempted in the end, or even that the entire regulation could be repealed or completely redrafted.

Let us now turn to the effects of current US trade policy. Mercantilism is nothing new and has always taken place in international trade relations. Seen in this light, the problem at the moment is not President Donald Trump’s intentions to reorganise trade relations between the US and other countries. The problem with him and his administration is that they clearly do not understand or do not want to understand the complexity of their decisions. In addition to the issue of tariffs, the main problem at the moment lies much more in the uncertainty and therefore the inability to make decisions for long supply chains. This particularly affects our industry, which can have very long supply chains from the raw material to the finished product.

At the moment, the focus is of course on the tariffs between China and the US, which have almost completely paralysed trade relations for this part of the leather supply chain. If you consider that around 30% of the cattle hides produced in the US regularly go to buyers in China, you can already see the impact this is having. If we then take the export of finished leather products from China to the US as an example, it becomes clear that large gaps in the supply of various products will appear. 

This applies to furniture and to many other consumer goods. We do not want to go into analysing the impact on individual products at this point. However, it is clear that every day that there is confusion between China and the US, entire logistics chains are broken. More than three weeks have already passed and, in addition to production, the international transport chain is slowly beginning to feel the effects of the problems. More and more ships are no longer being unloaded, the planning of transport routes across the Pacific is almost impossible and there are reports from China alone that over 100 ships loaded with exports have already been stopped.

Anyone who remembers the times of covid-19 will know how long it can take until a certain level of supply security is guaranteed again. The individual exemptions granted by Mr Trump for individual products are also of little help, as ships are not only loaded or unloaded because of individual products and containers. Either way, deliveries between China and the US will remain impaired for leather products for some time, which ultimately does not help the leather products business.

What solutions can be found for the problems? We can perhaps begin by noting the following. Approximately one-third, around 200,000 units, of the weekly US production of cattle hides must either be re-valued, taking into account the tariffs in order to continue to find buyers in China, or sellers must look for new markets.

The price of cattle hides is not only influenced by the import duty on US products to China, but also by the proportion of leather products exported from China to America. Here, too, customs duties are incurred, which are also passed on proportionately to the raw material. If no agreement is reached between China and the US in the short term, new market potential will open up for countries that are burdened with significantly lower reciprocal tariffs. US consumers will still be there, even if they buy a little less. There could be many opportunities for other countries to take over the Chinese market share. You can already see this in the diversion of flows of goods and also the fact that there are some countries that are already responding to these opportunities.

Owing to the long supply chains and the associated time windows, transport logistics will also play an important role in the decisions. In addition to the question of price, it is also crucial who, when and how much can be delivered to the US as a replacement.

However, it must also be borne in mind that individual tariffs with many countries are only suspended temporarily (for 90 days, initially, at least). Mr Trump is counting on bilateral negotiation successes, but no one knows at the moment with whom, when and to what extent these may be reached. The results of these negotiations could once again turn all assumptions and plans upside down. In any case, placing orders and receiving products in time for the winter and Christmas season will already be extremely tight.

Consumers around the world are already reacting to the uncertainty. Firstly, of course, especially in the US, where some products are being bought in advance. This is particularly noticeable for more expensive items such as cars, for which the tariffs could trigger significant price increases. Other items, on the other hand, are suffering because consumers are postponing purchases that are not absolutely necessary due to the uncertainty and expected price increases. If consumers expect everyday items to become more expensive in the near future, they will naturally postpone other purchases for the time being. As is so often the case, this also applies to leather products. All of these factors have a direct impact on consumption in the US and are therefore particularly important for those whose share of sales to and from that market is significant.

In addition to these facts, which are initially directly attributable to customs policy, we are also dealing with a number of other developments. These include, of course, the business development of luxury brands. Leather products play an important role for many of the large groups. Most recently, Kering reported a significant drop in sales for the first quarter of 2025 and the outlook for the coming quarters does not appear to be much better at the moment. Of the really big brands, only Hermès is actually able to escape the negative trend. There are also a few other smaller market players, but they do not play a significant role in the overall context of volumes.

In addition to general consumer sentiment, there is another, not insignificant problem on the horizon. At the moment, there is an increasing number of videos on Chinese social platforms questioning the value and price of imported luxury leather products and demonstrating that you could get equivalent products ‘Made in China’ for a fraction of the price. Although this is of course ‘propaganda’, its effectiveness should not be underestimated. If they disappear as quickly as they came, then it was just a shooting star. But if the idea catches on with consumers, it could very quickly become a problem.

Developments in the automotive industry on the Chinese market should serve as a warning example here. If the willingness to pay for ‘brand’ and ‘image’ decreases in China and people orientate themselves more towards value for money, this would pose a major problem for a large number of brands that are not icons. As a consequence, of course, this would also affect production and manufacturing in Europe.

Volatility in the financial markets has increased significantly. So far, the stock markets have still managed to recover from setbacks, but here too the clock is ticking. If there is no renewed reliability, then the profit forecasts of many companies will be impossible to maintain. The question of whether confidence in the US economy, and therefore also confidence in the US dollar, has been permanently shaken also remains to be answered. The US dollar has already lost 10% against many currencies and this is mainly due to the loss of confidence. Let us not forget that US dollar interest rates have risen at the same time, which makes the depreciation of the US dollar even more remarkable and the loss of confidence even greater.

So, let us summarise. Leather is still not a must-have, but an optional product. Leather demand was already shrinking before ‘Liberation Day’ on April 2. Tariffs, the war in Ukraine, the loss of consumer confidence, and the increase in uncertainty are currently determining consumer sentiment.

The prices for US raw materials are currently having to come down owing to the tariffs and are exerting corresponding price pressure on many other origins. The pressure on prices for consumer goods made of leather will continue to increase accordingly. Seasonally, we are currently entering the weak production quarters.

In our assessment, the fundamentals are therefore just as difficult and have only deteriorated further as a result of trade policy. Again an improvement can only come from a reassessment of leather as a material.

The market for leather from split is synchronised with the overall market. The influence of sales in the US has a correspondingly negative impact here. In Europe, the market for lime splits remains stable and firm because the supply from the leather industry remains small. However, this is less of a problem in terms of supply, as falling raw hide prices mean that more and more collagen is available from full hides for production today. The balance in the market for splits is likely to be severely disrupted again in the coming months owing to the potential global impact on leather production. If, for example, production in the Chinese leather industry were to fall further, this would of course also have a significant impact on the local split market too. We will be monitoring this closely over the coming weeks and months.

We do not yet see any major changes in sheepskin products. The niches and speciality products have not yet been affected by the general trend. However, we will probably see a shift in production from China here too. The market shares of Chinese producers in the US are extremely high for many finished products, which means that the pressure to relocate quickly is probably even greater than for cattle hide products. The season also plays an important role here, which is why quick and short-term decisions are probably even more important.

Finalised forecasts for the near future are not possible at the moment. The news situation changes on a daily basis and a lot can happen between the time this publication is written and published. However, this will probably only have a short-term effect on sentiment. In principle, the effect can only materialise after a long delay, because every day that passes causes too much damage in such a long supply chain such as this one.

The industry is creative and will not let the current problems get it down. Overall, however, there will probably be more damage and losses for the time being.

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