Page 65 - Plastics News November 2025
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introduced under various trade measures (e.g., Potential Consequences
Sections 301 and 232) targeting specific coun-
tries or product categories. Plastics manufactur- ♦ Margin Compression: Increased input costs
ers must stay vigilant in tracking exemptions, ad- can narrow profit margins if manufacturers
justments, and expirations that can significantly cannot swiftly pass these costs on to cus-
impact supply chains and bottom-line profitabil- tomers.
ity. ♦ Supply Chain Disruptions: Uncertainty
around tariff rates can prompt supplier shifts,
How Tariffs Affect the Sector
shipping delays, and volatile lead times.
Raw Materials: Resin imports (polyethylene, ♦ Competitive Pressures: Firms in tariff-ex-
polypropylene, PET), additives, and certain posed regions may lose ground to global
chemicals often face elevated duties that can in- competitors operating in tariff-free jurisdic-
stantly raise cost of goods sold (COGS). While a tions, pressuring both market share and
substantial portion of resin consumed domesti- profitability. However, even with tariffs,
cally is produced in the U.S., many specialty or some plastics-related imports can still land
high-performance resins are more likely to be at a lower total cost than domestically pro-
imported, as domestic capacity for niche or ad- duced equivalents, especially in cases where
vanced grades is more limited. For most plas- a country’s labor and production costs are
tics processors, raw material is by far the largest significantly lower.
input expense, emphasizing the importance of
passing through tariff-related price increases as Tariff Impact on Company Valuations
soon as feasible.
When evaluating mergers, acquisitions, or capi-
Equipment and Machinery: Tariffs on special- tal raises, investors and lenders scrutinize tariff
ized injection molding or extrusion equipment exposure for its potential to impair cash flows
can derail capital expenditure plans. Quantifying and revalue assets. The key mechanisms include:
these tariffs can be more complicated as well, ♦ EBITDA Adjustments: Unexpected tariff ex-
making pass through ability more challenging.
penses can reduce earnings before interest,
Cross-Border Supply Chains: Even if a company taxes, depreciation, and amortization (EBIT-
does not import materials directly (i.e., the com- DA), leading to downward revisions in enter-
pany purchases from a domestic supplier rather prise value if multiples remain unchanged.
than sourcing from overseas), second- or third- Quantifying tariff exposure should be front
tier suppliers could be importing components of mind for a quality-of-earnings analysis to
or raw materials subject to tariffs, and as a re- justify treating those costs as one-time or
sult, may pass on their own tariff-related price non-recurring, particularly if the tariffs are
increases. politically driven, temporary measures
November 2025 PLASTICS NEWS 65
