Page 67 - Plastics News November 2025
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IN THE NEWS
through rates to see where margins or cash ders among suppliers in different regions to
flow may be most vulnerable. mitigate single-country risk.
2. Overlay potential volume fluctuations if high- Vertical Integration & Strategic Alliances
er prices suppress sales.
♦ Upstream Partnerships: Acquiring or forg-
Risk Adjusted Discount Rate ing joint ventures with resin producers can
lock in pricing and secure raw materials.
1. Incorporate a risk premium into discount
rates for net present value calculations if ♦ Downstream Collaboration: Collaborating
your supply chain or top line is heavily ex- with key customers (e.g., large OEMs) to
posed to tariff fluctuations. share in tariff-related cost adjustments.
Mitigation Cost-Benefit Analysis Foreign Trade Zones (FTZs) and Duty Drawback
1. Include budgetary impact for tariff mitiga- Programs
tion measures—like dual sourcing, contract ♦ FTZs: Reduce, defer, or eliminate duties for
renegotiations, and inventory hedging—to goods imported and then exported.
assess net financial gains versus operational
complexity. ♦ Duty Drawback: Reclaim a portion of tariffs
paid if the product is later exported or used
Why This Matters: This holistic modeling frame- in a finished good that is exported.
work helps boards, lenders, buyers and inves-
tors understand the full financial picture — sup- Note, recent proposals have suggested limit-
porting informed decisions on M&A valuations, ing or removing drawback provisions for special
financing terms, and strategic expansions. tariffs; however, no sweeping policy entirely ex-
cluding these tariffs from drawback has been fi-
Mitigation Strategies to Preserve Enterprise Val- nalized. That said, the complexity of obtaining a
ue successful drawback claim can be considerable,
so each company must evaluate the practical
A well-defined mitigation plan can help plastics feasibility of recouping those tariffs on a case-
companies stabilize margins, attract favorable fi- by-case basis.
nancing, and maintain robust valuations in spite
of trade volatility. Contractual Hedging
Supply Chain Diversification ♦ Forward Contracts: Negotiate longer-term
contracts at a fixed price to shield from im-
♦ Alternative Regions: Sourcing from countries mediate tariff hikes.
with more favorable trade agreements to re-
duce tariff burdens. ♦ Financial Instruments: Use currency and
commodity derivatives to hedge some cost
♦ Dual/Multiple Supplier Strategy: Splitting or-
volatility.
November 2025 PLASTICS NEWS 67
