The holiday season in Europe has reached its peak. This means that hardly any leather-related factories will be open for the next two weeks. There is no such thing as a traditional summer holiday in Asia, which is why almost all eyes are on possible activity there. However, there is also relatively little to report from there, and really only that people are racking their brains as to how best to react to US tariff policy.

If you look at the movement on the raw materials markets, Vietnam remains one of the main centres for leather and shoe production, alongside China. Even if the tariffs place a burden on imports from Vietnam to the US, hides exported from the US to Vietnam are cheap. This means that part of the tariffs that are then levied on shoes and other finished products are ‘paid’ by US livestock farmers, who are currently receiving less for their animals than they hoped owing to lower returns from slaughterhouses for hides. In the overall calculation for the cattle, this is not of decisive importance, but the fact remains.

As already discussed in our last issue, China is focusing much more on the importance of the domestic market, because this is where one can see greater leverage for the leather industry at the moment. Of course, this does not mean that exports are not important and, for many products, the capacities from China cannot simply and immediately be replaced elsewhere. Nevertheless, the shifts to the Indian subcontinent and even Turkey cannot be ignored; everything can still be turned upside down by the tariff disruption.

The latest tariff announcements for Brazil also sent shockwaves through the leather supply chain. A tariff of 50% on goods from Brazil will close many doors for Brazilian products in the US market and put an end to the idea that Brazil could be a substitute supplier and production country to replace China.

A 25% tariff announced for goods from India could also have a significant impact on leather products. The last word has not yet been spoken on this matter; the tariffs in this case (as in others) have a political rather than an economic background.

For its part, the EU has concluded a tariff agreement with the US and opinions differ widely as to its impact and quality. At first glance, the 15% seems a rather low rate compared to others, but here too, products that use leather could also be hit hard. The agreements have not yet been signed and who can say at the present time whether what is being celebrated in the media as a major event will actually be finalised.

It is therefore relatively easy to summarise that, with regard to the problem of tariffs for the US market, all we know at the moment is that in reality we know nothing. Such a situation is not very helpful at a time when the demand for leather products and the use of leather is under severe pressure anyway. This is still a very cautious formulation of the situation. In addition to the direct influences on and for exports of leather products from many countries around the world to the US, the planning uncertainty is also an extremely large burden for all those involved.

Only those who either source few or no raw materials from the US or export few or no finished products to that market can take a more relaxed view of the general chaos. However, the distortions are so extensive, even in indirect form, that no one can really escape completely unaffected.

In recent weeks, many publicly listed companies have published their results for the second quarter and for the first half of 2025. The results were not particularly positive for the leather industry. European car manufacturers reported massive declines in turnover and profits and, as we all know, the use of leather has not been spared. The order situation at leather factories has been unsatisfactory for many months and this has now been confirmed once again by the figures. Publications and forecasts in such times of crisis must always be viewed with particular caution. Management boards are forced to strike a very fine balance between reality and optimism.

One thing was clear from the announcements: a rapid improvement in the situation and thus also an increase in sales and production of vehicles that are (still) equipped with leather is hardly to be expected. This means that the European automotive leather industry is unlikely to see a rapid, noticeable recovery in demand. At this point, however, we should briefly mention that we have received somewhat better news from China and that many of the major manufacturers are still using leather in their interiors. We would also like to refer back to our last issue, in which we were able to report that, when in doubt and with a reasonable price difference, Chinese customers still prefer leather to plastic.

The situation was not much better for luxury goods manufacturers. There were rays of hope, or at least one, with Hermès. But even there, there is talk of a deteriorating environment, if you read the statements correctly and know that material planning for the last quarter is being handled much more cautiously. By contrast, things looked bad for the other major groups. Declining sales and earnings, and as there is nothing more poisonous for exclusivity and luxury than failure, everything possible is being done to put the situation in perspective. A difficult task. Plans have been made, sales are not keeping pace with production, price increases have not been able to compensate, ‘noiseless’ solutions have to be found for unsold stocks of finished products and, in view of the general situation, a strong brand is no longer believed to be a recipe for quick success.

Instead, there is a fear that it is no longer possible to sell everything as luxury at top prices simply because a lot of money is spent on designers, models, advertising and store locations. It is possible that customers today demand much more than bling. Truly successful brands and their values are synonymous with eternity and must not exude the odour of transience, which unfortunately many do today. Just look at the development of materials and manufacturing. What was once craftsmanship in everything is now often an industrial commodity. Given the importance of this sector for the leather industry, the next few years will be very important. Simply buying tanneries has not and will not be enough to build on the success of the past.

As is well known, little has happened on the markets in recent weeks and the motto is ‘wait and see’. What else could you do in this phase of uncertainty, given that the holidays came at exactly the right time?

We can skip the splits and skins segments at the moment. Despite reduced supply, we are also hearing rather negative news from the split market. Intense competition for orders is also leading to price wars here, which are coming at the wrong time.

Otherwise, the European Union Deforestation Regulation (EUDR), which is due to come into force on 1 January 2026, has kept us busy again in recent weeks. This dangerous and, for many, potentially deadly monster that was created in Brussels is now said to have become a peaceful, cute little lapdog, suitable for petting and cuddling. At least this is what the European Commission seems to believe. We would not advise anyone to rely on this. They could find themselves still bitten or even eaten by the monster faster than they would like.

Without going into the details, which everyone who considers themselves affected must do anyway, it is worth considering the risk that third countries could take the zero-risk status of EU countries to the World Trade Organisation. It is almost certain that the EU will be sued by the WTO for distortion of competition. For this reason, EUDR will have to be stopped or suspended again. This is not because of the relatively insignificant leather supply chain, but because there are other areas and products in which the consequences cannot yet be fully assessed. Many regulations for finished products do not yet reflect reality at all. We should not even talk about monitoring and actual implementation. A regulation and law can only be applied if it can be monitored and complied with. There is no need to talk about the sense or nonsense of a law under these conditions.

But there are two important reasons why EUDR may not be abolished or suspended again. Firstly, the European Commission cannot lose face again; this would suggest, once again, that while the Commission wants a lot, it seems able to do little properly and in a sensible way. Secondly, there are now large corporations that are convinced that they will only be able to comply with EUDR requirements at great expense and effort. They will be able to put in the effort and carry the expense, but they know that many of their competitors will not. Therefore, they see EUDR compliance as a competitive advantage and have every interest in capitalising on it. They do not want the effort they have put into the preparations to be in vain.

We must expect the wait-and-see phase to continue over the next few weeks. On the one hand this is because of the holidays and on the other, of course, it is because of the general uncertainty caused by tariff policies. This is not just about the question of which customs duties will be levied on the end product, but also the many other influences, such as the question of energy costs, supplies and prices for chemicals, and so on. These will also have an impact.

However, it is also true that all of this affects all sectors and not the leather industry alone. The influences are so complex that it is hardly possible at present to make a final evaluation of the consequences. However, one issue, and perhaps the most important of all, remains completely unaffected: the question of how and in what form the use of leather as a material can be revitalised. Without this, all other issues may be important to individual companies, but do not change the main difficulty, which is that leather has lost market share. Any further hindrance and impediment that the decisions of the European Commission and other organisations cause will do nothing to support interest in leather, at least in Europe.