This Week in Earnings – Q1'25

Executives Quantify Direct Tariff Impacts and Underscore Manageability through Working with Vendors, Supply Chain Shifts, Cost Offsets, “Surcharges”, and “Local for Local” Strategies; Note Greater Concern with Knock-on Effects to Demand, Pricing, and Ultimately Inflation 

• Avery Dennison ($14.0B, Containers & Packaging): “We’re working to mitigate the direct impacts of the recent tariff announcements, while also activating our proven playbook to manage throughout various scenarios. As it relates to the direct impact of tariffs in both the current rate scenario, as well as the scenario where the previously announced tariffs revert after the 90-day pause, a relatively small proportion of our material purchases are impacted, less than 10% globally. It’s also important to note that the vast majority of our imports and exports between the U.S., Canada and Mexico are USMCA compliant. The overall direct cost impact will likely represent low-single digit inflation on our total raw material purchases. In order to mitigate the potential impact, we’re implementing some sourcing adjustments and pricing surcharges.”
• Dow ($24.7B, Chemicals): “While the tariff environment remains fluid, we estimate greater than 95% of our North American volume is USMCA compliant, which is an advantage for Dow. We have engaged in rigorous scenario planning to identify potential additional cost pressures and mitigation strategies.”
• Minerals Technologies ($2.0B, Chemicals): “We have a relatively small direct cost impact from tariffs just because we’re primarily sourcing and selling locally. But if I had to put a dollar number on it, the first quarter was about a $300,000 impact on tariffs, the second quarter probably about $1M. We have ways of mitigating that and we’ll likely offset most of that. But there’s some timing elements to passing that through and alternate sourcing and things like that. But that’s another cost element that we’re watching.”
• Eastman Chemical ($10.2B, Chemicals): “The main issue is how long do the tariffs stay in place that make it very expensive to buy an appliance or water bottle or whatever else in the U.S. that’s made in China. There’s some uncertainty and risk around how those supply chains adjust to that. There’s a huge amount of effort going on around the world right now to find ways to source and make these products, ramp up production. With all these uncertainties around tariffs and where they may negotiate, it’s hard to predict what the impact is in the back half of the year. I would note there are mitigating actions that we’re taking…we’re working with a lot of customers around how they’re moving to other parts of the world to make products. If we’re under pressure, imagine what it’s like being someone sourcing a blender from China right now. They’re highly motivated to find solutions and we’ll follow them where they go.”
• Freeport-McMoRan ($54.4B, Metals & Mining): “We’ve talked with our vendors, and the dollar amount of Chinese purchased components in their supply chain is not significant. [However], the magnitude of 145% is what adds up quickly. And so, if that’s reduced, this potential tariff impact will be reduced significantly. I’m confident that working with our suppliers, we can find ways to mitigate these impacts.”
• DuPont de Nemours ($31.3B, Chemicals): ”Based on tariffs in place today, our estimated cost exposure in 2025 before mitigation action is about $500M on an annualized basis. We have identified actions to substantially offset this potential headwind with the net cost impact currently estimated at about $60M, which primarily would impact the second half. We are a global organization with presence in all key regions. Our scale provides ample flexibility to adjust production and product flow, enabling us to mitigate trade risks. Additionally, from a sourcing perspective, the vast majority of our raw material buy is purchased in the region in which it is consumed and not subject to the new tariffs. Our teams have been carefully analyzing ongoing global supply chain dynamics, engaging with our customer and supplier base, and actively working on a number of tariff mitigation actions, including production shifts, sourcing alternatives, surcharges and product exemption.”
• Ecolab ($71.9B, Chemicals): “Even though we don’t import much from China, we expect the annualized impact from tariffs and increased local supplier cost due to higher onshoring demand to be a few hundred million dollars. To mitigate this impact, we recently announced a 5% rate surcharge for all customers in the U.S. only. This surcharge leverages the tools and capabilities we built a few years ago to ensure we can reliably supply customers, while also delivering value to them that exceeds the total price increase, so it’s a win-win situation. So, we expect the benefit from the trade surcharge to build over the coming months with full implementation beginning third quarter.”

Secondary Knock-on Effects / Demand Impact

• International Paper ($28.2B, Containers & Packaging): “We don’t ship a lot of stuff across borders that are going to be impacted by the tariffs. Almost all of the impact that we’re going to see is going to be second order effects. And really what happens to demand, therefore, what happens to price, and what could happen to inflation. The biggest thing that we’re concerned about is weakening demand, and then a third order effect of price. And then potentially, if you get a spike in inflation, that’s the really dark scenario that at this stage we don’t see. But you’ve got to at least consider it.”
• Crown Holdings ($10.4B, Containers & Packaging): “[In] our Mexican beverage can business, almost exclusively the cans we sell are filled and distributed in Mexico. Very few cans that our customers fill in Mexico get exported to the U.S. So, we don’t have that direct impact from tariffs. What we do worry about in a geography like Mexico would be the indirect impact, that is, consumer demand. In Canada, we have two very well run facilities, one in Toronto and one in Calgary, supplying soft drinks and beer. To the extent that Canadians want to consume more Canadian beer as opposed to U.S. imports, that will benefit us. If there are large tariff impacts for Canadian beer exported into the U.S., I don’t see that as a large impact to our Canadian business.”
• Avient ($3.4B, Chemicals): “While the direct impact from tariffs is not expected to be significant, we cannot underestimate the impact tariffs can have on overall market demand. Several public reports have confirmed a slowing demand environment in the U.S., which is also corroborated by some of our customers, especially in consumer, building and construction, and transportation end markets.“
• Avery Dennison ($14.0B, Containers & Packaging): “The indirect impact of trade policy on macro demand is more uncertain. The majority of our portfolio is anchored in consumer staples, but we also serve some more discretionary markets, such as industrials, durables and apparel. In apparel, retailers and brands serving the U.S. market are assessing sourcing, supply chain and pricing strategies, especially for garments produced in China.”
• LyondellBasell Industries ($22.7B, Chemicals): “The company’s global supply network is mainly positioned to serve local demand. Globally, less than 10% of our polyolefin sales volumes are likely to see direct impacts from escalating tariffs and counter tariffs. If trade barriers end up impacting our cost-advantaged U.S. exports, we have the ability to shift supply toward cost-advantaged production in Saudi Arabia. Just like in the past, our teams have immediately started optimizing trade flows. Of course, the secondary effects of tariffs are more complex and remain a source of uncertainty.”