US leather suppliers wary on new tariffs

The US hides and skins industry is concerned that the escalating trade dispute between the US and China may hurt their ability to compete in the global market, as the industry highly depends on foreign markets.

Hides and skins products are not targeted in the new tariffs China has announced. But the materials are a byproduct of the meat industry, which might take a hit, as China said it will increase the tariff rate on pork and beef by 25 percent.

"Tariffs are never a good option for any industry, either to the exporter who may lose market share or the importer who must pay more for raw materials and risks losing business opportunities," said Stephen Sothmann, president of the US Hide, Skin and Leather Association.

"Given the large trading relationship between the US and China in hides, skins and leather products, a tariff increase on the industry would negatively impact industries in both countries equally," he said.

The US is one of the top hides and skins suppliers to the global leather manufacturing industry. The producers regularly export more than 90 percent of total US production of these products, according to the association.

China is by far the largest leather and leather goods producing country in the world and the largest market for US hide and skin products.

China is the largest buyer of cattle hides with imports of more than $871 million in 2017. More than 50 percent of the cattle hides that the US produces goes to China each year.

"Combined, the total value of these product exports was just over $1 billion in 2017. It is a stable market for our products, consistently importing about $1 billion each year," said Sothmann.

The main states in the US that would be impacted by a potential tariff on hides and skins imports are those that have a large meat industry presence. "That tends to be the Midwest and Plains area of the country, such as Nebraska, Colorado and Texas," he said.

The thriving industry has been facing a challenge from slowing global leather consumption since 2015. A variety of factors, including reduced leather utilization in footwear globally, have pushed overall leather demand lower, according to the association.

A potential tariff would put the US industry at a competitive disadvantage as "formidable competitors" finalize free trade agreements, said Sothmann.

"Any large, commercial producer of beef is a competitor to the US in cattle hides, such as Australia, Brazil and some European countries," he explained.

The industry is paying close attention to the global trade landscape and concerned about the political rhetoric surrounding international trade, Sothmann said.

"We are all concerned about further tariff escalations. We encourage both governments to continue negotiations to resolve this dispute without further escalation," he said.