The Impact of the Tariff War on the Adhesive Industry

Recently, adjustments to U.S.-China tariff policies have sent ripples through the adhesive industry, much like a stone dropped into a lake. The effects of these policy changes on the adhesive industry are gradually becoming evident, prompting relevant companies to take proactive measures in response.

I. Overview of U.S.-China Tariff Policy Changes

Since the beginning of this year, the United States has made multiple adjustments to tariffs on Chinese adhesive tape products. Building on the 25% tariff imposed in 2019, an additional 20% tariff was imposed in March this year, followed by another 34% tariff recently, bringing the cumulative increase to 79%. Meanwhile, the United States has imposed a 46% tariff on Vietnamese adhesive tape products and a 24% tariff on Malaysian products. These frequent and significant tariff adjustments aim to influence the cost and market competitiveness of imported products through trade policy measures, thereby reshaping the supply chains of related industries.

II. Impact on the Adhesive Industry

(1) Cost Aspect

1. Rising Raw Material Costs

Adhesive production heavily relies on various chemical raw materials, some of which must be imported from the United States. The increase in tariffs has led to a significant rise in the cost of imported raw materials. For example, for certain special resins, additives, and other critical raw materials, companies must spend more funds on procurement, directly compressing profit margins. If companies cannot promptly pass on these costs, they will face a decline in profitability.

2. Increased Transportation Costs

Changes in trade policies have led to adjustments in logistics routes and changes in transportation demand, resulting in higher transportation costs. Whether it is the import of raw materials or the export of finished products, the increase in transportation costs has further increased the operational costs of companies. This cost increase has a chain reaction, potentially leading companies to make adjustments in pricing, market strategies, and other areas.

(2) Market Aspects

1. Fluctuations in Demand

For adhesive companies directly exporting to the U.S. market, the significant increase in tariffs has reduced the price competitiveness of their products. U.S. customers may reduce purchases of Chinese adhesive products due to price factors and instead turn to suppliers from other countries or regions. For example, some U.S. construction companies that previously imported large quantities of construction adhesives from China may seek alternative products from Southeast Asia, Europe, or other regions, which will directly impact the market share of Chinese adhesive companies in the U.S. market and, in turn, affect the company's overall revenue.

2. Changes in the Competitive Landscape

Under tariff pressure, some companies may choose to lower prices to maintain market share, intensifying price competition within the industry. Meanwhile, companies with cost advantages and the ability to quickly adjust their supply chains will gain a competitive edge. Some companies are establishing overseas production facilities to avoid high tariffs, enabling them to stand out in market competition, leading to gradual changes in the industry's competitive landscape.

(III) Supply Chain Level

1. Supply Chain Restructuring

To address tariff risks, companies are actively restructuring their supply chains. On one hand, some companies are accelerating the establishment of overseas production bases, such as in Southeast Asia and Mexico, to reduce tariff costs. On the other hand, companies are strengthening cooperation with domestic suppliers, increasing the proportion of locally sourced raw materials, reducing reliance on imported raw materials, and enhancing the stability and resilience of the supply chain.

2. Inventory Management Challenges

The uncertainty of tariff policies makes it difficult for companies to accurately predict market price trends for raw materials and products, posing significant challenges to inventory management. Excessive inventory may lead to product depreciation risks, while insufficient inventory may disrupt normal production and delivery, resulting in customer loss. Companies need more precise market forecasting and inventory management strategies to address this complex situation.

III. Responses from Adhesive Companies

(1) Yongguan New Materials

In response to investor inquiries about tariffs, Yongguan New Materials stated that its direct exports to the United States account for approximately 4% of total revenue, a relatively low proportion, and that the current US-China trade tariff friction has had a limited impact on the company's overall business. Additionally, in response to the uncertainty of global trade policies, the company leverages its first-mover advantage. Its overseas factories have a tariff advantage over domestic production capacity in terms of U.S. business, and these overseas factories can also serve countries such as Mexico and Pakistan that have imposed tariffs or anti-dumping duties on China. The company will continue to closely monitor changes in international trade policies and actively implement countermeasures.

(2) Henkel Group

Henkel Group, the global leader in the adhesives industry, announced on April 3 that it will adjust product prices effective May 1, 2025. This price increase decision is primarily driven by “continuously rising raw material, environmental, and logistics costs,” and it explicitly states that existing orders with delivery dates after May 1 will also be subject to the new prices. In fact, as early as the beginning of 2025, Henkel had already adjusted prices for selected products in its product portfolio due to complex and volatile macroeconomic conditions, economic growth slowing under the influence of monetary policy, ongoing inflationary pressure in the market, historic increases in energy prices, and rising labor costs. These adjustments took effect on January 10. This price hike may prompt competitors to follow suit, posing significant cost challenges for downstream industries reliant on Henkel adhesives, such as automotive manufacturing and electronics assembly.

(3) Wacker Chemie

Following Henkel's price hike announcement in early April, global silicone and polymer giant Wacker Chemical announced on April 9 that it would follow suit, raising prices for emulsions and redispersible latex powders in Europe and the United States starting May 1. The collective action by these two industry leaders signifies that the coatings and chemicals supply chain is undergoing dual shocks from cost pass-through and supply chain restructuring.

Wacker Chemie stated that, effective May 1, 2025, if existing customer contracts permit, Wacker will increase prices for emulsions and redispersible latex powders produced in Europe and the United States, with the maximum price increase reaching up to 5%. The primary driving factors behind this price adjustment are the sustained rise in raw material and logistics costs.

It is understood that Wacker Polymers manufactures adhesives and additives based on vinyl acetate, vinyl acetate copolymers, and terpolymers, which are widely used in various fields such as building chemicals, coatings and surface coatings, adhesives, sealants, carpet applications, and non-woven fabrics, as well as fiber composites and polymer materials based on renewable resources. The price adjustment of its products will undoubtedly have a certain impact on the downstream coatings industry.

Wacker Chemie is headquartered in Germany and is a globally operating specialty chemicals company renowned as an expert in silicone chemistry and vinyl polymers. Wacker supplies over 3,000 products to more than 100 countries and regions, with most products based on inorganic raw materials. Its product portfolio covers virtually all major industries, from cosmetics to solar cells, and even includes tile adhesives. The most important customer industries include automotive, construction chemicals, semiconductors, consumer goods, medical technology, pharmaceuticals, and the photovoltaic industry.

IV. Summary and Outlook

The adjustments to U.S.-China tariff policies have had a comprehensive and far-reaching impact on the adhesive industry. Based on company announcements, different companies have been affected to varying degrees due to differences in business structure and market positioning.

For the adhesive industry, companies must actively address challenges in cost control, market expansion, and supply chain optimization in the short term to mitigate the impact of tariff policies. In the long term, the industry will accelerate integration and upgrading. Companies must continuously enhance their technological innovation capabilities, increase product value-added, optimize supply chain management, and strengthen their risk-resilience in complex trade environments to remain competitive in the market. Industry practitioners should closely monitor policy developments, promptly adjust business strategies, seize opportunities arising from market changes, and collectively promote the sustainable development of the adhesive industry.