China SBS Challenges & Opportunities on Tariff Increase
Introduction: Since the Trump administration came to power, the United States has continued to impose tariffs on imports from China. Starting from March 3, an additional 10% tariff has been imposed on the original basis, which may have a profound impact on China’s SBS and downstream product market. Under the background of high tariffs, China’s SBS and some downstream products are facing challenges. Yet, behind the challenges, there are also opportunities for the export of SBS and downstream products.
Since the Trump administration came to power, the United States has continued to impose tariffs on goods imported from China on the grounds of the “fentanyl” issue. Starting from March 3, it imposed another 10% tariff on Chinese goods, which may have a profound impact on the existing SBS, SEBS, and downstream product market patterns. The impact on China’s export of SBS and SEBS is limited, while the greater impact lies in the end downstream products, involving shoes, home carpets, and daily necessities.
The shoemaking, TPE and other product industries are facing unprecedented challenges
According to the latest data from World Footwear Yearbook released by APICCAPS, global footwear output in 2023 fell by 6% YoY to 22.4 billion pairs (data for 2024 has not yet been released). China is the world’s largest footwear producer, with output reaching 12.3 billion pairs in 2023, accounting for 55% of the global total. China exported a total of 8.89 billion pairs of shoes throughout 2023, accounting for 72% of the total. Against the backdrop of the United States imposing tariffs on Chinese goods, there may be a large impact on China’s main end products such as footwear, especially in some regions such as Guangdong and Fujian, which mainly receive export orders from the United States, having an impact on products involved in the industrial chain.
Downstream demand recovery in Q1 fell short of expectations under the influence of the tariff increase.
As one of the major downstream products of SBS, the TPR shoe material industry has been greatly affected. Since the imposition of tariffs in March, orders and production in some major shoe material markets have been greatly affected. Under cost pressure, some mid-to-long-term orders failed to be accepted normally, resulting in a decline in current and future operating rates. As another downstream of SBS, the TPE industry has also been greatly affected in some areas, especially for carpet materials and foamed export products, which may lead to a slowdown in the growth data of the TPE industry in 2025.
Some end product enterprises accelerate the transfer to overseas markets such as Southeast Asia.
Since the tariff increase in March, product enterprises have suffered unprecedented cost pressure. Take the footwear industry as an example, after two tariff increases, the tariff on Chinese footwear exports to the United States has soared to 45%. The average tariff on Vietnam’s exports to the United States is only 12.5%. The huge cost difference puts China’s footwear industry at a disadvantage in the international export market. For this reason, China’s footwear industry actively seeks to build factories overseas such as in Southeast Asia to accelerate industrial transfer in order to cope with unfavorable competition.
Industrial transfer has potential export opportunities for SBS and downstream TPR.
As for some Southeast Asian countries, although there is an advantage of low-cost and intensive labor, there is a lack of upstream industrial chain supporting resources, and the main feedstock is heavily dependent on imports. From the perspective of major exporting countries in Asia, China is far superior to other countries in terms of SBS and TPR capacity and supply chain perfection. After China’s footwear and other product industries go global, more feedstock supply may still mainly rely on China’s resources, which provides potential development opportunities for China’s SBS and TPR exports.
SCI’s view on the tariff increase.
Every coin has two sides. The tariff increase may have a short-to-mid-term impact on the SBS industry chain, but there are great development opportunities in exports as China has the most complete supply chain system in the world. From a development perspective, there are expected to be opportunities for China’s SBS and TPR shoe materials industries in the long run. SBS players need to improve their internal competitiveness more. At the same time, they need to focus on overseas, and gradually shift from relying solely on the domestic market in the past to developing domestically and exporting in parallel, so as to gradually get rid of the current situation.
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