Impact of Tariffs on Cost Structure and Pricing Strategy
The company's global direct tariff impact in 2025 is estimated at approximately $40 million, down from an earlier estimate of $60 million, reflecting changes in tariffs, especially on China and copper.
Management highlighted ongoing analysis of cost inputs and active adjustments in pricing strategies to mitigate tariff effects, with full realization of recent tariff-related price increases expected in the second half of the year.
Tariffs on Europe are now set at 15%, and copper tariffs are also impacting costs, leading to multiple rounds of staggered price increases between March and June, with full effects anticipated in the latter half of 2025.
The company has a track record of successfully navigating inflationary periods and remains confident in maintaining favorable price/cost outcomes despite the fluid tariff environment.
Impact of Trade Uncertainty on 2025 Outlook and Margin Management
Timken has reduced the high end of its 2025 earnings guidance due to cautious outlook on the second half, primarily driven by trade uncertainty.
The volatile tariff environment has led to incremental costs, but the company is actively passing these costs into the market through repricing, with some lag.
Timken estimates a full-year net negative impact from tariffs of approximately $10 million, an improvement from previous estimates of $25 million, with full mitigation expected by 2026.
Impact of U.S. Tariffs on Swiss Imports and Guidance Revision
U.S. administration announced a significant increase in tariffs on Swiss imports to 39%, which would negatively impact FY2025 EPS guidance by approximately $0.40.
The gross impact of tariffs on the company is estimated at around $95 million annually, with efforts underway to fully offset these costs by next year.
Management emphasized ongoing mitigation actions and confidence in their ability to offset tariff impacts, despite the dynamic and uncertain trade environment.
Management highlighted the ongoing 25% automotive tariffs, which have significantly influenced import patterns and demand, especially in the tire industry.
The surge in tire imports into the U.S. following the early May tariff deadline has elevated channel inventories and weighed on local tire manufacturing, with expectations of normalization in June data.
Tariffs on India, including potential 15-25% rates, are expected to impact carbon black imports, making them less economically viable and influencing global supply dynamics.
Negotiations for tariffs in India are underway for 2026, with early customer actions driven by elevated tire imports and optimistic outlook for resolution.
European markets are under investigation for Chinese tire dumping, which could alter competitive dynamics and import pressures in the region.
Management anticipates that the new tariff paradigm could lead to a demand ramp-up in 2026, despite current uncertainties and cautious customer behavior.
Dafinchi