Spuntech: Who Is Really Absorbing The Tariffs, The Customers Or The Company

Where The Main Article Stopped, And What This Follow-Up Is Isolating

The main Spuntech article argued that 2026 is not really a demand question. It is a margin-conversion question. This continuation isolates the exact point of friction: not every tariff hits Spuntech the same way, and not every cost increase lands on the same side of the transaction.

That matters because the blunt reading, “tariffs hurt the company,” misses the internal structure. When the cost comes through raw materials imported into the U.S. plant, the company describes a mechanism under which most of the increase was passed on to customers. When the tariff sits on finished goods shipped from Israel into the U.S., the company keeps uniform prices for identical items from both plants and therefore absorbs a significant part of the hit itself. Put differently, customers pay for one layer and the company pays for another.

The timing made that especially important. 2025 already carried a heavy FX squeeze, so every shekel of tariff cost that could not be passed through hit a margin system that was already under pressure. The real question is not whether there were tariffs. It is which tariff moved through to the customer and which tariff got stuck inside Spuntech.

Two Tariffs, Two Absorption Mechanisms

Spuntech is effectively describing two different tariff channels, with very different economics:

This is the core point. Spuntech is not dealing with one tariff problem. It is dealing with two different ones: an input-cost shock that can be passed through to a meaningful degree, and a trade-cost shock that collides directly with its pricing architecture.

Where Customers Really Paid

In the market-risk section and the risk-management policy, the company explains that it adjusts selling prices in source currency, usually once a quarter, for changes in raw-material prices and market conditions. Elsewhere it adds that most raw-material price changes are passed to customers quarterly, semiannually, or monthly. That is not a perfect mechanism, but it is a real pass-through structure.

That is why the raw-material layer in the U.S. looks more manageable. The company says raw materials imported into the U.S. plant became about USD 2 million more expensive because of the tariff program, but most of that increase was passed on to customers. This is an important point about margin quality: when the shock looks like a raw-material cost, Spuntech seems able to route it into its existing pricing machinery.

That also means 2025 should not be read as a complete pricing failure. The pass-through system exists, and it worked in at least one part of the chain. The problem is that it works better when the cost arrives as a familiar input-cost change, and worse when it is tied to the difference between Israeli production and U.S. production.

Where The Company Itself Paid

This is where the story becomes sharper. The company states explicitly that it keeps a uniform price for identical items whether they come from the plant in Israel or from the plant in the U.S. That is a reasonable commercial choice if the goal is to show the customer one price rather than reopen the source-of-production argument on every order. But in 2025 that same choice became an economic constraint.

On exports from Israel to the U.S., the company paid about USD 2.4 million of tariffs, about NIS 7.7 million. Because it wanted to preserve the same price for identical items from both plants, it had to absorb a significant part of those tariffs. So the most visible tariff layer, the direct trade tariff on cross-border shipments, did not pass through cleanly to the customer.

The numbers make clear that this was material. In the fourth quarter alone, the tariff on exports from Israel to the U.S. reduced gross profit by about NIS 3 million. In the second half of 2025, the tariff program cut more than NIS 5 million from gross profit. This is no footnote. It is large enough to explain why better utilization and better volume did not fully translate into margin recovery.

The paradox is that the uniform-pricing policy protects customer relationships while breaking the economic symmetry between the two plants. If the customer gets the same price regardless of whether the goods came from Israel or the U.S., then every time Spuntech serves the U.S. market from Israel during a tariff regime, part of the cost stays inside the company. That is no longer a demand problem. It is a margin ceiling embedded in the pricing policy.

Why 2025 Was Especially Sensitive

The tariffs did not hit in a clean year. At the same time, the shekel strengthened by 6.65% against the dollar on the 2025 annual average, and the company quantified a NIS 45.8 million revenue hit and a NIS 12.6 million gross-profit hit from FX. In the fourth quarter alone, the FX drag took about NIS 21.3 million out of sales and about NIS 4.5 million out of gross profit.

The analytical implication is that unpassed tariffs were not operating in a vacuum. They arrived in a year when each dollar of revenue translated into fewer shekels and when inventory values were already being compressed in shekel terms. So the tariff hit on the Israel-to-U.S. channel was not just another cost item. It landed on a margin base that had already been weakened by FX.

That is also what explains the asymmetry between the two tariff layers. In the U.S. raw-material channel, the company could still activate its pass-through mechanism. In the Israel-to-U.S. finished-goods channel, it entered with a stronger shekel, a uniform-price policy, and less room to absorb costs. That is likely why the disclosed hit to gross profit became so visible in the second half and in the fourth quarter.

2026 Does Not Start From A Clean Slate

There is relief here, but not a full reset. On February 20, 2026, the U.S. Supreme Court ruled that President Trump had exceeded his authority in the broad tariff program, but on the same day a new 10% global tariff was announced on top of tariffs that remained in force. Even after that change, a 10% tariff still applies to imports of the company’s products into the U.S.

That means the more problematic layer, the tariff on finished goods entering the U.S., did not disappear. It only fell from 15% to 10%. By contrast, the company does not provide the same kind of updated quantification for the raw-material layer after the February 2026 change. So the clean reading is not “the tariff issue is over.” It is narrower: the pressure eased, but the channel that trapped margins in 2025 still exists in 2026 as well.

That also sets up the next test for investors. If Spuntech shows better gross margin under a 10% tariff regime, that would suggest the company is improving its production mix, its price transmission, or both. If margin still fails to improve after the move from 15% to 10%, the conclusion will be that the uniform-pricing architecture is more expensive than it first appears.

Bottom Line

The answer to the title question is both sides, but not in the same layer. Customers absorbed a large part of the raw-material inflation in the U.S. because Spuntech has a relatively structured mechanism for updating prices around raw-material costs. The company itself absorbed a significant part of the tariff on exports from Israel to the U.S. because it chose not to price identical items differently by source of production.

That is what turns tariffs from an external annoyance into a margin-quality issue. As long as tariffs still apply to products entering the U.S., and as long as the company keeps the same pricing rule for identical items from both plants, part of Spuntech’s gross profit will continue to be determined not just by volume, but by which plant supplied the goods and who paid for that decision.