Avery Dennison (AV3) Risk Analysis

We have operations in more than 50 countries and our domestic and international operations are strongly influenced by matters beyond our control, including changes in economic, geopolitical, social and labor conditions, tax laws, and U.S. and international trade regulations (including tariffs), as well as the impact these changes have on demand for our products. In 2025, approximately 69% of our net sales originated outside the U.S. Macroeconomic developments such as impacts from slower growth in the geographic regions in which we operate; inflation resulting from, among other things, increased raw material, energy and freight costs; labor shortages; geopolitical, social, supply chain and other disruptions; epidemics, pandemics or other outbreaks of illness, disease or virus; and uncertainty in global credit or financial markets could result in a material adverse effect on our business as a result of, among other things, lower consumer spending, fluctuations in foreign currency exchange rates, reduced asset valuations, diminished liquidity and credit availability, volatility in securities prices, and credit rating downgrades. Trade-related uncertainty remains elevated between the U.S. and other regions and countries, including Canada, Mexico, China, India and the European Union. In 2025, the U.S. implemented a 10% global baseline tariff rate on nearly all imports, with higher rates on certain goods. Additionally, it applied significant tariffs on goods from Canada, Mexico, China and the European Union, each of which announced reciprocal tariffs. The amount of these tariffs or the classes of goods on which they are applied continues to evolve and could significantly change. The U.S. government continues to negotiate with countries regarding the tariffs. In July 2025, the U.S. and the European Union agreed to a framework for a trade deal that included a baseline tariff rate of 15% on most goods imported from the European Union into the U.S. While the direct impacts on our operations after our mitigating actions have not been significant, our business could be materially adversely impacted by changes in U.S. and non-U.S. trade policies, including potential modifications to existing trade agreements and additional tariffs or other restrictions on free trade, impacting our raw materials or finished products. The indirect impact on demand for our products and solutions as a result of these events, which have resulted in softer consumer volumes, continues to be uncertain and elevated. We estimate that the indirect impact of tariffs resulted in an aggregate low single digit rate decrease in sales in our overall apparel categories over the second, third and fourth quarters of 2025. In February, 2026, the U.S. Supreme Court ruled that the applied tariffs were not authorized under the International Emergency Economic Powers Act. Beginning in the second quarter of 2026, the U.S. Customs Border and Protection began processing refunds related to certain unliquidated tariffs affected by this ruling. In June 2026, the U.S. Department of Justice filed an appeal in the U.S. Court of Appeals for the Federal Circuit asserting that the U.S. Court of International Trade overstepped by ordering refunds to non-litigants on liquidated entries. In July 2026, the U.S applied new tariffs of 10.0% and 12.5% on certain imports from 60 countries. Further developments in international trade relations, including ongoing developments on tariffs required by the U.S. or other countries, and increased deglobalization, could have a material adverse effect on our business. In addition, business and operational disruptions or delays caused by geopolitical, social or economic instability and unrest – such as recent civil, political and economic disturbances in Syria, Yemen, Iran, Turkey, North Korea, and Bangladesh and the related impact on global stability, recent conflicts involving the U.S., Israel and Iran and related hostilities in the Middle East, the Russia-Ukraine war, the Israel-Hamas war, the U.S.'s engagement in Venezuela, terrorist attacks and the potential for other hostilities or natural disasters in various parts of the world – could have a material adverse effect on our business. Since the Russia-Ukraine war began in 2022, we have maintained our position of not shipping products to the Russian market. The impact of the continuing war, as well as any further retaliatory actions taken by Russia, the U.S., the European Union and other jurisdictions, is unknown and could have a material adverse effect on our business. In addition, our sales in Israel have not recovered since the beginning of the Israel-Hamas war in late 2023, with sales representing less than 1% of our total net sales in 2025. The recent conflicts involving the U.S., Israel and Iran have affected our operations in the Middle East, a region that represented approximately 2% of our net sales in 2025. The continued impact of these conflicts and any related hostilities in the Middle East region or elsewhere is unknown and could have a material adverse effect on our business. We are not able to predict the duration and severity of adverse economic, geopolitical, social, or labor conditions in the U.S. or other countries.