Ansell Ltd (ASX: ANN) shares have been under pressure since the US announced reciprocal tariffs on goods from several countries around two weeks ago.

Shares in the protective personal equipment (PPE) company are down 13% for the year and currently trade at $29.27 apiece, having slipped from $34.43 on April 1st.

Now, Macquarie analysts have weighed in on the potential impact of these tariffs on Ansell and its local shareholders. Here's what the bank says investors need to know.

How might tariffs impact Ansell shares?

Ansell shares, like most on the ASX, have not been immune to the global market sell-off that occurred in the days after the tariff announcements.

What the long-lasting impacts of the policy will be – including whether it will even remain in place – are yet to be fully known.

Still, Macquarie has updated its earnings forecasts for Ansell in a note to clients this month, factoring in the potential fallout from the US tariffs. It says it is the "most exposed" to the tariffs in its coverage universe.

The bank expects that Ansell will be able to pass on about 75% of the tariff costs to customers by raising prices on its goods sold.

But this still leaves a "significant downside" risk for the company if it can't fully pass them on. As it stands, it produced 42% of its revenue in the US in FY24, whereas a total of 60% of its revenues are based in US Dollars.

It also has a "diversified" supply chain, claiming 14 manufacturing facilities across nine different countries, the largest in Malaysia and Sri Lanka.

While management is confident in the plan to "fully offset tariff increase through pricing", according to Macquarie, any failure to fully pass these costs on could clamp down on profits and, by extension, Ansell shares.

We see (Ansell) as the most exposed to tariff headwinds in our coverage. The high level of reciprocal tariffs assessed on a broad number of Southeast/South Asian countries will pressure costs. For a low-margin business, ANN's earnings face significant downside if the company cannot successfully pass through tariff increase to end-customers.

However, ANN's products are daily necessities for its industrial and healthcare clients who value supply chain stability over price alone. Moreover, the supply chain for medical surgical products are highly comparable across competition.

We expect ANN to lean on its scale and strong customer relationships in those price discussions to offset the tariff impact.

Whether this eventuates or not is a matter of time and fate, but in the meantime, Ansell shares continue to be volatile in the wake of the tariff announcements.

What's the outlook?

Macquarie also revised its target price for Ansell shares, lowering it by more than 20% from $40.30 to $31.05.

This reflects the expected impact of tariffs on earnings and the broader uncertainty in the industrial sector. The broker has also downgraded Ansell from a buy to a hold rating.

Macquarie also revised its forecasts on Ansell, now projecting a 17% decline in net profit for FY25, followed by a further 16% drop in FY26. At the end of the day, if the tariffs do stay in place, it's all about Ansell's ability to pass the costs onto customers, as the broker repeats throughout its note.

Our scenario analysis points to downside risk to earnings if the company cannot fully pass through potential cost increases (Figs 5-8). We incorporate a more conservative assumption of ~75% tariff pass-through in our forecasts (in-line with our base-case scenario).

Foolish takeaway

Ansell shares are at a crossroads after the US announced reciprocal tariffs on its major trading partners this month. Investors have sold the stock in line with the broader market's decline.

What this means going forward is anyone's guess, but Macquarie sees risks to Ansell's profits these next two years. The stock is up 17% in the past year.