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With President-elect Donald Trump reentering the White House on Jan. 20, tariffs are once again a major concern for the beauty industry.
While nothing is set in stone as of yet, Trump has most recently threatened 100 percent tariffs on the BRICS nations of Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia and the United Arab Emirates. This is in addition to the 25 percent tariffs he has mooted for all goods imported from Canada and Mexico.
The stakes are high if these threats become reality. In the case of China alone, government data showed that U.S. imports of toiletries and cosmetics from China totaled more than $1.5 billion in the year to October. What’s more, this is for finished goods and doesn’t account for ingredients and packaging, much of which is sourced from China.
“Let’s say, on average, 30 to 40 things go into making a shampoo. Each one of those components could potentially have an original source in a tariffed country,” said Christine Staples, chief executive officer of Cohere, consisting of four manufacturers — Marianna Beauty, Arizona Natural Resources, Health Specialty Inc. and Contract Filling Inc.
The result, industry experts cautioned, could be price increases across the board to mitigate the impact of these tariffs.
“Higher taxes on imported beauty goods could significantly affect the end cost for the consumer, due to increased import costs on ingredients and supply chain disruptions that require product reformulations,” said David C. Chung, Founder and CEO of iLABS and Morae Packaging. “An increase in tariffs could mean the beauty products you buy today could be noticeably more expensive in 2025, which could polarize consumers as the demand for lower-priced goods will rise.”
Among the big players most impacted is E.l.f. Beauty. While it has reduced its footprint, 80 percent of its goods are still imported from China.
“We’ve been subject to 25 percent tariffs since 2019 so we know how to deal with tariffs,” said Tarang Amin, CEO of E.l.f., during an interview with WWD last month. “Last time, we had a very balanced plan between pricing, [foreign currency exchange], supplier concessions, cost savings so we’d use a similar playbook this time. The other thing we have this time is that, in 2019, 100 percent of our manufacturing was done in China, but now we have less than maybe 80 percent,” he continued, noting that the business has been diversifying in other parts of Asia, the U.S. and Europe.
“You’ll continue to see us do that combination,” he said, “that balanced plan, plus additional diversification. We’ll have to see what they are. But I’ve got a lot of confidence in the team and our ability to navigate that.”
Others stressed they are already more diversified.
“We will monitor the transition in the U.S. closely and adjust our priorities to ensure the sustainability of our business,” the Estée Lauder Cos. CEO Fabrizio Freda told investors during the company’s annual stockholder meeting in November. “As a global company, we have a diversified manufacturing size and a robust global supply network. Our supply chain agility ensures we are well positioned to respond to changes in the tariff landscape.”
Sue Nabi, CEO of Coty, had a similar message: “We closely monitor the markets we are operating in, not only to ensure that they’re able to capture all the opportunities, but also to enhance any developing elements. For Coty, the supplier base and manufacturing footprint is really balanced between the U.S. and Europe, and this can help us mitigate any kind of potential risk across our business, wherever it happens.”
Andre Schulten, chief financial officer of Procter & Gamble, stressed, too, that the company has a very global supply chain with a lot of built-in flexibility. He added that it has the ability to revise formula cards as needed, which allows it to shift not only ingredients, but also sourcing of ingredients. “In most cases, we’re already multi-region sourced, multi-supplier sourced,” he said.
Bath & Body Works, meanwhile, manufacturers 85 percent of its products in North America.
But while these global companies appeared confident in their strategies, tariffs could significantly hinder smaller brands.
“Big CPG companies have teams that can manage this really well,” Staples said. “They also have more leverage at retail than the emerging indie brands, so a big CPG company can negotiate really hard with the low-cost country sources where they’re getting these materials. They can also lobby, and they can also bring in large quantities of materials in advance of a tariff hitting. Small brands don’t have that leverage.”
She advised that they work with manufacturers on mitigation plans, which could entail changing buying quantities, locations of purchase, ingredient sources and choices.
Chung added that although many beauty products and packaging materials are manufactured in China, brands should consider alternative options like Vietnam or South Korea, where it has a location.
“Using alternative turnkey materials and manufacturers could lead to significant tariff cost savings for the brand and consumer. While moving manufacturers takes time, there can be an added benefit to relocating,” he said. “Overall, companies need to adapt by reevaluating their supply chains, pricing strategies, and market approach strategies to mitigate the negative impact of the increased tariffs.”
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