Rising production costs driven by tariffs, meanwhile, could erode margins, inflate retail prices and diminish consumer demand. Globally, the tariff climate remains volatile, with looming hikes across multiple markets threatening to exacerbate these issues.
Given Trump’s penchant for employing tariffs as a trade tactic, the beauty sector can look to the not-too-distant past for clues about how duty changes would play out. Under the previous Trump administration’s tariffs, US imports from China shrank by $87.4 billion — a 16.2 per cent year-on-year decline — bringing the total to $452.2 billion in 2019, according to the US International Trade Commission. However, overall imports remained relatively stable as importers shifted production from China to other attractive international sourcing locales, says Angela Santos, partner and customs practice leader at law firm ArentFox Schiff.
If Trump applies a “broad-brush” approach to tariffs, beauty imports will inevitably cost more, especially if duties are applied to skincare and cosmetics power producers like France and South Korea, says Neil Saunders, managing director of retail at data analytics company Globaldata.
Domestic production: A double-edged sword
The prospect of reshoring production presents a potential buffer against tariff volatility, offering benefits such as reduced lead times, enhanced quality control and lower carbon footprints. Laura McCann, CEO of fragrance company Adoratherapy, highlights the advantages of local manufacturing, emphasising the ability to handcraft premium products while reducing shipping distances and emissions.
However, these benefits come with significant caveats. Currently, only a small fraction of beauty and personal care products sold in the US mass market are made domestically — just 7 per cent, according to NielsenIQ data. Haircare, cosmetics and nail products (34 per cent), and bath and shower (18 per cent) dominate this limited share. While US-made beauty items come with a 5.5 per cent premium, Mayo notes that the rising production costs could further challenge brands trying to strike a balance between affordability and price increases.
Higher labour costs and the limited availability of raw materials in the US can significantly ramp up production expenses. Experts highlight the complexity of sourcing specialised ingredients domestically, as many are not native to the region, so shipping these components into the US adds further complexities and costs, says Santos. “Raw materials imported from China and other countries would have to be subject to increased tariffs, and then they’ll be subject to higher production costs in the United States,” she says. Since tariffs are typically calculated as a percentage of the imported product’s value, the cost impact on raw materials — which are often valued lower than finished goods — might be less significant. But these expenses still accumulate over time, adding another layer of financial strain for brands exploring onshore production.
