Trump’s Stricter Tariff Policies:
Survival Strategies for the Beauty Supply Industry

©CNN

The re-election of President Trump has brought with it sweeping tariff policies that threaten to disrupt global trade dynamics and exert significant pressure on the beauty supply sector. Unlike the targeted tariffs of the 2018-2019 U.S.-China trade conflict, which led many hair companies to shift production to countries such as Vietnam, India, and Indonesia, the new measures are far broader and more challenging. The proposed policy introduces a universal tariff of 10-20% on all imports, alongside a steep 25% tariff on goods from Mexico and Canada, and additional tariffs ranging from 60% to 100% on Chinese products. For businesses, the cost implications are immense. These tariffs are anticipated to drive up prices across the supply chain and potentially leading to higher retail prices for consumers.

Tariffs on Mexico and Canada: What do they mean for the beauty supply industry?

President-elect Donald Trump has announced plans to impose additional tariffs, citing concerns over drug trafficking and illegal immigration. In a statement shared via social media, Trump revealed his intention to sign an executive order on his first day in office that would introduce a 10% tariff increase on Chinese goods and a 25% tariff on all imports from Mexico and Canada.

For years, Mexico and Canada have been favored destinations for companies seeking to reduce tariff-related costs, bolstered by their geographical proximity and the trade benefits offered under the United States-Mexico-Canada Agreement (USMCA). However, these new tariffs threaten to erode that advantage, potentially curbing the attractiveness of manufacturing operations in these countries and driving up prices for consumers.

Canada and Mexico together account for nearly half of U.S. haircare product imports, making them critical players in the supply chain. With additional tariffs likely to impact the beauty industry at large, beauty brands may face significant new challenges.

Top 5 Exporting Countries of Hair Care Products (HSN Code 3305) to the United States (2022-2023)

Source: Global Trade Atlas

Cutting off Chinese bypasses: Stricter rules of origin signal U.S. trade shift

In tandem with its aggressive “tariff bomb” approach, U.S. Customs and Border Protection (CBP) is stepping up its efforts to curb the diversion of Chinese goods through stricter enforcement of rules of origin. These regulations mandate that products minimally processed in a third country must retain their original country of origin. Moreover, goods incorporating Chinese raw materials are increasingly being classified as originating from China, regardless of their final production location.

Currently, these measures are primarily impacting targeted sectors, such as Chinese steel and aluminum rerouted through Mexico. However, the scope of enforcement could widen significantly if tariff policies are expanded further—potentially encompassing industries like beauty and personal care. This strategy highlights a decisive effort to “eliminate all Chinese bypass routes,” signaling a profound shift in global trade dynamics.

Beauty supply companies struggle with rising costs amid reduced reliance on China

Since the onset of the U.S.-China trade war in 2019, beauty supply companies have reduced their reliance on China. However, the industry remains heavily dependent on imports. The new tariff policy, which imposes a universal tariff of 10-20% on all imports, is expected to drive up product costs. For instance, a 10% tariff alone could increase the average price of a wig from $100 to $110. Combined with raw material tariffs and higher logistics expenses, consumer prices could rise by as much as 20-30%.

Even products manufactured in the U.S. are not entirely immune to the effects of tariffs. In Fact, very few finished products are made domestically. Now, domestic production faces more challenges such as high labor costs and limited manufacturing capacity.

Beauty companies relying on patented ingredients produced overseas—especially in the chemicals and cosmetics categories—are likely to face substantial price increases, as sourcing comparable ingredients at lower costs is often not feasible. Key components such as coconut oil, palm oil, and other essential inputs for haircare and makeup are predominantly imported. Additionally, tariffs on packaging and support materials further compound the pressure on final product pricing.

As a result, value-conscious consumers may turn to alternative brands or look for products of similar quality at more affordable prices. While this shift could pose challenges for high-end brands, it could also open opportunities for beauty supply companies that provide a wide selection of budget-friendly products.

Beauty supply producing countries: challenges and opportunities

– Vietnam: A powerhouse for China substitution, but surveillance risks are increasing

Vietnam has become a leading alternative to China to produce synthetic hair, apparel, and general merchandise. However, its significant reliance on China for raw materials has made it the second-most scrutinized country, after Mexico, for potential trade bypassing. Consequently, some companies are shifting production to Myanmar and Cambodia to mitigate these risks.

– India: Ramping up ethical production and competing on quality

India remains the largest global supplier of high-quality human hair. To bolster ethical practices, all hair exporters in India are now required to obtain licenses from the Indian Ministry of Commerce. With a transparent and ethical sourcing process, Indian hair products are expected to maintain strong demand, even under the new tariff policy.

– Indonesia: A hub for low-cost synthetic hair

Indonesia is a key player in producing affordable synthetic hair, a crucial segment in the beauty supply industry. However, a universal tariff of 10-20% threatens its price competitiveness. Rising consumer prices, particularly in price-sensitive categories, could challenge the market. To mitigate these impacts, Indonesia must focus on maximizing production efficiency and diversifying raw material sources.

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– Singapore: The best place to export to the U.S. in southeast Asia

Singapore is the only country in the Association of Southeast Asian Nations (ASEAN) with a free trade agreement with the United States, allowing most exports to the U.S. to be duty-free. By processing or repackaging raw materials from nearby Indonesia, which offers lower production costs, Singapore provides an effective strategy for bypassing tariffs while optimizing logistics. This advantageous position makes Singapore a prime hub for exporting to the U.S.

– South Korea: cosmetics and skincare strengthen their presence in the U.S.

Before the U.S.-China trade conflict, the beauty industry heavily relied on China for color cosmetics. However, K-beauty has since gained prominence, particularly in skincare and color cosmetics, solidifying its foothold in the U.S. market. While tariffs may challenge K-beauty’s cost-effectiveness, ODMs like COSMAX and Kolmar Korea, which operate production facilities in the U.S., are well-positioned to capitalize on this market shift. These companies have the potential to enhance their competitiveness by expanding local production and developing customized products for the U.S. consumer base.

An analysis of U.S. imports of human and synthetic hair in 2023 and 2024 reveals that the hair industry has already significantly reduced its reliance on China. For context, in 2018, China held the largest market share in human hair exports (HSN 6704). source: volza.com

Will the $800 de minimis duty-free policy be scaled back: new opportunities for brick-and-mortar beauty supplies?

In September 2024, the Biden administration announced plans to significantly reduce the de minimis exemption, which allows importers to use the $800 low-value shipment exemption, under Sections 301 and 201 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962. This change would effectively eliminate the current duty-free thresholds for tariffable imports.

The move aims to address concerns that Chinese-origin e-commerce platforms, such as Shein and Temu, are distorting the market by flooding the U.S. with low-cost products. The expected outcome is a reduction in their ability to compete on price, potentially creating new opportunities for brick-and-mortar beauty supply stores. Consumers who have relied on these platforms for affordable wigs and hair products may return to physical beauty supply outlets, appreciating the reliability and immediacy of in-person shopping.

The Trump administration is also expected to adopt a stricter stance on the zero-tariff rule. Although specific announcements have not yet been made, measures are anticipated to tighten over the next four years. This could further enable in-store beauty supply retailers to narrow the price gap with online platforms and regain their competitive edge.

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Be prepared before tariffs rise

If tariff hikes take effect, import prices will inevitably increase, and certain products may become scarce due to hoarding. Retailers and hair companies should act proactively to mitigate the impact of rising costs by tightening inventory management. However, excessive stockpiling could lead to higher logistics costs and risks related to product expiration. Accurate demand forecasting will be crucial for optimizing stock levels without overburdening operations.

Stock up on essentials before tariffs take effect

When tariffs were announced, some companies acted swiftly by placing large orders for a year’s worth of essential items as soon as Trump was elected. To mitigate the impact of rising prices, stocking up on essential items before tariffs drive costs higher is considered a smart strategy.

Strategic inventory management through demand analysis

Leveraging sales data to prioritize stocking your best-selling products is crucial. Timeless items, such as hair products and chemicals, tend to have steady consumer demand and ensure long-term sales stability.

Prioritize products with a long shelf life

Focusing on bulk purchases of items that can be sold consistently, such as chemicals with a long shelf life, is a prudent approach. This strategy helps prevent stock-outs after tariffs are implemented and ensures you can meet customer demand even as prices rise.

Challenges and opportunities for the beauty industry under Trump’s tariffs

The future of Trump’s tariffs remains uncertain. Will they remain in place indefinitely, serve as political bargaining tools, or allow for exemptions as they did during his first term? Some experts caution that companies might exploit the tariffs as an excuse to raise prices unnecessarily.

During the 2018-2019 period, prices for some products did increase, but not as sharply as initially feared. In fact, the beauty industry has shown remarkable resilience, successfully navigating both the pandemic and the inflationary pressures that followed.

These tariff policies represent more than just a challenge—they could reshape the industry. They demand diversifying supply chains and increasing local production. Companies and retailers that anticipate these shifts and respond proactively are best positioned to gain a competitive edge, capitalize on new opportunities, and strengthen their market presence.

© Quartz