Trump’s Tariffs: Beauty’s Winners and Losers

President-elect Donald Trump has called a tariff “the most beautiful word.” And if he enacts his planned tariffs on foreign-made goods, the beauty industry will certainly feel their impact.

On the campaign trail, Trump proposed levying tariffs as high as 60 percent on goods made in China, and 20 percent on those from other markets such as Europe, in order to reward American companies for doing business with other domestic firms. According to the Washington-based think tank the Tax Foundation, the proposed tariffs would hike taxes by $524 billion annually and shrink the US’ GDP by at least 0.8 percent, without accounting for the possibility of retaliatory tariffs or a wider trade war.

While some investors think the tariff threats are more likely to be a negotiation tool than a foregone conclusion — in his previous administration, Trump did posit and then walk back some tariff policies — China has been a consistent target.

If they go ahead, the beauty industry would be sure to feel the impact, though some firms would fare better than others.

E.l.f Beauty, for instance, is particularly vulnerable because around 80 percent of what it sells in the US is made in China. Other firms that make beauty tools and electronics in China, like the popular LED face masks or hair stylers sold by Current Body and Shark would also be implicated. Jolie, a company that sells shower filters made in China purported to have skincare and hair care benefits, said it would need to raise the price of a filter by 24 percent to $205 if the tariffs go ahead.

In contrast, Estée Lauder Companies has multiple manufacturing plants on home soil, with its largest in Melville, Long Island, while L’Oréal makes around two-thirds of what it sells in the US domestically, with a central hub in North Little Rock, Arkansas.

Still, the ramifications could be far-reaching. Many ingredients and raw materials used for cosmetics and their packaging are sourced from countries including China, Italy, Japan and Korea. European firms like Givaudan and Firmenich produce fragrances like Lancôme Idole, Marc Jacobs Daisy and Boss Hugo Boss, while companies like French perfume bottle maker Verescence manufacture for the likes of L’Oréal.

It’s still unclear if the proposed tariffs will go ahead, and if they do, whether they’ll apply to all materials or solely finished goods. In the meantime, preparing for these changes will likely stress-test the supply chains and margins of many beauty firms, and mean they need to pad their US budgets.

“Bigger companies with lots of different business lines, lots of domestic production and a frankly endless list of real cost savings … can find ways to manage through,” said Lauren Lieberman, a managing director in Barclays investment bank. “For smaller companies, it is probably going to be tougher.”

Who Is The Most Vulnerable?

Beauty’s most visibly exposed company is mass beauty brand E.l.f Cosmetics, which makes around 80 percent of its products in China, and sells around 80 percent in the US.

Its overseas supply chain has allowed it to keep prices low — most products cost less than $10. But since the first Trump administration, which saw the 2019 implementation of an initial 25 percent tariff on Chinese imports — the company has worked to diversify its production, reducing its reliance on Chinese production from around 99 percent to around 80 percent, chief financial officer Tarang Amin said on an August call with analysts.

“To offset those tariffs, we had a number of levers at our disposal. We had cost savings with our suppliers, cost concessions with our suppliers, foreign exchange moved into our favour,” he said, adding that the company had increased prices by around a dollar or so too.

Should the proposed 60 percent tariff go ahead, Korinne Wolfmeyer, an analyst at investment bank Piper Sandler, said it doesn’t mean E.l.f. Beauty is necessarily in dire straits. For one, she said the cost of the tariff is often split between its suppliers and the company itself, and that in order to protect its margin, she estimates the company would only need to raise its prices by 20 percent, which “sounds like a lot, but when a lot of [E.l.f’s] products are $6, $7, it’s not a big lift,” she said. For other companies like Jolie or other beauty tool makers, the price increases could feel more significant to consumers.

E.l.f Beauty’s overall performance can also be shielded by the other brands in its portfolio; it also owns brands like prestige skincare maker Naturium, which makes all its products in the US. While around 68 percent of E.l.f Beauty’s products are likely to be hit by the tariff, Wolfmeyer said the overall margin hit “isn’t as significant.”

Because the US makes up around 80 percent of its sales, continuing to grow sales outside of the US can also serve as a buffer, she added.

“They can really ramp up international and get [that] to be a bigger part of the mix.”

Who Is Best Positioned?

The uncertainty around the specifics — and likelihood — of the tariffs can also put pressure on margins. Raising prices is one lever to offset the cost of tariffs across the supply chain, but consumers are reeling from inflation-prompted price hikes, which have largely been powering beauty’s overall growth since 2023, even in top-performing categories like fragrance. Shoppers’ anger at rising prices, even on discretionary items, is palpable.

“If you’re all driven by price, your consumer relevance has gone down,” said Lieberman.

If brands with supply chains implicated by tariffs have to raise their prices to protect their margins, they risk consumer pullback. A firm like Estée Lauder Companies, that has several US manufacturing plants, could be able to outspend squeezed competitors.

“If [competitor brands] aren’t raising their prices and just taking a margin hit, theoretically, [an ELC brand] has greater flexibility to reinvest in marketing and in store activity,” said Lieberman, adding that ELC’s management have previously dismissed the impact of tariffs by pointing to their domestic manufacturing capabilities and gross profit margins.

Any other price rises will need to be carefully considered. While brands might be able to increase their prices to cover any tariff impact, and perhaps even to provide further growth, consumers are finely attuned to price increases, with growth beginning to taper off in the US as shoppers look for better deals and more conscious consumption.

What Can Companies Do Now?

While the impact of any tariffs won’t be felt until most firms’ 2026 financial year, supply chains need to be stress-tested now. For firms that manufacture some products overseas and some in the US, ensuring their domestic plants can handle an increase in production is key, as well as closely monitoring the impact on raw materials and components.

There’s also the possibility of retaliation, both in the form of tariffs from other countries, or consumer pullback, particularly in China. (A fresh pullback in the Chinese market is the last thing international beauty brands want, as the country’s slow pandemic recovery is already dampening sales.) If prices do spike in the US because of the tariffs, consumers could turn to the grey market or seek out cheaper prices from third-party sellers or by deputising friends and family members to buy on their behalf overseas.

Companies with flexible supply chains and agile procurement processes have a leg up, as well as those that already have room in their margins. Lieberman gave the example of Procter & Gamble, which owns mass brands like skincare line Olay and hair care maker Herbal Essences as a company in a strong position, given that the majority of what they sell in the US they produce in the US.

“They have an incredibly flexible supply chain and can move production and sourcing as they need,” she said. Firms that can move fast, negotiating with suppliers to arrange concessions or even shift production will come out on top.

Supply chains and procurement might be less attention-grabbing parts of growing a beauty company, but in times of instability, they can become the difference between a profitable quarter and a pressurised one.

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