Trump’s Tariffs Send Beauty Industry Into Crisis Mode

With US President Donald Trump’s “liberation day” tariffs now in effect, the beauty world has spent the last week in frantic preparation. Brands have been negotiating with both suppliers and retailers on prices, CEOs are evaluating their entire budgets line by line and investors are pulling term sheets, executives and founders told The Business of Beauty.

The Apr. 5 tariff announcement, which slapped double-digit fees on beauty manufacturing hubs like South Korea and France, turned the industry “upside-down,” said David Chung, the founder of skincare label Farmacy and beauty manufacturing company iLabs, which handles production in both South Korea and the United States for over 50 brands. “The whole world right now is at 180 degrees. Everyone is literally going crazy. They are panicking,” he added.

The import-reliant US beauty industry is set to be hit especially hard as full tariffs go into effect today and all top-five trading partners received rates above 20 percent. South Korea, which eclipsed France as the largest source of beauty imports to the US last year, will see a rate of 25 percent, a significant blow to the booming K-beauty market. The first 10 percent “baseline” tariffs began on Saturday.

If the numbers stay in effect where they are now, the impacts will be felt across the beauty supply chain, even in cases in which a product is labelled as “made in the USA.” For the brands sourcing from countries with the highest tariffs such as China, which saw 104 percent in tariffs go into effect after midnight, staying afloat will be a challenge.

“This 32 percent increase in Taiwan — we can’t just eat that,” said The Lip Bar founder Melissa Butler in an Instagram video, noting that the brand’s prices would likely go up as a result of the new tariffs. She noted that 85 percent of the brand’s products are made in Taiwan, with packaging produced in China as well as some production in Italy and a “tiny bit” in the United States. “Small businesses especially can’t afford these tariffs,” she said.

“This is existential for a lot of brands,” said Stacey Tank, the CEO of Bespoke Beauty Brands. The company is the parent company of Kimchi Chic Beauty, which sources products from South Korea and other locations. “Anxiety is high, and I understand that, especially if you’re not well capitalised. I was on the phone with someone this morning who said that she’s afraid she’s not going to make payroll.”

K-Beauty’s Reign

Comprising 22 percent of all US beauty imports, South Korea’s tariff rate is poised to have one of the biggest impacts on the industry if trade negotiations beginning today are not successful.

In 2007, a US free-trade agreement between South Korea and the United States paved the way for a K-beauty boom in the United States. Beyond the Korean cultural wave that led to the influx of K-pop and Korean films into the US market, the country’s manufacturing innovation led to its rise as an important source of production for international beauty brands — first for skincare, then makeup and now increasingly hair.

Surpassing France as the United States’ largest source of non-fragrance beauty imports in 2024, South Korea’s homegrown K-beauty brands have seen a renewed wave of US popularity in recent years thanks to their TikTok virality. The country’s reputation for its innovative formulas has attracted a wide range of global made-in-Korea brands like Rare Beauty, Glow Recipe, 111Skin and Olive & June.

The beauty supply chain that brings brands to the shelves of US retailers is global and complicated. South Korea and other big beauty exporters like France, Canada and Italy have a production infrastructure that the United States simply does not. Nearly all US brands get packaging components from China, say experts. And while some products, like skincare, are made at scale in the US, more technical items — such as gel lip pencils, inky eye pens or finely milled blushes — tend to be made abroad.

“The manufacturers have to change their business model in order to incorporate a lot of makeup stuff, like the pens, eye pencils, eyeliner pencils, eyeliners. Those aren’t really made here,” said cosmetic chemist and beauty influencer Javon Ford. For bigger brands, “because they’re working at such scales, and the technology they’re using, it’s mainly in Korea.”

For many formulas, the tariff rates still do not make US manufacturing competitive on prices. According to Tank, the prices of Kimchi Chic Beauty’s made-in-Korea products would be “four to eight times higher domestically.”

That doesn’t factor in the time and investment that would need to go into setting up a manufacturing infrastructure for certain products. The process of building Korea-level capacity for beauty production would take “hundreds of millions of dollars” and at least two to four years, said Tank.

Even manufacturers like iLabs that already produce in the US have little more than a head start on what would still be a costly transition.

“You cannot do that overnight,” said Chung.

South Korea-produced Krave Beauty founder Liah Yoo also posted on Instagram that the brand would be raising prices, saying that its next shipment from South Korea would be facing the 25 percent tariffs. “This will change pretty much everything,” she said, predicting that K-beauty would no longer be considered affordable.

Navigating the Chaos

With production likely to remain abroad, Trump’s promised manufacturing jobs probably won’t materialise, at least in beauty. But one area that could see cuts is corporate jobs as brands scramble to slash budgets and maintain margins.

“As a business, you have to figure out the math, and that means you have to look everywhere, and that can unfortunately include jobs,” said Tank. The cuts could also hasten the adoption of AI over human workers as executives look to find cheaper options for customer service.

Hiring and jobs are just one area brand leaders are looking at in an attempt to maintain margins while minimising impact to the customer. Executives and experts noted cuts could be made in the areas of agency partnerships, warehouse space or choosing formulations with cheaper materials and more “filler” ingredients to keep prices down. Brands have also started negotiation talks with retailers and suppliers, hoping they will help shoulder the weight of new costs.

“Right now, everyone’s negotiating. They’re asking factories, ‘Can you drop us 10 percent, 20 percent to offset, and then we take some losses too?‘” said Chung. “Everyone’s squeezing.”

As companies worry about costs, startups are likely in for increased fundraising difficulty.

“Some of the investors that I was speaking with said they pulled all their term sheets when all of this came out,” said Tank. “It’s very hard to raise capital right now.”

While budget strategies may vary, one thing experts agree on is that price increases are inevitable.

“No matter how you strategise, at the end of the day, consumers pay for those increases. No one’s going to cut their profit margin,” said Chung, who estimates that prices could generally increase by at least 10 to 15 percent across categories.

Some brands are taking a “wait and see” approach as countries hit by tariffs attempt negotiations. In an Apr. 8 note on Truth Social, Trump posted that he had “a great call with the Acting President of South Korea” and “we have the confines and probability of a great DEAL for both countries.” South Korea’s trade minister Cheong In-kyo will visit Washington, DC today, and the tariffs have been challenged in the US court system.

“My advice is stay put right now, wait and see if it’s posturing or not, and just optimise for speed in your supply chain,” said Nick Benson, the founder of beauty product development and manufacturing platform Atelier, which connects beauty brands with the producers of labels like Glossier, Shiseido and La Mer.

With such an unprecedented level of uncertainty gripping the industry, brands are taking the crisis one day at a time.

“No one probably alive today has ever lived through tariffs that look like this,” said Tank. “Not one person has the lived experience of how to navigate this. So we’re going to have to figure it out together.”

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