How Trump’s Reciprocal Tariff Policy Impacts China’s Beauty Industry

Recently, following President Trump’s announcement of the reciprocal tariff policy, global markets have been swept into a new wave of trade tensions. These developments have added uncertainty to the world economy, putting strain on the established supply chains, potentially raising consumer prices, and slowing economic growth. As tensions continue, the cosmetics industry is feeling the effects. This article focuses on how these policies would affect the Chinese beauty market, examining key areas such as supply chains, product pricing, and shifting competitive dynamics in this rapidly evolving global market.

Trump’s Reciprocal Tariff Policy

Since early 2025, U.S. President Donald Trump has implemented a series of measures to raise tariffs on Chinese goods. On April 2, 2025, Trump signed the Executive Order Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits, announcing the so-called Reciprocal Tariffs Policy. The tariffs start at a baseline rate of 10% on 185 countries, nearly all of America’s trading partners, while slapping a higher 34% tariff on Chinese imports.

Data Source: BBC News

On April 4, China announced countermeasures in response to the US actions. The Tariff Department (Office of the Customs Tariff Commission of the State Council) issued a public notice to announce that, effective April 10, all imported goods originating from the US would be subject to a 34% tariff, in addition to the current applicable tariff rate.

Trade War Escalates

On April 8, Donald Trump declared through his social media an additional 50% tariff on Chinese imports, totaling 104%, escalating trade tensions. China swiftly responded with a matching 50% increase, bringing the total to 84%.

Afterwards, Trump again intensified the pressure by increasing the tariffs to 125%. In response, on April 11, the China Tariff Department released a public notice, announcing to increase in the US tariff from 84% to 125%. The notice further indicated that, given the current tariff level, there would be no market acceptance for U.S. goods exported to China; any further tariffs imposed by the United States on Chinese goods exported to the United States would be ignored.

Impact on China’s Beauty Industry

1. Reconstruction of Supply Chain

The ongoing China-U.S. tariff war is reshaping this complex and interconnected cosmetics supply chain and creating significant challenges for the industry.

Cosmetic Ingredients

Adjustments in tariff policies may drive up the cost of cosmetic ingredients from the U.S. Currently, China’s ingredient production remains mid-to-low-end. The most widely used bulk ingredients in cosmetics, such as base oils, surfactants, emulsifiers, and fragrances, and mid-to-high-end ingredients, are still primarily sourced from global ingredient giants. Notably, about 80% of high-performance active ingredients rely on imports.

To tackle tariff-related challenges, Chinese cosmetic companies have to restructure their ingredient supply chains. Particularly critical areas heavily dependent on U.S. imports, such as sunscreen filters (e.g., avobenzone) and active ingredients (e.g., hyaluronic acid), may face price increases. As a result, Chinese cosmetic manufacturers are under growing cost pressure throughout the production process.

Recently, Dow Chemical, a major U.S. ingredient supplier, announced a price hike of 5-10% for its silicone products, effective April 20, 2025, depending on product lines and markets. More suppliers may follow with similar price adjustments in the future. This means Chinese cosmetic companies that import ingredients from the US will need to either absorb shrinking profit margins and seek alternative suppliers from other regions like Japan, South Korea, Europe, etc. (potentially impacting quality), or reformulate their products. Each option carries significant cost and could compromise product quality. In short terms, such disruptions could also lead to product shortages, delays, or lower-quality offerings, making it harder for Chinese brands to maintain their global competitiveness.

Cosmetic Packaging

According to MarketsandMarkets, the global cosmetics packaging market is projected to reach 436.6 billion yuan by 2025, with a compound annual growth rate of 4.03%. As a major player in the global packaging industry, China boasts an annual output value exceeding 2.5 trillion yuan, with a wide variety of internationally competitive packaging materials.

Notably, U.S. beauty brands are heavily dependent on Chinese packaging. Melissa Butler, founder of The Lip Bar, shared on her social media that 85% of her brand’s products had been made in Taiwan, China, with packaging from mainland China; and only a small portion had been produced in the U.S. In response to raised tariffs, she warned, “This will kill small cosmetics companies in the United States,” highlighting that small brands would be especially vulnerable to increased costs.

However, the impact is not one-sided. As rising costs prompt American brands to shift orders to countries like Vietnam or Indonesia, where labor is cheaper, and tariff policies are more favorable. Chinese packaging suppliers may also suffer. Low-end Chinese packaging manufacturers, already operating on thin margins, may face factory closures or pivot to the domestic market under increasing pressure.

2. Cosmetic Exports: Rising Barriers

According to China Customs data, in 2024, the United States remains China’s largest export market for cosmetics, topping the list with a total export value of $1.45 billion. This figure shows a significant lead over other key markets such as Hong Kong, China ($840 million), the United Kingdom ($530 million), Japan ($320 million), and Indonesia ($310 million). However, tariff increases will definitely create obstacles for Chinese cosmetics entering the U.S. market.

Specifically, the tariff hike would most directly impact product pricing. For instance, a 100-yuan cosmetic product will face an additional 145 yuan in tariffs. As Chinese brands have long focused on the mid-to-low-end market, relying on cost-efficient supply chains and cross-border e-commerce to cater to mass consumers with affordable products, the cost-efficient strategy now faces heightened challenges. Besides, the Trump administration announced the end of the tax-free policy for small packages below $800, starting May 2. This policy change will further increase export costs for China’s low-value cosmetics exports. These increased costs present difficulties for Chinese beauty brands:

• Higher consumer prices: To tackle increased costs, brands may raise retail prices, which will undermine their competitive edge in the U.S. market and lead to a loss of market share compared to Southeast Asian or European brands.

• Squeezed profit margins: Companies may choose to absorb these costs, leading to financial reductions or losses.

Under the high tariffs of 145%, small and mid-sized brands are particularly vulnerable. Many may be priced out of the U.S. market entirely, unable to absorb the cost surge while remaining competitive. This could even lead to layoffs and bankruptcies.

3. Cosmetic Imports: Potential Declines

According to China Customs data, the U.S. ranks as China’s fourth-largest cosmetics import market (with an import value of $1.76 billion). The escalating tariff war is creating significant two-way challenges for cosmetics companies operating in both markets. The April 2 tariff policy announcement triggered immediate market repercussions. The stock prices and market capitalizations of major U.S. companies such as Estée Lauder, P&G, Colgate, and Coty came under significant pressure. According to data from East Money, P& G’s share price dipped 0.62% on April 2, followed by sharper declines of over 5%, 2%, and 1% on April 4, 7, and 8, respectively. While Estée Lauder saw a brief gain of 1.31% on April 2, its stock plunged more than 15% and 9% on April 3 and 4, and continued to slide with a further drop of over 5% on April 8.

Just as Chinese exporters struggle with heightened barriers to the U.S., American brands now face parallel pressures in China: they are likely to choose to increase prices or absorb the costs, accepting substantially reduced profit margins. So far, no major beauty brands have publicly announced price increases. To some extent, the global production model adopted by these cosmetics giants has helped mitigate the impact of the tariff increase. For example, Estée Lauder’s Advanced Night Repair serum sold on Tmall lists its origins as the United States, the United Kingdom, Belgium, and Japan, allowing the company to shift production sites based on market conditions.

Unlike essential goods such as agricultural products, cosmetics are highly substitutable, so price increases carry a greater risk of dampening sales. With the growing popularity of domestic brands in recent years, the appeal of American cosmetics among Chinese consumers has declined. Over the past three years, U.S. cosmetics exports to China have seen consecutive drops of 1.2%, 25.0%, and 3.4%. In such a context, a significant price hike would certainly further reduce competitiveness and accelerate the shift of Chinese consumers toward domestic products or alternative imports from Europe, Japan, and South Korea.

Possible Future Trends

In recent years, China’s position in the global cosmetics market has risen, making it the second-largest cosmetics consumer market. As trade tensions between China and the U.S. escalate, cosmetics companies face both short-term challenges and long-term strategic opportunities.

• Strengthening R&D and Ingredient Independence

Trade friction would prompt domestic brands to increase investment in technology and innovation. The long-term success of China’s beauty industry may hinge on whether it can achieve a breakthrough in ingredient development and move from import substitution to global leadership. For example, brands like GuYu and OSM have advanced their whitening formulas using ingredients like glycyrrhizin, hydrolyzed conchiolin protein, and other self-developed patented technologies. The real industrial resilience is built not through tariff barriers, but through self-reliance supported by technology and innovation. Reducing dependence on imported ingredients and technologies could also encourage more consumers to choose domestic products, which can expand local market share.

• Diversification of Overseas Markets

Since last year, an increasing number of beauty companies have expanded into Southeast Asian markets such as Indonesia, Vietnam, and Thailand through a variety of online and offline channels. With increasing trade uncertainty, Chinese beauty brands are likely to diversify their global footprint, shifting focus to markets in Southeast Asia, the Middle East, and Europe, etc. A diversified export strategy could reduce reliance on the U.S. and open new, sustainable paths for international expansion.

• Policy Support

In response to external pressures, the government may introduce some targeted support policies to help domestic cosmetics companies navigate current challenges. On the demand side, measures may include increased subsidies for consumer goods to boost beauty product consumption. On the supply side, reforms could involve tax exemptions, improvements to the business environment, and stronger incentives for R&D.

In a word, the impact of the China-US trade war on the cosmetics industry extends beyond short-term cost fluctuations. Both challenges and opportunities abound. While the increased tariffs and trade barriers have disrupted the status quo, they have also created opportunities for domestic Chinese brands to expand and innovate. Ultimately, the global cosmetics landscape may undergo significant shifts, potentially creating historic market opportunities.