What Trump's Election Means for K-Beauty Industry?

Donald Trump, a staunch advocate for the protection of domestic industries, was elected as the 47th President of the United States on November 5, 2024. As the Korean beauty industry heavily invested in U.S. exports, it must rapidly brace for potential policy shifts, including the looming threat of steep tariffs that may emerge under Trump's administration.

During his campaign, Trump declared that he would impose a universal tariff of 10% on imports. Mike Sohn, general manager of Reach24H Korea, said that, "in the first Trump administration, the pressure was largely focused on defense issues. The cosmetics industry was not significantly affected. However, if a 10% tariff is imposed, the Korean cosmetic industry will inevitably suffer." Currently, indie brands are the main drivers of the rising trend in Korean cosmetic exports to the U.S. Since many of these companies are small and sell mid-to-low-priced products, the burden from tariffs could be relatively heavier for them. "As consumers' perceptions of Korean cosmetics have formed as “reasonably priced, effective products”, raising prices may be difficult, making it challenging to find ways to alleviate this burden."

In such context, concerns are mounting that the current surge in K-beauty’s popularity in the U.S., along with the monthly increases in Korean cosmetics exports, could provide justification for potential trade sanctions. The Bank of Korea highlighted in a recent report, “Historically, when the U.S. trade deficit with Korea widened or when there was heightened public sentiment for protecting domestic industries, various trade sanctions were escalated.” Mike Sohn further elaborated, “Although, Korean cosmetics currently represent less than 1% of the U.S. cosmetics market and are unlikely to be immediate targets for active sanctions, measures extending beyond tariffs might be implemented by U.S., if the popularity of K-beauty continue to climb bringing threats to local industry.” 

Regarding the potential changes to U.S. cosmetic regulations, Mike Sohn remarked, "Cosmetics are not a priority industry for the FDA. Additionally, any changes resulted from the Modernization of Cosmetics Regulation Act (MoCRA) could also impact U.S. companies. It seems unlikely that Trump's administration will alter the existing regulatory framework for cosmetics." However, he anticipated that there would be indirect effects stemming from the enhanced import-export procedures and stricter customs regulations.

Positive impacts are also expected. The Korea International Trade Association recently stated in a report that "the re-election of Trump will significantly reinforce the trend of U.S. centrism, which is likely to lead to considerable confusion and disruption due to a variety of tariff measures and attempts to undermine key policies implemented by the Biden administration." Trump government’s strengthened trade measures against China could potentially create rebound benefits for South Korea’s exports, which could be advantageous for the Korean economy. Moreover, the association emphasized that the investments made by Korean companies play a vital role in enhancing the competitiveness of U.S. manufacturing, thereby underscoring the necessity for a thorough and rational assessment of the benefits that may arise benefits these developments. With the situation established, it is imperative that Korean domestic companies begin to prepare adequately for the various repercussions that will inevitably arise from Trump's protectionist policies aimed at safeguarding domestic industries.

In the first half of 2024, K-beauty exports to China totaled 1.21 billion USD, reflecting a notable decrease of 14.1% compared to the same period the previous year. Conversely, exports to the U.S. experienced a remarkable surge of 61.1%, reaching 870 million USD. However, if K-beauty’s market position begins to diminish in the U.S., which has become a key alternative amid the declining Chinese market, the export volume for 2025 is likely to face a downward trend. An industry insider remarked, “If this situation can serve as an opportunity to transition from a marketing strategy focused on cost-effectiveness to one that emphasizes high-quality premium products, it could ultimately prove to be a blessing in disguise.”