Beauty Brands in Crisis: Navigating Tariff Hikes and Recession Fears in 2025
The beauty industry is experiencing turbulent times akin to a scene from Martin Scorsese’s GoodFellas. Brands are facing significant challenges with their supply chains, as skyrocketing tariffs and looming recession fears create a perfect storm. How can these brands ensure their survival during such trying times?
The Impact of Tariffs on the Beauty Industry
With 145% tariffs imposed by the previous administration, countless beauty and personal care brands are feeling the pinch. Nearly every brand relies on China for at least part of their supply chain, leaving them vulnerable to the ongoing trade war. Inventory and supplies are getting rerouted, sent back to the manufacturers, or languishing in Chinese warehouses due to financial constraints.
Founders are scrambling to secure funds to facilitate shipments. As the trade war shows no signs of resolution, brands are grappling with the impending reality that they might not just be navigating rough waters—they could be sinking.
Urgent Calls for Stability
One voice of reason amidst this chaos is Alexandra Fine, co-founder and CEO of Brooklyn-based sexual wellness brand Dame. Fine expressed her frustration: “Nobody wants to order something, be told it’s a certain price, and then find out it’s actually 150% more.” She emphasizes the precarious position many brands find themselves in, where making informed decisions about their supply chain has become nearly impossible without stability.
Economic Foreboding
The unfortunate backdrop to this crisis is a dramatic dip in consumer confidence and tourism, leading to fears of an economic downturn. Torsten Slok, Chief Economist at Apollo Investments, predicts a 90% chance of recession in the U.S. by summer. His newsletter cautions that we might be staring at empty shelves soon, as small businesses—especially those that have thrived on a stable U.S. economic system—are now on the precipice of disaster.
Small Businesses in the Crosshairs
Slok notes that “extremely high tariffs hurt all U.S. businesses, particularly small ones.” These businesses often lack the necessary working capital to absorb the tariff costs due when imported goods arrive in the country. The implications are severe: expect ships sitting offshore, orders being canceled, and even well-established retailers facing bankruptcy.
Innovative Strategies Amidst Crisis
While some brands are struggling to foot the bill for their shipments, others are pivoting to navigate these challenges strategically. James Stewart, Business Development Manager for Clearit, a Freightos company, reveals that many companies are attempting to reroute containers to Mexico and Canada to avoid exorbitant tariffs. “We’re seeing companies re-manifest ocean bills of lading or keep inventory in the country of origin, hoping for interim agreements,” Stewart shares.
Conclusion: The Future of Beauty Brands
The landscape for beauty brands is changing, and adaptation is key. With the looming specter of tariffs, recession, and shifting consumer behavior, brands must be proactive in their strategies if they are to survive beyond 2025.
Understandably, the beauty industry is in a precarious situation, but those who can navigate these choppy waters with agility and foresight may just emerge stronger than before. As we move forward, the question remains: which brands will rise to the occasion and redefine what it means to thrive in the beauty space?
For more insights into economic conditions affecting small businesses, check out Apollo Investments’ latest newsletter.
