The European beauty industry is not freed from Trump’s tariff threats

The beauty sector in Europe also faces a scenario of uncertainty about the possibility that Donald Trump imposes tariffs (25 %) to imports of cosmetics and fragrances from the European Union (EU). The measure could seriously affect the industry, which in 2023 exported products to the United States worth 4,960 million dollars, according to the Federation of Beauty Companies (FEBEA), the main association of the sector in France.

The beauty industry in Europe prepares for a possible blow that could significantly alter its relationship with what is, today, one of its main markets.

The United States is a strategic market for European beauty. In France, leader in fragrance and cosmetics exports within the EU, the case can reach dramatic levels: in 2023, sales of French products to the US reached 2.8 billion euros, representing the second largest source of income for the French industry. It is followed by Italy, Spain, Germany and the Netherlands as the main beauty exporters within the community block.

Xavier Gueantdirector of Legal and International Affairs of Feba, has described the situation as “Extremely precarious”. The possible imposition of tariffs generates concern among European manufacturers, who have already lived similar episodes in the past with the Trump administration.

Until now, Trump’s threats have focused on other sectors, but uncertainty is high. Recently, the president has raised the possibility of applying a 200 % tariff to European alcoholic beverages in response to the EU decision to tax US spirits with 50 %. In addition, the EU has announced reprisals with tariffs on American products valued at 26,000 million euros as of April 1, in response to 25 % tariffs imposed by the US. UU. To the European steel and aluminum.

The possibility that cosmetics and fragrances are included in the list of affected products especially worries companies in the sector. February 26, Trump mentioned the idea of ​​applying a 25 % general tariff to EU productswhich could impact the beauty industry along with other luxury goods.

Trump’s threats generate uncertainty in business planning. Marc Puig, president and executive director of the Spanish Group Puig, addressed the issue during the presentation of the company’s annual results in 2024.

“Thanks to the solidity of our brands and our gross margins, we can face tariffs to some extent”Puig said. However, he acknowledged that if 25 %is finally imposed, the company must reassess its impact on the profit margins.

Astrid Hermann, financial director of Beiersdorf AG, said that 66 % of the company’s business in the US comes from products made of the countrymostly in Mexico. A 25 % tariff to Mexican imports could reduce the margin of its consumption business by 50 basic points, although the company studies measures to mitigate the impact, such as the increase in inventories or possible price increases.

Hermann stressed the importance of the US market for Beiersdorf and His intention to continue expanding in the country with strong brands and new releases.

United States: a key market for European beauty

US is a strategic market for beauty not only for its sizebut also for its demography. It is expected that in the next five years the number of potential consumers will increase at 12 million, mainly driven by the Latin population, which shows great interest in makeup and fragrances.

Besides, The multirracial population in the US has tripled in the last decade and already represents 10 % of the total populationwhich generates new beauty needs and opportunities for brands that are committed to diversity.

Another key factor is purchasing power: USA houses a third of consumers with high purchasing power in the world and generates 60 % of the global expenditure of this segment.

Multinationals such as L’Oréal, LVMH Moët Hennessy Louis Vuitton and Beiersdorf already have production plants in the US, which reduces their exposure to tariffs. However, SMEs, which do not manufacture in US territory, would be the most harmed.

According to Febea, SMEs represent more than 80 % of companies in the sector in Europe. Many of them have designed their export strategies by 2025 with the US as a key market, so a 25 % tariff would mean a significant blow.

Gueant emphasizes industry’s concern: “It is a great challenge, since many companies must rethink their market diversification.”

If tariffs on European beauty materialize, the EU could retaliate, which would affect the trade of American products with the community block. In 2023, US cosmetics and fragrances exports to the EU amounted to 2,160 million dollars.

Spain is not among the main American beauty importers, a list headed by Francethe largest importer of American beauty products, followed by Germany, the Netherlands, the Czech Republic and Poland. A tariff confrontation would harm both parties.

This situation reminds of the 2018 trade war, when Trump imposed 25 % tariffs on steel and 10 % to EU aluminum. In responsethe EU applied 25 % to certain American products, including cosmetics such as eye makeup, nail polishes and skin care products.

Currently, tariffs on beauty products between the US and the EU are relatively low, around 5 %. However, an increase up to 25 % would have direct prices consequences, profit margins and the competitiveness of European companies in the US market.

Marie AudrenDirector of Public Affairs and Communication of Feba, warns: “A sudden increase will affect the entire value chain: from suppliers to the final price for the consumer. “