If you source ingredients or packaging from overseas — and most indie beauty brands do — tariffs are eating into your margins right now. Not next year. Right now.
The brands that are protecting their margins aren’t the ones hoping tariffs will go away. They’re the ones who’ve already made changes. Here are three strategies that work.
The current landscape
Beauty and personal care products are caught in the crossfire of expanding tariff policies. Key impacts for indie brands:
- Active ingredients sourced from Asia — many specialty actives (peptides, botanical extracts, fermented ingredients) come from South Korea, Japan, and China. Tariffs on these have increased significantly.
- Packaging components — glass jars, pumps, custom molds, and printed packaging often come from overseas manufacturers where tariffs now apply.
- Raw materials — base ingredients like glycerin, cetyl alcohol, and preservative systems are globally sourced, and supply chain disruptions have compounded tariff impacts.
The result: COGS are up 10-25% for many indie beauty brands, and the increases aren’t slowing down.
Strategy 1: Alternative sourcing
The most direct approach — find new suppliers who aren’t subject to the same tariff rates.
What this looks like in practice:
- Domestic ingredient suppliers. The US specialty ingredient market has expanded significantly. Many actives that were previously only available from Asian manufacturers now have domestic or European alternatives.
- Tariff-friendly countries. Not all countries face the same tariff rates. Shifting sourcing from a high-tariff country to a lower-tariff one can reduce costs without going fully domestic.
- Regional packaging. Glass and packaging manufacturing in Mexico, the US, and Europe has become more competitive as tariff costs make Asian sourcing less attractive.
Timeline: 3-6 months from initial sourcing to first production run with new suppliers. You need time to qualify alternatives, test formulation compatibility, and negotiate pricing.
What it saved one brand: $100,000 annually by moving three key ingredient sources from a high-tariff country to a combination of domestic and tariff-friendly alternatives. The product quality was equivalent — the only change was where the ingredients came from.
The catch: Not every ingredient has a viable alternative source. Specialty actives with limited global production are harder to replace. Start with your highest-volume, highest-tariff ingredients first — that’s where the savings are biggest.
Strategy 2: Reformulation for domestic components
More aggressive than sourcing alternatives, but potentially more effective — reformulate products to reduce dependence on tariffed ingredients entirely.
What this looks like in practice:
- Swap tariffed actives for domestic equivalents. If your hero serum uses a peptide sourced from South Korea at 25% tariff, is there a US-produced peptide with similar efficacy? Your formulator can evaluate.
- Simplify formulations. Some products have ingredient lists that grew over time — each new version added actives without removing old ones. Streamlining can reduce tariff exposure and improve margins.
- Adjust concentrations. Some actives are effective at lower concentrations than currently used. A formulation review might reveal opportunities to maintain efficacy while reducing ingredient volume.
Timeline: 4-8 months. Reformulation requires stability testing, potentially new claims validation, and updated packaging if ingredient lists change.
When it makes sense: For products where tariffed ingredients represent a significant portion of COGS and domestic alternatives exist. Not practical for products where the tariffed ingredient IS the product (e.g., a product built around a specific Korean ferment).
Strategy 3: HTS classification review
The least obvious strategy — and sometimes the most immediately impactful. Your products are classified under Harmonized Tariff Schedule (HTS) codes that determine the tariff rate. The wrong classification means you’re paying more than you should.
What this looks like in practice:
- Review current HTS codes. Are your products classified correctly? Skincare products can fall under different codes depending on whether they’re classified as cosmetics, toiletries, or pharmaceutical preparations. The tariff rates can differ significantly.
- Reclassification opportunities. Some products may qualify for a lower-tariff classification based on their primary function, ingredient composition, or intended use. A customs broker or trade specialist can evaluate.
- First Sale Valuation. If you buy from a middleman who buys from the manufacturer, you may be paying tariffs on the middleman’s markup. First Sale Valuation lets you pay tariffs on the original manufacturer’s price instead.
Timeline: 1-3 months. Classification review can be done relatively quickly, and savings apply retroactively if you’ve been overclassified.
What to watch for: Incorrect reclassification can trigger customs audits and penalties. Work with a qualified customs broker, not just your 3PL’s default classification.
What not to do
A few common mistakes beauty brands make when responding to tariffs:
Don’t absorb the cost and hope it goes away. Tariff policies change slowly. Planning around “maybe they’ll be reversed” is not a strategy. Protect your margins now and adjust if the landscape changes.
Don’t pass all costs to customers immediately. Price increases are sometimes necessary, but across-the-board increases without first optimizing your cost structure means you’re passing along inefficiency, not just tariff costs.
Don’t switch suppliers based solely on price. The cheapest alternative supplier isn’t always the best. Quality, reliability, lead times, and minimum order quantities all matter. A supplier who saves you 15% on ingredients but ships late costs you more in stockouts and customer complaints.
Build your tariff playbook
The brands that navigate tariffs well don’t treat it as a one-time crisis. They build an ongoing process:
- Quarterly COGS review — track how tariffs are impacting your actual costs, not just your projections
- Supplier diversification — maintain relationships with 2-3 qualified suppliers for critical ingredients
- Classification audit — annual HTS review with a qualified customs broker
- Reformulation pipeline — work with your formulator on contingency formulations for your highest-tariff products
You don’t need to do all of this yourself. A fractional COO with beauty industry experience can manage the sourcing, negotiate with suppliers, and coordinate with customs brokers — so you can focus on running the brand.
Get a tariff impact assessment
We’ll review your supply chain exposure in a free 30-minute cost analysis and identify the highest-impact tariff reduction strategies for your specific product line.