Articles

Tariffs and the U.S. CPG Supply Chain: Disruption and Opportunity in 2025

As someone with a specialized degree in International Trade who has spent my career in product development and supply chain for some of the world’s biggest brands—manufacturing goods from the U.S. to Europe to China and back—I’ve seen trade policy shifts come and go. The recent resurgence of tariffs under the Trump administration has many in the consumer-packaged goods (CPG) sector reacting with alarm. The conversation often centers on rising costs, disrupted supply chains, and shrinking margins.

I see it differently. For companies willing to be proactive, agile, and strategic, tariffs represent more than a headwind—they create a blank space in the market. They expose gaps in domestic capability, sourcing resilience, and product design that U.S. businesses are well positioned to fill. In a competitive landscape where most players are hunkering down, there’s room to play offense—and win.

In 2025, U.S. trade policy shifted decisively toward blanket tariff coverage. The administration imposed a baseline 10% “reciprocal” tariff on nearly all imports, layered on top of existing measures from previous years, including broad China tariffs under Section 301. Higher rates remain in place for a wide range of goods, from raw materials and packaging to finished products and manufacturing equipment. For CPG companies, this policy shift is reshaping sourcing economics, tightening margins, and forcing operational adjustments.

The most immediate effect has been across-the-board cost increases. The 10% global baseline tariff applies to almost all imports—ingredients, packaging, production components, and finished goods—unless specifically exempted. This has created a structural uplift in landed costs that touches every part of the value chain. For those producing in China and other targeted countries, the pressure to diversify sources has intensified. While shifting to regional or domestic suppliers can reduce exposure, it often comes with higher unit costs, longer lead times, and more complex onboarding.

Companies are also abandoning some of the principles that defined lean, just-in-time operations. Many have engaged in pre-buying ahead of rate changes, leading to short-term inventory spikes that strain warehouse capacity and cash flow. Procurement, quality assurance, and logistics teams are simultaneously wrestling with integrating new suppliers while maintaining consistent quality and compliance.

Tariffs have introduced pricing volatility that makes long-term planning harder. With the cost base for key materials and components in constant flux, pricing strategies now require more frequent recalibration. List prices, promotions, and contract terms must adjust faster to protect margins without alienating customers.

If companies stay reactive—fixated on daily firefighting while waiting for the next change—this environment will feel like an endless storm. To succeed, leaders need people in their organizations focused on long-term strategy and willing to withstand short-term turbulence in order to position for long-term advantage.

That means engineering around the tariff. This starts with rigorous tariff classification audits and lawful duty-reduction methods, such as first-sale valuation, alongside monitoring and applying for product-specific tariff exclusions when they become available.

It also means building a multi-source supply network. Having a Plan B should be standard operating procedure. If the COVID-19 pandemic didn’t make that clear, tariffs should. A “China+N” strategy—developing suppliers in multiple regions, especially in USMCA or other favorable trade agreement markets—provides flexibility. Cultivating relationships with domestic suppliers can further reduce risk while offering shorter lead times, fewer border delays, environmental benefits, and a stronger U.S. manufacturing base.

Designing for flexibility is equally critical. Iconic brand packaging can build equity, but it often comes at the expense of agility. Overly customized materials or tooling can lock you into specific suppliers and make pivoting difficult. Smaller businesses and start-ups, in particular, benefit from creating product and packaging specifications that allow substitutions without major redesigns. Exploring alternative materials and processes can reduce reliance on tariff-exposed inputs while sparking innovation.

True agility requires more than a buzzword—it demands leadership commitment. If it isn’t embraced from the top, agility becomes chaos for frontline teams. Companies that shorten their pricing cycles from annual to quarterly or semiannual reviews, link price adjustments to market indices, and rationalize SKU portfolios can respond more quickly to cost shifts. Streamlining product lines to focus on high-margin, high-velocity offerings allows resources to be concentrated where they drive the most value. For smaller players, partnering with larger manufacturers or retailers on private-label programs can open access to production capacity, R&D, and materials at scale.

Most importantly, tariffs should be treated as a manageable variable, not a shock to the system. Establishing a cross-functional tariff response team—spanning procurement, finance, logistics, and legal—ensures that policy changes are tracked, costs are integrated into the bill of materials, and decision-making is grounded in accurate margin data. And no company should stand on the sidelines. Industry coalitions have influenced tariff scope and timing before; coordinated advocacy can yield exemptions, phased implementations, or even rate reductions.

Tariffs are no longer a temporary disruption—they are becoming a permanent fixture of the U.S. trade environment. The companies that thrive will be those that treat them as a strategic factor in planning, not just a compliance burden. By building resilient supply networks, designing adaptable products, and using every available trade tool, forward-thinking CPG companies can turn what others see as a barrier into a competitive edge.

The winners won’t simply endure. They’ll be the ones who seize this moment to reimagine their supply chains, strengthen domestic capabilities, and capture market share while others remain stuck in defense mode.

Monica Riehl

August 2025