Consumer goods companies confront tariff turbulence
Tariffs squeeze margins as consumer goods firms rethink pricing, sourcing, and risk
Consumer goods companies are feeling the strain across their margins, sales, investment plans, and day-to-day operations as a result of the sweeping tariffs introduced by the Trump administration in April, 2025 and now going into effect.1 The measures span a wide array of products—from toys, video games, and appliances to smartphones, TVs, shoes, and clothing—exposing nearly every corner of the sector to rising costs and strategic uncertainty.
Tariffs have become a persistent cost and risk factor for US consumer goods companies, affecting packaging, ingredients, pricing, margins, and sourcing decisions. KPMG LLP surveyed C-suite executives in May 2025 to shed light on the effects of the proposed tariffs and how companies across industries, including consumer, are navigating this changing tariff environment.2
Financial and operational impacts
To offset tariff pressures, finance and treasury teams at consumer goods companies are running SKU-level landed-cost models to gain true margin visibility, analyze performance drivers in detail, and improve profit and loss and cash flow. They are also conducting price-volume elasticity scenarios and managing working capital timing related to tariffs. But these efforts have yet to fully counter the financial strain caused by tariffs.
The sector is already grappling with margin compression: 43 percent of surveyed consumer goods executives reported a 1 percent to 5 percent decline in gross margins—among the steepest across all industries surveyed. Tariffs have affected imports and foreign operations of raw materials like metals and minerals, which are critical to 30 percent of consumer companies, according to the survey.
Packaging metals are a pressure point for center-store categories as higher steel and aluminum duties would drive up can and foil costs—putting upward pressure on prices for canned foods, beverages, and other metal-packaged goods.
Sales are also down. More than half (57 percent) of executives cited decreased sales, both foreign and domestic. One third of consumer goods companies reported a 6 percent to 15 percent drop in international sales, compared to just 31 percent of companies overall seeing a decline of 5 percent or less.
Risk preparedness strategies
Across supply chain functions, consumer goods companies are incorporating tariff scenarios into integrated business planning, adjusting safety stock policies to account for duty and lead-time risks, and making network shifts such as nearshoring and bypassing distribution centers for tariff-heavy SKUs. These tactical moves support broader tariff strategies.
Amid tariff headwinds, companies are taking selective price actions, especially in China-sourced categories, while consumers respond by trading down to value and private-label options. Twenty-eight percent of consumer goods execs surveyed said their primary response has been raising prices to preserve margins. Among consumer goods respondents, 77 percent said they have passed up to 50 percent of tariff costs on to consumers, compared with the 73 percent average across all sectors. Further price hikes appear likely: 57 percent of respondents in the sector plan additional increases, compared to 40 percent in other sectors.
Beyond pricing, firms are strengthening contingency planning around critical third parties and single points of failure in their supply chains. Thirty percent have made this a top priority—over four times the rate seen in other industries.
Mitigation strategies in practice
Tariff uncertainty has caused many organizations to alter investment and operational plans. A major constraint is inflexible supplier arrangements. While 24 percent of surveyed consumer goods executives are looking to shift sourcing to countries with lower tariffs, 57 percent are limited by existing contracts.
Likewise, reshoring operations to the United States remains a challenge. Only 30 percent of respondents in the sector view it as viable, citing three primary hurdles:
- Higher operating costs (87 percent, the highest of any sector)
- Higher labor costs (73 percent)
- Relocation delays—71 percent estimate it would take one to two years to move operations back, versus 57 percent in other sectors
Nearly half of consumer goods companies have postponed or scaled back facility upgrades, tech investments, or product development due to tariff uncertainty. Similarly, 40 percent have delayed major capital investments by 7 to 12 months.
In addition, 40 percent of consumer goods firms reported that 11 to 25 percent of their tier-2 and tier-3 suppliers rely on a single country for tariff-sensitive materials—underscoring the urgency of diversifying sourcing strategies.
***
Despite the turbulence, consumer goods companies are proving adaptable, reworking pricing, supply chains, and risk plans. Looking ahead, continued focus on strategic price shifts, supplier diversification, and contingency planning could help companies maintain resilience amid ongoing tariff pressures.
Footnotes
1 “Fact Sheet: President Donald J. Trump Ensures National Security and Economic Resilience Through Section 232 Actions on Processed Critical Minerals and Derivative Products, The White House,” April 15, 2025.
2 The survey of 300 C-suite executives (including 30 from consumer) was conducted online from May 22, 2025, to June 11, 2025.
Explore more
Insight
Tariff Business Impact: What Executives Think Now
Explore how businesses are leveraging technology and reshoring strategies to navigate the financial and operational challenges posed by rising tariffs.
Insight
Policy in Motion: Insights for navigating with confidence
Your resource for the latest on trade, tariff and regulatory policy changes.
Meet our team
With special thanks to: Sam Rajakumar
1. The online survey of 300 U.S. based C-suite executives (including 30 from the technology sector) was conducted from May 22, 2025, to June 11, 2025.