The Trade Shock That Could Build America Back Better

Apr 4

I know many of you are still wrapping your heads around the latest tariff developments. The sweeping policy shifts have caught much of the market off guard, and it's fair to say there's a mix of confusion, concern, and uncertainty out there. I completely understand that reaction. At first glance, the headlines are jarring. But beneath the noise, I believe there’s a deeper, longer-term opportunity that’s being overlooked. This letter is meant to be thought-provoking, not dogmatic. My goal is to offer a constructive perspective—grounded in data and sector insights—on how this new trade environment may ultimately benefit domestic businesses and reward the right kind of investor mindset. Tariffs are no doubt disruptive, but I believe they can also be catalytic. What follows is a sector-by-sector look at how this shift is reshaping competitive dynamics, and why the right strategies today may yield durable advantages tomorrow.

Trade Policy Overview: Recent Tariff Measures and Trends

The United States has dramatically escalated its use of tariffs over the past few years, reaching levels unseen in decades. This culminated in President Trump’s latest “Liberation Day” tariff announcement, which introduced sweeping new import duties:

10% Universal Tariff
A baseline 10% tariff on all imported goods from every country, effective April 5, 2025. This universal tariff is designed to ensure a minimum level of protection and leverage in all trade relationships.

Targeted Tariff Hikes
Significantly higher tariffs on countries with large trade surpluses with the U.S. President Trump imposed 34% tariffs on Chinese goods (totaling over 50% when combined with earlier tariffs) and a 20% tariff on imports from the European Union. Neighboring Canada and Mexico, while initially slated for new tariffs, remain subject to the 25% duties imposed earlier in 2025.

Sector-Specific Duties
Additional tariffs were placed on strategic products and materials. For example, a 25% tariff on automobile imports was introduced, alongside expanded duties on steel and aluminum. Plans are also underway for separate import taxes on items like pharmaceutical drugs, lumber, copper, and semiconductors to protect critical industries.

These measures build on the tariff framework established during Trump’s first term. Between 2018 and 2020, the U.S. levied 25% tariffs on $370+ billion of Chinese imports, as well as 25% steel and 10% aluminum tariffs globally. Those policies remain largely in effect, with the Biden Administration maintaining and even expanding certain tariffs on China prior to 2025. In May 2024, President Biden’s review of China’s trade practices led to a decision to keep existing tariffs and raise duties on strategic Chinese goods such as semiconductors (from 25% to 50%), electric vehicles (25% to 100%), and solar cells (25% to 50%). In short, both major U.S. parties have converged on a tougher trade stance, using tariffs to counter what are seen as unfair practices and to incentivize domestic manufacturing.

From a global perspective, these U.S. actions mark a historic departure from the free-trade era. Allies and rivals alike have responded with alarm and retaliation. China has condemned the new tariffs and vowed countermeasures, warning they “endanger global economic development”. In response, China raised its average tariff on U.S. exports to over 22% and, as of this morning, imposed sweeping 34% duties on all U.S. goods.

European leaders have sharply criticized the 20% tariff on EU imports, warning it poses a serious risk to transatlantic trade relations. Washington, however, is unapologetic. President Trump has doubled down, arguing that the post-WWII trade system has systematically disadvantaged the United States—and that a hard reset is long overdue. The administration has explicitly tied tariff rates to trade imbalances—imposing punitive duties proportional to each country’s surplus with the U.S., then cutting those rates in half. The message is clear: tariffs will stay high until trading partners address the imbalances and eliminate unfair practices.

The magnitude of this shift is illustrated by the numbers. Prior to the trade war, U.S. tariffs averaged around 2-3%. With the latest actions, the average U.S. tariff across all imports is set to jump to ~22%, up from 2.5% last year, reaching heights not seen since the 1930s. On Chinese goods specifically, U.S. tariffs now average over 40%, creating a substantial cost differential to favor domestic products. While such aggressive measures do carry near-term risks – global markets initially dipped on fears of higher costs and foreign recessions – they also open unique opportunities for American businesses behind this higher tariff wall. In the following sections, I delve into how key consumer sectors are affected and why I believe tariffs ultimately strengthen the competitive position of U.S. companies.

Apparel Sector: Supply Chain Realignment and “Made in USA” Revival

Tariffs are poised to transform the apparel industry’s supply chain, an industry where an overwhelming majority of goods sold in the U.S. are imported. In 1980, over 70% of apparel purchased by Americans was made domestically; today, that figure is barely 3%. This decline was driven by decades of offshoring to countries with cheaper labor and materials. Now, rising import tariffs on apparel and textiles are narrowing the cost gap and sparking new interest in U.S. manufacturing.

Brands that long relied on Asian factories face an adjusted cost structure: for example, a popular $150 Nike sneaker made in Asia would incur an additional $37.50 in tariffs under Trump’s plan. A $100 pair of imported jeans or shoes could now carry a $10–$25 tariff cost. These increases, if simply passed through, would raise retail prices significantly. However, apparel companies are already strategizing to adapt rather than simply charge consumers more. Tim Boyle, CEO of Columbia Sportswear, noted that while they are concerned about tariffs, Columbia is “adept at managing” them through supply chain adjustments. Many firms are diversifying production to tariff-free countries or exploring nearshoring to places like Latin America. Crucially, some are looking back home: U.S. garment factories are seeing a surge in inquiries. Ferrara Manufacturing, which runs a New York City apparel factory, reports that potential clients have been reaching out much more frequently since the new tariffs were announced – similar to the spike in interest seen during Trump’s first term. “Brands are trying to figure out what’s possible,” says Bayard Winthrop, CEO of American Giant, a direct-to-consumer (DTC) apparel brand known for making sweatshirts and jeans in the Carolinas. His company is fielding numerous calls from brands seeking advice on rebuilding domestic supply chains.

This trend suggests a nascent revival of American apparel manufacturing. Factories in the U.S. still have “a ton of capable humans and capability,” according to Winthrop, though scaling up will require investment. The tariffs provide exactly the economic signal needed to justify that investment – they effectively subsidize domestic production by penalizing imports. Higher import costs make it feasible for U.S. factories, paying higher wages, to compete on price. Early evidence of this can be seen in brands like American Giant thriving with a Made-in-USA model. Founded in 2012, American Giant built its brand on quality local manufacturing and proved it can be done competitively even before tariffs. Now that tariffs are raising the cost of the alternative (importing cheap goods), larger apparel players have a stronger incentive to follow suit.

From an investor’s perspective, this realignment bodes well for companies that have existing domestic production or can pivot quickly. Consider New Balance, one of the few athletic footwear makers that still operates U.S. factories. New Balance long argued that import tariffs on shoes are vital to keeping its American plants viable. In fact, the company opposed trade deals like the Trans-Pacific Partnership precisely because removing tariffs would have undercut its U.S. made shoes. With a 25% tariff now hitting imported sneakers, New Balance’s domestically made lines become far more price-competitive, while import-reliant rivals like Nike or Adidas may have to raise prices. This leveling of the playing field means New Balance can gain market share or improve margins on U.S.-made products. Similarly, American apparel retailers that source even a portion of their lineup domestically (or from U.S.-Mexico duty-free channels under USMCA) can better weather the cost pressures.

There will, of course, be short-term adjustments. Retailers holding inventory of imported apparel might see margin compression as tariffs eat into profits. Some have already signaled they will pass on costs: executives at companies such as Columbia Sportswear and AutoZone have openly stated that if tariffs increase, they intend to raise consumer prices to offset the duties. However, it’s important to note that not all of a tariff is necessarily passed to the consumer. With a hefty 20% tariff on EU apparel or 34% on Chinese textiles, importers will likely seek cost-sharing across the chain. Foreign manufacturers may reduce their FOB prices to retain orders (effectively bearing part of the tariff), and wholesale distributors and retailers might accept slightly lower margins rather than risk a full volume collapse. The burden of tariffs is often shared by manufacturers, middlemen, and consumers. In fact, when the U.S. imposed tariffs on washing machines in 2018, studies found that retailers raised prices almost equal to the tariff amount on washers – and even increased the price of dryers (which had no new tariff). This indicates firms sometimes use tariffs as an opportunity to pad margins. In a high-tariff environment, well-positioned apparel brands could similarly see an opportunity to improve pricing power on domestically made goods, framing them as premium, patriotically sourced products.

Bottom line for Apparel: While tariffs will raise costs for brands heavily reliant on imports—especially in fast-fashion—they also create new competitive dynamics that forward-thinking companies can use to their advantage. This doesn’t mean only U.S.-made apparel will succeed. Many global supply chains are already adapting: diversifying sourcing, exploring nearshoring, and investing in greater supply chain control.

That said, brands with existing domestic production or the flexibility to pivot may find themselves better positioned to manage cost pressures and respond to consumer preferences around quality, transparency, and local impact. The “Made in USA” story is resonating more than ever—reinforced not just by policy, but by consumer values—and can be a powerful driver of brand equity for those able to lean into it.

Food Sector: Protecting Agriculture and Enhancing Food Security

The food and beverage sector is another area where tariffs can have profound effects – from farm to table. The U.S. imports a large array of food products: produce from Latin America, seafood from Asia, specialty items like cheeses, wines, and packaged goods from Europe, etc. Tariffs on these imports support domestic farmers and food producers by making imported competitors more expensive, thereby encouraging retailers and consumers to buy American-grown and American-made food products.

One major recent example is the U.S. leveraging tariffs in the agriculture arena during trade negotiations. In the 2018-2020 China trade dispute, China had retaliated with tariffs on U.S. soybeans, meats, and other farm goods, hurting American farmers. The U.S. response was twofold: provide subsidies (from collected tariff revenue) to affected farmers, and insist on large purchase commitments in a trade deal. This led to the Phase One trade agreement (Jan 2020), in which China agreed to purchase an additional $32 billion of U.S. agricultural products over two years. While China ultimately fell short of the targets, 2020 still saw record U.S. farm exports to China – a direct result of using tariffs as a bargaining chip. American soybean exports, for instance, rebounded strongly, injecting billions into the U.S. farm belt.

Domestically, tariffs on imported food can bolster U.S. producers in various niches. The U.S. has long maintained tariffs or quotas on certain agricultural imports (sugar is a classic example, with quotas keeping out cheap foreign sugar to support domestic cane and beet farmers). With the new tariff regime, we see broader food categories potentially benefiting. For example, if the U.S. applies its universal 10% tariff to imported dairy products from Europe, Wisconsin cheese-makers and upstate New York dairy farms gain an edge in price when competing for shelf space at supermarkets. Tariffs on imported seafood could make U.S. Gulf shrimpers and domestic fish farms more competitive. It’s worth noting that some of these tariffs were already in place under other rules, but a universal tariff simplifies and amplifies the protection.

There’s also a consumer angle: quality and safety. American food safety standards are among the highest in the world. By contrast, there have been instances of unsafe imported food items – from seafood found with heavy metal contamination to candies with unsafe additives. Tariffs, by shifting consumption toward domestic sources, mean consumers are more likely to get food produced under U.S. regulations (FDA/USDA oversight). Supporting local food production also reduces the distance food travels, potentially improving freshness and reducing carbon footprint (a selling point to environmentally conscious consumers).

Supply chain impact in food involves multiple layers: import brokers, distributors, wholesalers, and retailers are typically in between foreign producers and U.S. consumers. A tariff’s cost can be dispersed among these layers. For highly price-sensitive staples (like bananas or rice), importers might swallow more of the cost to keep prices stable, whereas for gourmet or specialty items (like French wines or Italian prosciutto), retailers may pass on the full tariff to affluent consumers willing to pay a premium. Either way, tariff revenue flows into the U.S. Treasury while some demand shifts to domestic alternatives. We already saw this in 2019 when the U.S. placed 25% tariffs on European wines and spirits as part of a trade dispute – American whiskey and California wine producers suddenly found European products a bit pricier, helping level the field at bars and liquor stores. U.S. vintners reported improved domestic sales as a result, even as European exporters lamented lost market share.

For direct-to-consumer models in food, such as farm-to-table delivery services or meal kits that source ingredients domestically, the benefit is similar to other DTC brands: fewer intermediaries to mark up costs. A local farmer selling produce through a community-supported agriculture (CSA) box doesn’t face the cascade of mark-ups that an imported avocado goes through (import duty, importer margin, distributor margin, retailer margin). Thus, DTC food providers can offer competitive pricing and story-driven value (“know your farmer”) in a tariff environment where mass-market import prices rise.

Furthermore, the tariff revenues collected can be reinvested in rural America. Some of the billions in tariff income have already been used to support farmers (e.g., through the USDA Market Facilitation Program in 2018-2019). Going forward, as tariffs increase federal revenues, they can fund infrastructure in farming communities or R&D in food technology – all of which enhance the productivity and sustainability of U.S. agriculture. This virtuous cycle means improved food security: a country less reliant on foreign imports for essential foods is more secure in times of global disruption. We’ve learned from recent global events (like pandemic supply shocks) that self-reliance in critical goods is invaluable. Tariffs encourage building that self-reliance in food.

In summary, food sector investors should watch for: domestic producers expanding capacity (e.g., greenhouse operations scaling up to replace some off-season vegetable imports), food companies with strong U.S. supply chains gaining market share, and possibly higher profit margins for U.S. brands if they face less low-cost import competition. Tariffs, in effect, ensure that the value-add stays within U.S. borders – from the farm jobs to the processing facilities – rather than sending profits overseas.

Beauty Sector: Resilient Brands and Domestic Sourcing of Ingredients

The beauty and cosmetics industry might not be the first one thinks of in trade policy, but it is remarkably globalized. From makeup and skincare to fragrances, many U.S. beauty brands rely on imported components or finished goods – whether it’s packaging (often sourced from China), ingredients (natural oils, chemicals from abroad), or entire private-label products produced overseas. Tariffs on these imports are prompting beauty companies to reconfigure their operations, and interestingly, some of the nimblest winners are DTC and vertically integrated brands.

One high-profile example is e.l.f. Beauty, a California-based cosmetics company known for affordable makeup. E.l.f. has heavily relied on China for manufacturing. When the first round of tariffs hit in 2019, e.l.f. suddenly faced a 25% duty on its Chinese imports. Rather than collapse or pass a 25% price hike onto consumers, e.l.f. executed a balanced playbook to adapt. CEO Tarang Amin explained that the company used a mix of selective price increases, cost savings, and even currency hedging to offset the tariffs. “We’ve been subject to 25 percent tariffs since 2019 and we pulled all the levers available to minimize the effects,” Amin noted. The result? E.l.f. continued growing and maintained its attractive price points, demonstrating that tariffs need not stifle growth for agile companies. In fact, by 2023 e.l.f.’s gross margins were healthy and its products remained competitively priced, indicating that part of the tariff cost was absorbed or mitigated through operational efficiencies.

As tariffs now expand, beauty companies with direct consumer relationships and flexible sourcing will have an edge. Many indie and DTC beauty brands already emphasize clean, high-quality ingredients and often source domestically for purity and marketing reasons. These brands can tout “Made in USA” or “USA-formulated” as a quality mark. Tariffs reinforce that advantage by making imported, lower-cost competitors more expensive.

Safety and trust are key in beauty products, similar to food. Consumers apply these products to their skin and hair daily. Scandals with imported cosmetics – such as products found to contain unsafe levels of heavy metals or unapproved dyes – have made headlines in the past. The FDA has a program to inspect imported cosmetics for contaminants, but not every batch is checked. By incentivizing more local production, tariffs indirectly ensure stricter oversight (since U.S. facilities are regularly inspected and must adhere to FDA cosmetic Good Manufacturing Practices). Thus, companies can market their domestically made cosmetics as safer or more reliably compliant. This resonates strongly in the clean beauty movement, where consumers scrutinize sourcing and transparency.

From a supply chain perspective, the beauty sector will adjust by increasing U.S. or allied sourcing. I anticipate more personal care product packaging (bottles, jars, pumps) being made in North America to avoid tariffs on Chinese plastics. Ingredient suppliers in the U.S. and Europe (for essential oils, vitamins, etc.) may see increased orders as brands seek to replace Chinese raw materials that now carry extra cost. Brands might also consolidate their supply chain – for instance, bringing final assembly of gift sets or kits back to U.S. soil to lower the dutiable value of imports (importing components separately can sometimes reduce tariff costs versus importing a finished high-value product).

It’s worth noting that the beauty sector has shown it can pass modest cost increases to consumers without dampening demand, especially in mid-to-premium segments. During the 2018-2019 tariff period, many beauty companies quietly raised prices a few percentage points citing higher costs, and consumers largely accepted it (beauty has a degree of price insensitivity for loyal customers). Now, with tariffs potentially larger, some price adjustment will happen, but if coupled with the messaging of better quality or local production, consumers may be willing to pay a bit more. Moreover, if the government follows through on promised tax cuts funded by tariff revenue, consumers will have more disposable income to absorb these price tweaks (I will discuss the tax cuts shortly).

Key takeaway for Beauty investors: favor companies that have control over their manufacturing or have diversified supply chains. A company like Estée Lauder, which owns some manufacturing facilities in the U.S. and Belgium, can pivot production to minimize tariff exposure, whereas a small brand fully dependent on a single Chinese OEM will struggle more. However, even smaller brands can benefit if they are DTC – they have higher gross margins (not sharing with wholesalers), giving more cushion to absorb tariffs. And if they emphasize domestic production, they can steal market share on the virtue of authenticity and trust.

Tariffs Across the Supply Chain: Cost Sharing and the DTC Advantage

Across all these sectors, one common theme is how tariff costs propagate through the supply chain and who ultimately bears the burden. Understanding this is crucial for investors to gauge which business models can thrive in a high-tariff environment.

A tariff is initially paid by the importer of record – often a brand or a wholesaler – when goods clear U.S. customs. But that doesn’t mean the importer simply eats the cost. They have options:

Negotiate with Suppliers
Importers can ask their foreign suppliers to lower prices to help offset the tariff. During the U.S.-China trade war, evidence showed that Chinese exporters did, in fact, reduce prices on some goods to keep them attractive despite U.S. tariffs. This means overseas manufacturers share part of the pain by cutting into their own margins.

Optimize Logistics and Classification
Companies can adjust how they import – e.g., importing unassembled parts (which might have lower tariff rates) and doing final assembly in the U.S., or shifting shipments to exploit any tariff exclusions or free trade agreement channels available. They might also use bonded warehouses or delay imports hoping for policy changes. These tactics can trim tariff liabilities.

Internal Cost Absorption
An importer (whether a brand or wholesaler) might accept a lower profit per unit to maintain volume. This often happens if demand is price-sensitive. For example, large retailers could accept a slightly smaller margin on high-volume, low-margin goods to keep prices competitive.

Passing to the Next Link
Wholesalers selling to retailers will incorporate the tariff into their price. The retailer in turn may raise the shelf price for consumers. Ultimately, some portion reaches the end consumer as higher prices. However, how much reaches the consumer depends on the competitive environment. If all brands face the same tariff, they all raise prices similarly – consumers might see a general inflation in that category. If only some products have tariffs (e.g., only imported ones), domestic alternatives won’t rise in price as much, which restrains how much importers can pass on without losing market share.

What about Direct-to-Consumer brands in this chain? DTC brands cut out middlemen – they typically design and manufacture (or contract-manufacture) their product, then sell directly via their website or stores to the consumer. This model inherently has fewer layers at which mark-ups occur, which is a critical advantage when tariffs come into play. If a traditional brand imports a lipstick for $2, sells to a distributor at $3, who sells to Sephora at $4, and it finally retails for $8, a 25% tariff on the $2 import ($0.50) might balloon to an ~$1.00 increase by the time it hits the consumer (as each markup amplifies it). In contrast, a DTC brand importing the same item for $2 would sell it directly perhaps for $5 (DTC often prices lower than retail since no middleman). A 25% tariff adds $0.50, and the DTC price might only need to go to $5.50. The consumer sees a smaller increase, and the brand can choose to absorb some of that $0.50 or adjust their marketing spend to cushion it. In short, DTC brands can react more flexibly and often maintain better pricing power under tariffs.

This benefit was echoed by various executives as they prepared for Trump’s tariff proposals. Companies like AutoZone and Columbia (traditional retail supply chains) talked about simply raising prices for consumers. In contrast, DTC-focused companies often talk about cost engineering and direct adjustments. For instance, e.l.f. Beauty (which, while sold through retailers, has a significant direct online presence and agility) managed to hold prices by quickly adjusting its cost structure. The CEO of a luxury DTC apparel brand might decide to swallow the tariff to keep his $200 jacket at the same price, rationalizing that the brand loyalty and lifetime value of the customer is worth more than a short-term margin hit. With no retailers in the middle demanding their cut, this decision is theirs alone.

Investors should therefore look favorably upon companies with DTC models or vertically integrated supply chains. Not only do these companies avoid double or triple mark-up of tariff costs, but they also tend to have better data on their customers, allowing for strategic pricing. They can communicate directly to consumers about why prices are changing – even turning it into a positive story (e.g., “to continue delivering the highest quality ingredients and to support American jobs, we’ve adjusted our pricing by a small amount…”). This transparency can build brand trust, whereas a product on a store shelf simply getting more expensive risks alienating the consumer with no explanation.

In essence, tariffs reward efficiency. A lean supply chain with minimal intermediaries will handle a new tax far better than a convoluted one. This might drive some companies to streamline distribution – for example, brands might reduce reliance on import brokers or consolidate distribution centers to cut costs elsewhere, compensating for tariffs. From a macro view, this improves supply chain efficiency overall.

Before moving on, it’s worth noting one more supply chain adjustment in the new tariff policy: the U.S. eliminated the de minimis import exemption for China. Previously, shipments under $800 could enter duty-free, which foreign e-commerce sellers used to send goods directly to U.S. consumers without tariffs. Now, Chinese direct shipments (and soon others) will incur tariffs even for small orders. This closes a loophole and further helps domestic retailers and DTC brands by removing the unfair advantage that overseas online sellers had when mailing cheap goods to Americans tariff-free. U.S. brands that were undercut by $10 items shipped from Chinese marketplaces will now find those items 10-25% more expensive at checkout, narrowing the price difference and giving U.S. products a better chance.

Tariff Revenues: Funding Tax Cuts and Economic Boost

Tariffs do more than alter competitive dynamics – they also generate substantial revenue for the U.S. government. Unlike many policies that cost taxpayer money, tariffs bring money into the Treasury, which can be used to fund other economic initiatives, including tax relief for businesses and consumers. This is a central plank of the pro-tariff argument: let trade partners pay into our coffers, and return that money to Americans via tax cuts or public investments.

In 2024, U.S. Customs collected about $80 billion in import duties – a figure that has surged from just $35–40 billion annually before the trade wars. With the new tariff regime in 2025, this revenue stream will grow exponentially. Senior administration officials project the latest tariffs will raise “hundreds of billions of dollars annually”. Indeed, independent analyses support this. The Tax Foundation estimates that a 10% universal tariff could raise roughly $2 trillion over 10 years, and that’s before accounting for the additional country-specific tariffs. President Trump explicitly stated the goal is to “bring in hundreds of billions in new revenue to the U.S. government and restore fairness to global trade”.

What will the U.S. do with this money? A significant portion is earmarked to fund major tax cuts for Americans. Both the President and Republican lawmakers have indicated that tariff revenues will offset the cost of extending the 2017 Tax Cuts and Jobs Act provisions set to expire in 2025. Extending those cuts (which lowered income tax rates and raised the standard deduction, among other benefits) for another decade is estimated to reduce federal tax receipts by about $4.5 trillion. Tariffs won’t cover all of that, but they could cover a large chunk. In effect, the burden shifts: instead of Americans paying higher taxes, foreign exporters and importers pay tariffs, and that money enables tax relief at home.

This strategy has compelling logic. It means more disposable income in U.S. consumers’ pockets due to tax cuts, which can stimulate spending and help offset any price increases from tariffs. For example, if the average household gets an extra $1,000 per year from extended tax cuts (through lower payroll or income taxes), and they face perhaps $200–$300 higher costs due to tariffs on various goods, they still come out ahead net. In 2025, a 10% universal tariff is estimated to cost U.S. households about $1,253 on average (in terms of higher prices), but if the tax cuts save that household a similar or greater amount, the net effect on their budget is neutral or positive. It’s effectively a transfer of wealth from foreign producers to the U.S. consumer, mediated by the U.S. Treasury. I can appreciate that a tax-cut-fueled boost in consumer spending could particularly benefit sectors like retail, food, and beauty – softening any demand impact from tariff-related price upticks.

Additionally, higher government revenue from tariffs can improve the fiscal picture, potentially allowing for strategic public investments (in infrastructure, R&D, education) without increasing deficits. Better infrastructure, for instance, lowers costs for businesses (faster transport, lower logistics costs), again helping profitability. It’s a longer-term, indirect benefit, but one worth noting when assessing the holistic impact of tariffs on the economy.

Of course, some critics argue that tariffs act like a tax on consumers and could be inflationary. However, it’s important to recall that during Trump’s first term, despite tariffs, inflation remained very low (around 2%). Now in 2025, inflation is a concern, but the tariff program is coupled with a fierce focus on domestic production and tax cuts, which could counteract inflationary tendencies. Moreover, if tariffs successfully bring manufacturing back, they mitigate future supply shocks that caused inflation. In summary, tariff revenues represent a strategic financial lever. They allow the U.S. to lower other taxes and fund growth-enhancing policies. For investors, the implication is a potentially stronger overall economy with robust consumer demand – a positive backdrop for corporate earnings in sectors that might otherwise worry about tariff impacts. It’s essentially a re-balancing: rather than our companies suffering from foreign undercutting and our government running deficits to cut taxes, tariffs make foreign actors contribute to our fiscal health.

Strengthening “Made in USA”: Quality, Safety, and Local Benefits

A core argument in favor of tariffs is that they make Made-in-USA products more competitive, reversing the decades-long trend of offshoring. This has multiple benefits that go beyond economics and into the realm of quality, safety, and national interest.

Competitiveness and Jobs

By raising the relative price of imported goods, tariffs give American-made goods a fighting chance in the marketplace. This encourages companies to invest in U.S. factories, which creates jobs. We have tangible proof from the manufacturing sector. When steel tariffs were imposed in 2018, U.S. Steel Corporation reopened blast furnaces in Granite City, Illinois, hiring 800 workers, citing the tariffs as a key factor. “The restart of the furnaces will allow us to serve growing demand for high-quality products melted and poured in the United States,” said U.S. Steel’s CEO. In other words, domestic demand was ready to shift to U.S. steel once imports were a bit pricier, validating the protective tariff. Similarly, new aluminum plants and appliance factories opened or expanded following tariffs on those goods. A Bloomberg report in late 2019 noted that “Trump’s tariffs revived a steel town” – a testament to how targeted duties can breathe life into local industries.

In the apparel sector, as discussed, we anticipate a modest revival of sewing and textile jobs. In the automotive sector (although not my focus here), tariffs or the threat thereof led to the USMCA trade deal, which stipulates higher North American content and better labor conditions, prompting automakers to increase U.S. sourcing of parts. All these translate into jobs with generally higher wages and better benefits than the positions in retail or services that they replace. There’s a multiplier effect too: manufacturing jobs support local economies (each factory worker’s salary circulates to create other jobs in schools, shops, etc.). Investors might see benefits in related industries – e.g., more manufacturing boosts demand for warehouses, trucking, and raw materials, potentially benefiting industrial REITs or materials suppliers.

Quality and Safety

U.S. production is subject to rigorous standards – whether it’s OSHA workplace safety, EPA environmental rules, or consumer safety regulations. Products made in the USA often undergo stricter quality control. This means fewer product recalls and scandals. There have been instances where lax standards overseas led to tragedies: consider the recall of millions of imported toys coated with lead paint in 2007, or pet foods imported from China that were contaminated with melamine, causing pet deaths. American-made toys and pet foods are far less likely to have such issues because of regulatory oversight. By making imported goods (especially from countries with lower standards) more expensive, tariffs naturally shift both production and consumption toward the safer alternatives. Parents might opt for an American-made baby food brand if the price gap with the imported brand narrows – and that choice could have health benefits. Tariffs thereby reinforce a market for quality. Brands that manufacture domestically can proudly label products as “Made in USA” and consumers associate that with higher safety and quality, which can command higher loyalty and even pricing.

Local Economic Benefits

Buying American supports American communities. This is something consumers are increasingly aware of. Tariffs can be framed as a way to internalize the true costs of imports. While a foreign-made shirt might be $5 cheaper than one made here, that $5 savings might come at the cost of a factory closure in North Carolina. When tariffs remove that savings, consumers are essentially paying the true cost – which includes keeping jobs in-country. Those jobs contribute to the tax base, fund local schools, and reduce the need for government assistance. There is a social return on keeping production local.

We’re also seeing a consumer shift towards valuing ethically made and sustainable goods. U.S. factories, with higher environmental controls, produce goods with a lower pollution footprint than some unregulated foreign factories that might dump waste in rivers or emit noxious fumes. Tariffs indirectly favor sustainable and ethical production, because often it’s the low-cost (and lower standard) producers abroad that get penalized the most. A garment sewn in a U.S. factory paying fair wages might cost more than one made in a sweatshop overseas – until tariffs even the odds. For brands that have built their identity on sustainability or ethical sourcing, this is a huge tailwind. They no longer have to compete as heavily on price; they can compete on values and quality on a more level field.

Innovation and Resilience

When manufacturing moves overseas, innovation often follows (since R&D and production are linked). Conversely, bringing production back can spur innovation here at home. Engineers and designers being close to the factory floor often leads to better product development. We can expect more R&D in advanced manufacturing, automation, and process improvements as companies invest in U.S. facilities to cope with higher costs. In time, this can make American industry more advanced and efficient. Also, a diversified supply chain that includes robust domestic capacity is more resilient to shocks. The next time there’s a global crisis, companies with domestic production won’t be as crippled by border closures or port delays.

In the apparel, food, and beauty sectors, “Made in USA” can also become a premium feature. I foresee marketing campaigns highlighting local production: farm-to-face skincare creams touting their California production and organic U.S. ingredients, clothing brands highlighting American craftsmanship and durability, food brands emphasizing home-grown crops. These narratives build brand loyalty. They also often correlate with higher safety and quality as mentioned. For investors, brands that successfully tap into this patriotic and quality-centric marketing can command higher price points and margins, turning what was a cost increase (from making domestically) into an advantage in brand equity.

To be fair, not every product can be made in the USA; some industries rely on resources we don’t have (like coffee or cocoa). Tariffs on those goods mainly serve to raise revenue, not to bring production here. But even in those cases, we can often find alternatives or encourage new industries. The overall effect is a tilt toward local value addition at each stage possible.

Tariffs as Leverage: Negotiating Better Trade Deals for the U.S.

Lastly, it’s critical to view tariffs not as an end in themselves, but as a means to an end: better trade agreements for the United States. President Trump has repeatedly framed tariffs as a negotiation tool – “We will use tariffs to negotiate fair and reciprocal trade,” he asserted, which is exactly what unfolded in several cases.

The USMCA (United States-Mexico-Canada Agreement) is a prime example. By threatening to terminate NAFTA and impose auto tariffs, the U.S. brought Canada and Mexico to the table to hammer out a more favorable deal. The resulting agreement (implemented 2020) included provisions that benefit U.S. workers: higher regional content requirements for cars (increasing U.S. part sourcing) and a requirement that a significant portion of autos be made by workers earning at least $16/hour (helping U.S. and Canadian workers compete with lower-wage Mexican labor). It’s doubtful such concessions would have been achieved without the credible threat of tariffs. Similarly, the mere announcement of tariffs on Mexico in 2019 (in response to immigration issues) led to a swift accord on immigration enforcement, and those tariffs were suspended. This showcases tariffs’ power beyond economics – they can achieve diplomatic and policy wins.

Another case is the Phase One trade deal with China. The U.S. applied escalating tariffs, and China, facing economic strain, came to negotiate. The Phase One deal committed China to purchase more U.S. goods (as noted, especially farm goods) and to strengthen intellectual property protections. While not all issues were resolved, the agreement addressed some structural concerns like stopping forced technology transfer. The tariffs were the leverage making this possible.

Going forward, the high tariffs announced in 2025 set the stage for future negotiations. The administration has signaled that other countries can earn exemptions or reductions by changing their trade practices. For instance, if the EU were to agree to eliminate certain tariffs on U.S. goods or open its market more to U.S. agriculture, the U.S. could lower that 20% tariff in a new trade pact. Already, we saw an example in 2022 when the U.S. and EU negotiated a tariff-rate quota arrangement to ease the steel/aluminum tariffs in exchange for cooperation on addressing Chinese overcapacity. We might see bilateral deals where countries pledge to reduce their subsidies, enforce labor standards, or eliminate their own tariffs that hurt U.S. exports, in order to gain relief from our tariffs.

From an investor standpoint, this could unlock new opportunities: if India, for example, cuts its high tariffs on American cosmetics or food products as part of a deal to get U.S. tariff relief, that opens a big market for our companies. Or if a country agrees to stronger IP enforcement, that benefits U.S. brands expanding abroad without fear of counterfeits. The tough stance now is intended to yield long-term advantages and a fairer playing field globally, which U.S. firms are well-poised to win on thanks to their efficiency and innovation when true reciprocity exists.

It’s akin to enduring some short-term volatility for long-term stability and growth. Tariffs give the U.S. negotiating chips that it hasn’t had in a generation. Many partners took for granted that the U.S. would keep its market open regardless of their barriers. Now, they must reconsider. The result could be a series of revised trade arrangements aligning more with U.S. interests – whether it’s better access for U.S. beef in Europe, stronger protections for American tech patents in Asia, or eliminating import caps that limit U.S. export potential. President Trump’s team has conveyed this intent clearly: “The higher rates exist to ensure compliance,” officials noted, implying they are a stick to drive trading partners to the table. Once fair deals are struck, tariffs can be reduced – a win-win outcome. In the meantime, American industries benefit from the temporary breathing room to grow stronger.

Where We Go from Here

In closing, I believe this new tariff-driven trade policy—while a sharp break from business-as-usual—presents real upside for investors across the apparel, food, and beauty sectors. By reshaping cost structures, tariffs are accelerating a return to American manufacturing, strengthening supply chain resilience, and elevating companies that prioritize quality and maintain direct, loyal relationships with their customers. While the transition comes with disruption, it’s paving the way for a more balanced and durable marketplace—one where U.S. businesses can compete on their merits, rather than be undercut by artificially cheap imports.

The data and examples speak for themselves: billions in new revenue flowing into the U.S. Treasury, factories roaring back to life in places like Illinois and North Carolina, and brands like American Giant and e.l.f. Beauty proving that agility and local focus can turn tariff headwinds into competitive tailwinds. Consumers, meanwhile, stand to benefit from a virtuous cycle of tax cuts, infrastructure investment, and safer, higher-quality products made closer to home. Yes, prices may rise in some categories—but those extra dollars are supporting American jobs and returning to households through tax relief and improved public services.

We shouldn’t view tariffs as a blunt instrument or a political risk, but rather as a strategic reset—one that corrects long-standing distortions in global trade and unlocks real value in domestic enterprise. Companies that respond decisively—by localizing production, streamlining supply chains, or leaning into their American-made advantage—are positioned to capture market share and build lasting brand equity. Many will also benefit from the cushion of tariff-funded tax cuts and a policy environment that is actively promoting domestic industry.

I remain optimistic about the road ahead. My personal focus will continue to tilt toward businesses taking proactive steps—whether that means expanding U.S. production, gaining tighter control over distribution, or incorporating the “Made in USA” story into their brand in a thoughtful, authentic way. At the same time, I fully recognize that not every path will look the same. Many excellent brands that manufacture overseas are actively working through this period with resilience, creativity, and urgency—and I’ll continue to support them.

The case for tariffs, at its core, is a case for American ingenuity. By investing in that future, we’re not just seeking returns—we’re contributing to a stronger, more self-reliant economic foundation. I envision a landscape where “Made in USA” evolves from a nostalgic tagline into a true premium standard—one that commands pricing power and loyalty. And in this environment, direct-to-consumer brands are especially well-positioned. With lean operations and tight customer relationships, they’re able to weather cost pressures and move faster than traditional players. That shift toward domestic strength extends across the supply chain—from packaging to ingredients to raw materials—which is why I expect U.S.-based suppliers to see meaningful growth as well.

On the broader macro front, the tariff program brings more than just industrial realignment—it brings fiscal flexibility. Tariffs, long viewed as pure cost, are now filling government coffers and helping fund future tax cuts. In doing so, they turn near-term trade friction into potential long-term gain. And as markets adapt, I expect valuations to shift too—rewarding companies with resilient, domestic supply chains and reducing the premium once placed on low-cost, globalized sourcing.

Moreover, this “pressure cooker” policy is likely to spur a fresh wave of bilateral trade agreements. We’re already seeing movement: just today, shares of Nike and Lululemon jumped after President Trump reported a productive call with Vietnam’s leadership. In response to new tariffs, Vietnam signaled a willingness to eliminate their own to avoid further U.S. levies—prompting a swift reversal in market sentiment.

This is a reminder that tariffs aren’t just economic—they’re diplomatic. Roughly half of Nike’s production happens in Vietnam, and the fact that the country is actively working to reduce trade barriers suggests a future where selective, fair partnerships become a real competitive advantage. Not all overseas production is misaligned with U.S. interests—and companies with sourcing in aligned countries may ultimately benefit from emerging trade pacts. What matters most now is flexibility, clarity, and an ability to adapt.

Throughout this transition, I’m doing my best to stay ahead of the curve. For years, I’ve believed in the long-term value of domestic manufacturing, agile direct-to-consumer models, and resilient supply chains—and it’s encouraging to see that conviction echoed by today’s market dynamics. That mindset shapes how I invest, how I support founders, and how I evaluate risk and opportunity in the years ahead.

I’m not claiming to have all the answers. But I do believe that operating with urgency, clarity, and a long-term view is the right playbook in times like these. That’s the approach I’m taking—both personally and professionally—as I work with portfolio companies and investors to navigate these shifting currents. I’ll continue to stay close to the data, to the market, and to the people building the next great American brands.

Thanks, as always, for your trust and partnership.

Martin Dolfi

Founder/CEO

Beliade Consumer Partners

Disclaimer, Citations, and References: the opinions expressed in this letter reflect my personal views and assessments. They are not necessarily shared by all team members at Beliade Consumer Partners and should not be interpreted as the official position of the firm. This letter was prepared with the assistance of advanced AI tools for research and drafting. This letter is not intended to solicit or facilitate the sale or purchase of securities in any jurisdiction where such activities are unauthorized, or to any individuals where such transactions would be unlawful. Please note that Beliade Consumer Partners does not provide legal, tax, or accounting advice. Copyright © 2025 Beliade Consumer Partners. All rights reserved.

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