Unilever, P&G Could Face Rising Supply Costs Under Trump's 25% Mexico Tariff Threat

Unilever and P&G, heavily invested in Mexico, may face higher costs and pass them on to consumers.

By Thea Felicity

Nov 07 2024, 11:20 AM EST

NETHERLANDS-AGRICULTURE-ALIMENTATION-DISTRIBUTION-UNILEVER — A picture taken on June 5, 2015 shows the logo of Unilever at the headquarters in Rotterdam. Unilever is a multinational company in the field of food, personal care and cleaning products. In 1930, Lever Brother, a British soap maker and Margarine, a Dutch company, merged to optimize their requirements and create the multinational Unilever. JOHN THYS/AFP via Getty Images

As it turns out, it's not just consumer prices that are bound to increase under Trump's second term, but also supply costs.

With the 25% tariff threat on Mexico, major companies that could face higher costs include Unilever and Procter & Gamble (P&G). Prior to his victory over Kamala Harris, these threats were to pressure both China and Mexico to curb the flow of fentanyl into the United States.

Both Unilever and P&G, as well as PepsiCo, heavily invested in Mexico that it has become a central hub for their supply chains. About 10% of P&G's third quarter shipments were from Mexico, with 2% of Unilever's US imports coming from the same place, Yahoo Finance reported.

Under Trump, spending millions to develop Mexican supply chains to support US markets will eventually to higher supply costs and consumer prices.

Mexico Tariff to Consumer Price

As a result, US consumers will see price increases on everyday items, like food and soap. Both Mexico and the US are reliant on Mexico trade, meaning that tariffs on products from said companies could ripple through the economy.

These companies have publicly spoken about the strategic importance of Mexico in their operations, particularly as they try to shield themselves from global supply chain disruptions. What they can do in this case is to either absorb the additional costs or pass them on to consumers. Both strategy will also be a huge risk.

With that, experts are now studying the exploration on 'nearshoring' by these companies, which involves relocating production closer to key markets. This way, Business Standard shared that it will reduce reliance on distant manufacturing.

It's worth noting, however, that the 25% tariffs still remain as a threat by Trump and experts are unclear on whether this would be enacted. The outcome could largely depend on ongoing negotiations and efforts to address the fentanyl issue, which means Unilever and P&G will need to closely monitor the situation for the sake of their cross-border supply chains.