Trump tariffs on natural ingredients hurt small business, consumers, NPA says

Jul 31, 2018

The Natural Products Association (NPA; Washington, DC) is urging the Trump administration not to impose tariffs on many of the ingredients used to create natural products and dietary supplements. On July 6, the Trump administration pulled the trigger on $34 billion worth of active tariffs on Chinese goods. On June 20, the administration sought public comment on an additional $16 billion in proposed tariffs against China. Later in July, the administration proposed an additional $200 billion in tariffs on a gamut of China-produced goods, including many ingredients heavily used by U.S. manufacturers of natural products and dietary supplements.

As Nutritional Outlook reported in July, those ingredients facing potential tariffs include pork and fish; various vegetables (soybeans, carrots, peas, chickpeas, etc.); various fruits (mangosteen, guava, strawberries, bananas, coconut, etc.); various nuts (peanuts, almonds, walnuts, chestnuts, pistachios); oats, corn, quinoa, and rice; inulin; other herbs and botanicals (seaweed, ephedra, ginseng); cod liver oil; xylitol, cane sugar, and beet sugar; numerous minerals (calcium, sodium, potassium, zinc, magnesium); phospholipids; choline; and more. Click here for the complete list.

On July 30, NPA announced it sent a letter to U.S. Trade Representative Robert E. Lighthizer stating that these tariffs “will cause disproportionate economic harm to U.S. interests and increase costs for small businesses and consumers.” NPA president and CEO Daniel Fabricant, PhD, is set to testify at an upcoming U.S. Trade Representative hearing in late August on these proposed tariff actions. NPA says Fabricant will “present the association’s views and the potential impact of the proposed tariffs on its members, small businesses, and consumers.”

“We strongly urge the Administration to rethink its trade policy that will cause a financial burden on small businesses and the three quarters of American consumers who use nutritional supplements,” said Fabricant in a press release. “Our members, made up largely of small businesses, are deeply concerned that tariffs on dietary ingredients and finished supplement products will make it impossible to remain profitable without raising prices on consumers. We look forward to sharing our views in more detail with the Administration in the coming days.”

NPA is asking the administration to exempt many dietary ingredients, noting that many of the ingredients used in the natural products industry are sourced from China. See NPA’s proposed list here. “Many dietary ingredients used in the domestic manufacture of dietary supplements are dependent upon sourcing in China because it is the only country which can handle ingredient sourcing supply on the scale demanded by finished product manufacturers of dietary supplements in the U.S.,” NPA pointed out in a press release. In a previous Nutritional Outlook article, Scott Steinford, executive director at large of the CoQ10 Association (Salt Lake City, UT), estimated that up to 90% of the dietary supplement ingredients used in U.S.-manufactured products come from China.

The industry’s reliance on Chinese goods means tariffs would cause “significant harm and financial impact to U.S. companies,” NPA said, with the likelihood that many small- and medium-sized companies sourcing goods from China might go out of business. In addition, tariffs could drive U.S. companies to opt to relocate operations to China instead of keeping their business stateside. Finally, NPA points out, consumers will bear the increased product costs resulting from a trade war.

Again, NPA points out, small businesses are likely the ones to suffer most from tariffs, which could trickle down to hurt the industry at large:

“The dietary supplement industry receives significant ingredient innovation from new, small business startup companies. It is that ingredient innovation which drives future product sales for this industry. Any disruption of the raw material supply chain through tariffs on ingredients sourced from China will curtail innovation, decrease future sales, and flatten the expected CAGR for the dietary supplement and natural product industries. The 10% CAGR in the future global market over the next 10 years means that any proposed tariffs on dietary ingredients will lead to strong sales for the rest of Europe, South America, and Asia, and a lack of growth for the U.S. for the first time. It is an action which the U.S. dietary supplement industry may not be able to recover from.”