European Cosmetics Sector Pursues Exemption from Trade War Tariffs
L'Oréal spearheads industry efforts to remove beauty products from the EU's retaliation list as trade conflicts with the US intensify.
L'Oréal, the French cosmetics powerhouse valued at around one hundred eighty-eight billion euros, has officially asked the European Union to exempt the beauty industry from its proposed retaliatory tariffs on the United States.
This request arises amidst increasing trade tensions affecting the luxury and consumer goods sectors.
In March, L'Oréal's CEO indicated that the company is ready to adapt should tariffs be enacted, highlighting the company's pricing capabilities and favorable currency conditions linked to a robust US dollar.
He emphasized that while tariffs are manageable, they should not form part of a reciprocal trade approach.
Soon after, L'Oréal assembled a coalition of fifteen beauty companies to formally appeal to the European Commission for the exclusion of the beauty sector from its draft list of targeted imports from America.
The EU had developed a ninety-nine-page document detailing possible tariff targets, initially scheduled to be implemented on April 1. However, the European Commission postponed the enforcement until April 13 to facilitate further diplomatic discussions with the United States.
The French spirits sector, threatened with US tariffs reaching as high as two hundred percent, also pushed for this delay.
France’s cosmetics industry association has contested new tariffs, citing trade statistics that indicate France imports about five hundred million euros worth of American cosmetics each year, while exporting around two and a half billion euros in personal care items to the US. The overall European cosmetics sector supports close to two million jobs across the continent.
Though L'Oréal manufactures about two-thirds of the products it sells in the US domestically, company sources reveal that its fragrance and scented product divisions remain particularly susceptible to tariffs.
A downturn in these categories could affect the company’s profitability, which is already facing challenges due to declining consumer confidence in China.
China is a crucial market for the global cosmetics industry and has emerged as the second-largest beauty product market in the world following the United States.
L'Oréal has experienced falling sales in China over several quarters: a decline of six point five percent in Q3 2024, three point six percent in Q4, and an approximate four percent reduction for the entire year.
China constitutes about seventeen percent of the company’s overall sales.
In contrast, sales in the United States increased by only one point four percent in 2024.
Over the last year, L'Oréal's stock price has dropped by roughly nineteen percent after several years of growth during the COVID-19 period, which was partly fueled by heightened demand for premium cosmetics.
Despite the recent decline, the stock has appreciated by forty-eight percent over the previous five years.
In 2024, L'Oréal reported annual revenues of forty-three point four eight billion euros, representing a year-over-year increase of five point six percent.
The net profit reached six point four one billion euros.
In comparison, Estée Lauder, its American competitor, is currently valued at about twenty-four billion US dollars.
The New York-listed firm has seen its share price decrease by approximately fifty-seven percent over the past five years, with a fifty-two percent drop in the last year alone.
L'Oréal's strong performance has made it a key investment for several prominent funds.
One significant backer is Terry Smith, a renowned UK investor whose fund manages thirty-six billion pounds in assets.
The cosmetics industry's plea for exemption, similar to that of the spirits industry, has faced public backlash.
Critics argue that exempting luxury goods from the EU’s trade response signifies a detached perspective, particularly in light of the ongoing economic strains initiated by the previous US administration.
This request arises amidst increasing trade tensions affecting the luxury and consumer goods sectors.
In March, L'Oréal's CEO indicated that the company is ready to adapt should tariffs be enacted, highlighting the company's pricing capabilities and favorable currency conditions linked to a robust US dollar.
He emphasized that while tariffs are manageable, they should not form part of a reciprocal trade approach.
Soon after, L'Oréal assembled a coalition of fifteen beauty companies to formally appeal to the European Commission for the exclusion of the beauty sector from its draft list of targeted imports from America.
The EU had developed a ninety-nine-page document detailing possible tariff targets, initially scheduled to be implemented on April 1. However, the European Commission postponed the enforcement until April 13 to facilitate further diplomatic discussions with the United States.
The French spirits sector, threatened with US tariffs reaching as high as two hundred percent, also pushed for this delay.
France’s cosmetics industry association has contested new tariffs, citing trade statistics that indicate France imports about five hundred million euros worth of American cosmetics each year, while exporting around two and a half billion euros in personal care items to the US. The overall European cosmetics sector supports close to two million jobs across the continent.
Though L'Oréal manufactures about two-thirds of the products it sells in the US domestically, company sources reveal that its fragrance and scented product divisions remain particularly susceptible to tariffs.
A downturn in these categories could affect the company’s profitability, which is already facing challenges due to declining consumer confidence in China.
China is a crucial market for the global cosmetics industry and has emerged as the second-largest beauty product market in the world following the United States.
L'Oréal has experienced falling sales in China over several quarters: a decline of six point five percent in Q3 2024, three point six percent in Q4, and an approximate four percent reduction for the entire year.
China constitutes about seventeen percent of the company’s overall sales.
In contrast, sales in the United States increased by only one point four percent in 2024.
Over the last year, L'Oréal's stock price has dropped by roughly nineteen percent after several years of growth during the COVID-19 period, which was partly fueled by heightened demand for premium cosmetics.
Despite the recent decline, the stock has appreciated by forty-eight percent over the previous five years.
In 2024, L'Oréal reported annual revenues of forty-three point four eight billion euros, representing a year-over-year increase of five point six percent.
The net profit reached six point four one billion euros.
In comparison, Estée Lauder, its American competitor, is currently valued at about twenty-four billion US dollars.
The New York-listed firm has seen its share price decrease by approximately fifty-seven percent over the past five years, with a fifty-two percent drop in the last year alone.
L'Oréal's strong performance has made it a key investment for several prominent funds.
One significant backer is Terry Smith, a renowned UK investor whose fund manages thirty-six billion pounds in assets.
The cosmetics industry's plea for exemption, similar to that of the spirits industry, has faced public backlash.
Critics argue that exempting luxury goods from the EU’s trade response signifies a detached perspective, particularly in light of the ongoing economic strains initiated by the previous US administration.
