The United States-Mexico-Canada Agreement (USMCA) serves as a critical lifeline for the American cosmetics and personal care industry. By eliminating tariffs and streamlining regulations through a specialized annex, the pact supports nearly $500 billion in economic output across North America.
The 42% ingredient gap threatening domestic supply
The report highlights a profound dependence on international sourcing within the personal care sector. Industry analysis reveals that at least 42% of ingredients used in cosmetics and personal care products cannot be sourced domestically in the required quantities. This creates a significant vulnerability for American manufacturers who rely on a steady flow of specialty chemicals, packaging materials, and aerosol systems that are not available at scale within the United States.
Without these imported components, the production of daily essentials—ranging from toothpaste to sunscreen—could face significant delays or sudden cost increases. this dependency makes the seamless movement of goods across borders a matter of domestic industrial stability.
The unique USMCA Cosmetics Annex and its regulatory role
The USMCA provides a specialized mechanism to manage these complex supply chain requirements. As the report notes, the agreement includes a groundbreaking Cosmetics Annex—the only one of its kind in any U.S. free trade deal. This specific provision works to streamline product approvals and harmonize standards across borders,effectively reducing the regulatory barriers that once complicated commerce between the three nations.
By creating a unified standard, the annex allows companies of all sizes to reach consumers more efficiently. this regulatory alignment is designed to ensure that safety and quality are maintained without the friction of redundant, country-specific testing protocols.
Protecting 2.6 million jobs and $240 billion in U.S. GDP
The economic stakes of maintaining these trade lanes are massive for the American economy. The cosmetics and personal care industry contributes nearly $500 billion in total economic output and generates over $240 billion in U.S. GDP. Furthermore , the sector supports approximately 2.6 million American jobs.
According to the report, North America is the cornerstone of this trade, with 2025 export figures showing nearly $16 billion in products, more than one-third of which are purchased by Canada and Mexico. This regional integration allows U.S. companies to remain globally competitive by leveraging the manufacturing strengths of the entire North American bloc.
The shadow of the 2018 steel tariffs and 2025 Canadian retaliation
Trade volatility remains a constant threat to the stability of these integrated supply chains. Historical precedents, such as the 2018 tariffs linked to Section 232 steel and aluminum measures, show how quickly consumer-facing sectors can be disrupted. The report also points to the 2025 Canadian retaliatory tariffs on U.S. consumer goods as a warning of how trade disputes can raise costs for everyday essentials like shampoo and skincare, even when the industry is not a participant in the underlying conflict.
Will the Cosmetics Annex survive the next USMCA review?
As policymakers begin to review the USMCA, several critical questions remain regarding the future of the industry's trade protections. While leaders like former U.S. Representative Kevin Brady and Thomas Myers, CEO of the Personal Care Products Council (PCPC), advocate for the preservation of zero tariffs and the current rules of origin, the specific outcome of these negotiations remains unverified. It is still unknown whether the unique Cosmetics Annex will be maintained in its current form or if it will be sacrificed during broader diplomatic negotiations.
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