Donald Trump’s 'America First Trade Policy' has raised serious concerns about the status quo in the consumer packaged goods (CPG) sector. Household CPG brands — from instant noodles to ketchup and popcorn — used to rely on complex global manufacturing networks, including across the US borders with Canada and Mexico.
“In a new 25% tariff era it makes zero sense,” says Oisin Hanrahan, CEO of Keychain, a CPG data platform that connects more than 30,000 brands and retailers with manufacturing partners. “That supply chain is obliterated. All of those actions are now happening in the US.”
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The CPG sector, which is the largest US domestic manufacturing sector supporting over 22 million jobs, will be crucial for President Trump’s goal to favour the local production economy. Data evidence suggests the industry is already pivoting to secure domestic supply chains.
Between December 2024 and January 2025, Keychain recorded a 70% increase in its unique users filtering for only US-based manufacturers. While about 10-20% of the growth came from additional Keychain unique users, this remains a signal of the CPG industry response to the president’s policies.
On March 4, President Trump’s 25% tariffs on all imports from Canada and Mexico took effect, making a case for US retailers to source from local suppliers to avoid duties and protect profit margins. His 2025 trade agenda, released on March 3, aims to increase the manufacturing sector’s share of the economy, boost real median household incomes and reduce the size of the US’s trade in goods deficit.
The pivot towards domestic production traces back to Mr Trump’s first term. Both foreign and domestic investors intensified their investment campaigns to add production capacity in the US and make the most of the favourable tax policies implemented under Mr Trump’s first term.
Direct investment commitments in food and beverage manufacturing by foreign and US interstate investors peaked at almost $15bn in 2021, according to fDi Markets, which tracks greenfield project announcements. Bonus depreciation in the 2017 Tax Cuts and Jobs Act (TCJA) allowed companies to deduct up to 100% of their first-year spending on eligible assets like machinery and equipment.
During the low interest rate environment and tax incentives, companies could “be cash generative on buying new machinery” for up to four years, says Mr Hanrahan, who adds this “created an enormous spike” in US manufacturing capacity.
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As the 100% bonus depreciation began to be phased out after 2022 — dropping to 80% deduction on assets in 2023 — direct investment fell to $8.6bn, according to fDi Markets figures. Investment in food and drinks factories then rebounded slightly to about $10.5bn in 2024, despite the bonus depreciation falling to 60%.
Looking ahead, uncertainty over import tariffs, retaliatory tariffs, sustainability policies and layoffs at regulatory agencies “are likely to make it more difficult to make investment decisions as well as the establishment of new production facilities”, says Jim Renzas, director of North America at BCI Global, a consulting firm.
Even in the context of a more challenging landscape for new investment, data shows that there is some spare US manufacturing capacity to serve a growing need for CPG products and their inputs to be sourced domestically and avoid border crossings and duties associated with them.
Monthly data produced by the Federal Reserve shows that capacity utilisation in the food, beverage and tobacco industries in the US fell to an all-time low during the Covid-19 pandemic, before surging to an all-time high at the end of 2023. Since then, capacity utilisation has declined as investments in machinery have come online.
Mr Trump has bold ambitions to reshore many supply chains. But there are still hard realities to face up to in the industries producing the goods found on US supermarket shelves. For many CPG companies and retailers “shifting supply chains to domestic production remains unfeasible”, says Nick Stuart, a consumer products senior analyst at RSM, a multinational accounting firm. Businesses still need to consider the availability and cost of labour, the strength of the US dollar and cost of input materials when considering whether to reshore production.
The Consumer Brands Association (CBA), an industry body, has warned that the tariffs could lead to higher consumer prices and retaliation.“Despite sourcing the vast majority of ingredients and inputs from US farms and domestic suppliers, CPG companies depend on global supply chains for certain imports due to unique growing conditions and other limiting factors around the world,” said Tom Madrecki, vice-president at the CBA, in response to Mr Trump’s tariffs on Canada and Mexico.