The herbal supplements industry is still reeling from the U.S.-China trade war resulting in tariffs and a pending Section 232 investigation.

Basic nutritional compounds, like vitamins, minerals, fatty acids, amino acids, and more have been exempted thus far from tariffs imposed by the U.S. in the tit-for-tat tariff hikes which brought tariffs on U.S. imports from China to 145%, up from the 20% tariff rate which was applied earlier this year (which still remains in effect). Notably, other specialty ingredients, such as amino acid precursors to NAC, are also subject to 25% Section 301 tariffs on imports from China which have been in effect since the first Trump Administration.

Several other classes of specialty ingredients used in the nutraceuticals industry, including all herbs and botanicals, on the other hand, have seen no exemptions from the April 2 tariff increase, and though the Trump administration appears likely to maintain a 30% tariff rate on these products, the disruptions have been unprecedented and disproportionate compared to other natural products and nutraceuticals, observers note.

Graham Rigby, president and CEO of the American Herbal Products Association (AHPA), noted that herb and botanical companies face disruptions to procurement times and are being forced to reevaluate their supply chains. Many China-sourced ingredients are “difficult or impossible to replace domestically. Even a temporary rollback may offer cost relief, but it does not eliminate the barriers that remain for companies that rely on these critical ingredients to produce the dietary supplements that consumers count on for their personal health.”

“The uncertainty fuels confusion,” he continued. “Do importers raise their prices? How about contract manufacturers who convert these imported goods to finished products? The lack of certainty is fueling confusion and frustration among those trying to accurately plan their business.”

Level of Disruption is Unprecedented

Botanical suppliers report that the level of disruption they’re experiencing today dwarfs that caused during the outbreak of the COVID-19 pandemic.

“Even with Covid, we knew what the endpoint would be, and that things should normalize if we got through it. With what is currently going on, there is no end in sight and where we end up is a great unknown. But once you let the proverbial bird out of the cage, there is no going back to the old system,” said Wilson Lau, president of Nuherbs. He added that the only sense of assurance the herbal industry will weather the storm is “from our partners who are using the botanicals that we are bringing, in that they are willing to pay the new prices and need the material to continue to provide wellness to Americans.”

Corey Shaw, vice president of Jiaherb, Inc., concurred, noting that while prices and inflation skyrocketed during Covid, the current situation is more challenging. As tit-for-tat tariffs escalated in recent months, “we had to load up our New Jersey and California warehouses way more than we normally would, and pay these updated tariff rates across the board depending on if the material was sea-shipped in, air-shipped in, and what dates those shipments left China (for sea shipments) or what dates they arrived into the U.S. (for air shipments).”

“It went from having to just worry about having the stock necessary for each of our clients, to how much stock would we need, and is it worth it to bring in at 10%, 20%, 54%, 30%?” he added. “It kept changing every day, it was unreasonable, and we had to completely stop bringing in material until we received a solid answer of 30% for 90 days — and only then did we start bringing in material at a normal basis from China again.”

Even now, Shaw continued, the future is still uncertain. “We don’t truly know how long this will last. During Covid, the supply chain was much easier to forecast, because event if it was going to be low stock, at least we could predict it and see that coming up. Right now, we’re completely blind to what the future will be.”

Shaw emphasized the need to get back to “business as usual, as that is what our clients are expecting … We will make sure to have the material ready for anyone who needs it. We just have to go day by day as a company, and it’s very difficult, but we have to keep the gears going.”

Bracing for the End of the Tariff Pause

Analysts expect the 90-day tariff pause will be extended, but there are no guarantees.

Large suppliers like Jiaherb are able to “ramp up and get back to normal much quicker,” said Shaw, and are able to return operations to pre-tariff levels after two or three months. “But if the tariffs do go up again after the 90 days, then who knows, we could be right back to where we were before.”

For other companies, the trade war mandates permanent change. The 90-day tariff pause essentially gives 45 days for companies to get their goods out of China, said Lau, as shipments take 30 days, and it takes roughly 2 weeks to clear customs. “Companies that source commodity ingredients that are ready to ship are faring better,” he said, while those sourcing more specialized materials simply weren’t afforded enough time by the current tariff pause.  

“Once you rock the boat this intensely, you will have to change course and navigate in new ways to achieve success,” said Lau. “Thus, the question isn’t how long it will take to get back there, but really, where are we going now in this new paradigm?”

Certain herbs and botanicals only yield valued bioactive compounds when grown in biomes unique to China, and are sold mostly through a highly-localized market. While Chinese ginseng (Angelica sinensis) is also sold widely in China, certain herbs are only popular in the U.S.

“It’s very possible this shock will cause farmers to go out of business, or decide to no longer grow for the American market because it’s too unreliable,” said Lau. “There are so many more possible repercussions, some of which most businesses won’t see coming.”

While botanicals are not expected to be implicated in the Section 232 investigation, if they are, “this would have a significant chilling effect,” guaranteeing that consumers would lose access to certain products, Lau noted.

Domesticating Herb Supplies

The sheer scale of the problem of patriating herb supply to the U.S. is severely overlooked, Shaw said.

“China, by far, has the most variety that we use in our industry and is able to produce at an economic scale,” Shaw said. “The U.S. and a lot of other countries agriculturally are not set up to produce traditional Chinese herbs on a massive scale,” he noted. “We can buy certain ingredients from the U.S. that are already commercially set up, such as cranberry, American black cohosh, and saw palmetto, but that’s it […] the alternatives are just not there.”