North America: Tariff uncertainty and complexity

The North American label market closed 2025 on a relatively optimistic note, following a year of economic uncertainty. Much of that uncertainty has been driven by changing tariff policies, which deterred capital investments, complicated supply chains and contributed to a slowdown in hiring.

Despite these challenges, the underlying economy continues to be strong, with real GDP growth at 4.3 percent in the third quarter of 2025, strong consumer spending and a decrease in the US Federal Reserve interest rate.

This state of affairs could be summed up by an acronym that economist Alex Chausovsky highlighted during a talk at the TLMI Annual Meeting in October: VUCA, or volatility, uncertainty, complexity and ambiguity. ‘We’ve shifted from uncertainty to complexity as a way of doing business,’ Chausovsky said at the meeting.

Chausovsky explained that the beginning of 2025 was marked by economic uncertainty, with questions about what tariff policies would look like and what their impact would be, and whether there would be a new US tax law. Some of these factors are no longer unknown, while others, such as the future of certain tariffs, remain unclear.

‘The economy has proven to be surprisingly resilient in the face of all of this uncertainty that we’ve had,’ Chausovsky said at the TLMI meeting.

Tariff landscape

Over the past year, businesses have been responding to fluctuating tariff policies that have changed multiple times, often without much notice.

The Trump administration has implemented a wide array of tariffs over the past year, with different goals including addressing trade imbalances, protecting US industries, pursuing various political aims, or drug enforcement. Some tariffs have affected specific products, while others have been more widespread, impacting almost all products from specific countries.

Tariffs have also been issued under various laws. For example, the Trump administration implemented a 50 percent tariff on steel and aluminum under Section 232 of the Trade Expansion Act. Mark Andy received a Section 232 tariff exemption, protecting it from tariffs on steel and aluminum used in its equipment.

A baseline 10 percent tariff rate on imports from most countries was issued under the International Emergency Economic Powers Act (IEEPA). The average tariff rate on imports into the US is currently 17 percent, according to the nonpartisan Tax Policy Center.

The impact of these fluctuating tariff policies has been nuanced, as importers employ various strategies to mitigate price increases. These have included working with foreign suppliers to reduce prices or absorbing part of the tariff costs themselves. The result has been that the cost of many goods has increased in the US, though not as much as the full tariff rates.

During his talk at the TLMI Annual Meeting, Chausovsky highlighted that US industrial production – a relevant measure of the economy for label converters – has been flat for the past two years. The industrial economy gained momentum early in 2025, but it ended with the announcement of the Liberation Day tariffs in April.

For label converters, the uncertainty around changing tariff policies – an uncertainty that remains, with the US Supreme Court expected to soon weigh in on the constitutionality of the IEEPA tariffs – has caused them to delay making capital investments.

‘We’ve seen our customers, especially in the latter half of the year, be far more conservative in their investments,’ says Patrick Potter, president of Flexo Wash and co-chair of TLMI’s regulatory affairs committee.

This past year has been a nuanced one for Flexo Wash, which sells both machinery and consumable products.

‘There are two sides to it for us, because there’s the capex side of the business and there’s the consumable side of our business,’ Potter says. ‘The consumables have remained pretty steady and have actually been pretty good. There are pockets of our customers who have had peaks and valleys throughout the year. What it shows me is that, overall, as a whole, they’re producing, they’re busy. Peaks and valleys, but they’re busy. They’re just being cautious and conservative in their investments.’

One type of consumable heavily hit by tariffs has been inks, as pigments are generally imported from India, which is currently subject to a 50 percent tariff.

Andrew Wasserman, managing partner at Cyngient, says that there have been upsides to tariffs. One is that tariffs have pushed businesses to be more creative and nimble and to build stronger customer relationships.

‘It’s forcing everybody in the industry to really look at how they formulate and how to really come out with performance-based products,’ Wasserman says.

Other factors

Tariffs are not the only factor shaping the economic outlook for label companies.

During his talk at the TLMI Annual Meeting, Chausovksy said that the One Big Beautiful Bill Act, passed over the summer, contains business-friendly provisions, such as allowing companies to expense domestic R&D costs.

Additionally, Potter notes that interest rates have come down – a positive signal to business owners for the coming year.

‘Whether it’s getting used to tariffs being in place and building that into the cost of business if they’re going to stay, or continuing a lower interest rate environment, and inflation coming down, I am optimistic about 2026,’ Potter says. ‘Less uncertainty would be nice.’