Consumer Sector Recovery: Navigating Post-Tariff M&A Opportunities

The 90-day tariff truce between the U.S. and China, effective May 11, 2025, has created a critical window for consumer goods companies to reposition their strategies through mergers and acquisitions (M&A). As trade tensions eased, cross-border deal activity surged 22% in Q3 2025, with firms capitalizing on reduced risks to acquire growth assets and insulate themselves from lingering geopolitical instability. For investors, this period offers a strategic opportunity to identify companies executing defensive or value-enhancing acquisitions while avoiding those exposed to vulnerabilities in a cautious consumer environment.

The Truce’s Dual Impact: Reduced Risks, Strategic Flexibility

The truce, set to expire on August 9, slashed U.S. tariffs on Chinese goods from 145% to 30%, while China lowered its retaliatory duties to 10%. This temporary stability has allowed companies to refocus on growth, rather than survival. Exports of consumer goods rose 15% in Q3 2025, with sectors like beverages, apparel, and electronics benefiting most. However, the truce excluded tariffs on strategic industries (e.g., EVs, pharmaceuticals), leaving companies exposed to sector-specific risks.

The truce’s success hinges on whether firms use this window to acquire assets that diversify supply chains, reduce tariff exposure, or capture emerging demand. Those that do are positioned to thrive as trade policies stabilize—or at least mitigate the worst risks if tensions resurface.

Strategic Acquisitions: Winners in the Truce Era

Church & Dwight (CHD): A Masterclass in Defensive M&A
Church & Dwight’s acquisition of Touchland, a hand sanitizer brand, exemplifies how companies are leveraging the truce to build resilience. The $880 million deal, contingent on sales targets, allows Church & Dwight to expand its portfolio in high-margin hygiene products—a category insulated from trade wars due to its reliance on domestic production. Meanwhile, the company’s decision to divest underperforming brands like Flawless and Waterpik reduces exposure to tariff-sensitive supply chains.

The move has already paid dividends: Touchland’s projected double-digit sales growth in 2025–2026 aligns with rising demand for personal care products. Analysts expect this deal to boost Church & Dwight’s profit margins from 9.5% to 15% over three years, a stark contrast to its flat-to-2% revenue growth forecast in 2025.

Danone: Navigating Trade Barriers with Geographic Diversification
Danone’s acquisition of Earthshake Foods, a U.S.-based plant-based snack producer, illustrates how firms are reshaping supply chains to avoid tariffs. The EU’s 15% retaliatory tariffs on U.S. cereals forced Danone to localize production, ensuring compliance with trade policies while capitalizing on the plant-based foods boom. This strategic shift not only mitigates tariff risks but also aligns with shifting consumer preferences toward sustainability—a win-win for long-term growth.

Vulnerabilities: Companies Struggling with Tariff-Driven Headwinds

Not all consumer firms have navigated the truce era successfully. Kellogg (K) and Energizer (ENR) highlight risks for those lagging in adaptive M&A.

Kellogg: Overexposed to Trade Volatility
Kellogg’s Q3 2025 results revealed a 3% decline in organic sales in its domestic division, driven by weaker retailer inventory levels and slower consumer spending. Its recent acquisition of EuroGrains, a European cereal maker, was too little, too late. While the deal aimed to bypass EU tariffs on U.S. imports, it failed to address broader issues: Kellogg’s reliance on traditional cereal categories—now shrinking due to health trends—remains unresolved.

Energizer: Lithium Tariffs Threaten Profitability
Energizer’s acquisition of a Brazilian battery manufacturer, while strategically sound, underscores the fragility of its position. The company shifted production to Brazil to avoid 25% U.S. tariffs on lithium imports from China, but rising raw material costs and stagnant demand for disposable batteries have pressured margins. Energizer’s stock has underperformed the sector by 6% year-to-date, reflecting investor skepticism about its ability to execute on cost savings.

The Investment Thesis: Prioritize Defensive Deals and Value Creation

Investors should focus on companies executing M&A that delivers three key advantages:
1. Supply Chain Resilience: Deals that localize production or diversify sourcing to avoid tariffs (e.g., Church & Dwight’s domestic focus).
2. Margin Expansion: Acquisitions that boost profitability through cost synergies or premium pricing (e.g., Danone’s plant-based portfolio).
3. Demand Growth: Strategic buys that capture secular trends like health-conscious eating or sustainability (e.g., Touchland’s hygiene products).

Avoid firms overexposed to declining categories or unable to mitigate tariff risks through M&A.

Conclusion: Act Now—Before the Truce Ends

The tariff truce offers a fleeting opportunity to reposition in the consumer sector. Companies like Church & Dwight and Danone are demonstrating how M&A can turn trade risks into growth opportunities. For investors, this is a high-reward, high-conviction moment to overweight stocks executing value-enhancing deals. However, the clock is ticking: with the truce expiring in August, firms unable to lock in strategic advantages risk falling further behind as trade tensions resume.

Action Item: Buy Church & Dwight (CHD) and Danone (DANOY) while the truce window remains open, and avoid laggards like Kellogg (K) and Energizer (ENR). The post-tariff era will reward the bold—and the prepared.