Reynolds Consumer Products: Turning Aluminum Tariffs into a Competitive Weapon

The U.S. aluminum tariff landscape has evolved dramatically since 2025, creating both challenges and opportunities for companies like Reynolds Consumer Products (REYN). As tariffs on foreign aluminum hit 50% (with exceptions for the U.K.), Reynolds—a manufacturer of household staples like Reynolds Wrap foil and Hefty bags—finds itself at a strategic crossroads. While critics might see tariffs as a threat to its Canadian-sourced materials, the reality is far more nuanced. By leveraging domestic production and addressing its “Made in USA” litigation, Reynolds could transform these tariffs into a defensive shield and an offensive advantage. Let's unpack how this plays out.

The Tariff Double-Edged Sword

The tariffs, set at 25% for U.K. aluminum and 50% for other imports, directly impact Reynolds' Canadian operations, which supply nearly 60% of U.S. aluminum imports. However, the rules offer a critical loophole: tariffs don't apply to aluminum “smelted and cast” within the U.S. Reynolds' 27 domestic manufacturing facilities are key here. If the company pivots to sourcing aluminum from U.S. smelters rather than Canadian imports, it can avoid tariffs entirely. This shift isn't just theoretical—Reynolds has already hinted at cost-reduction strategies in its 2025 guidance, even if it hasn't yet quantified tariff impacts.

Litigation Risk Mitigation via Domestic Sourcing

The class-action lawsuit alleging misleading “Made in USA” claims hinges on Reynolds' reliance on imported bauxite (the raw material for aluminum). Critics argue that without bauxite imports, Reynolds couldn't produce aluminum foil. Yet, the tariffs create a paradoxical solution: domestic aluminum production could sidestep both tariffs and litigation concerns.

Here's why:
- If Reynolds sources aluminum from U.S. smelters, even if those smelters use imported bauxite, the final product qualifies as “Made in USA” under tariff rules. The lawsuit's core claim—that the finished product relies on foreign materials—is weakened if the aluminum is processed domestically.
- This dual benefit—avoiding tariffs and countering litigation—could resolve two major headwinds at once. Reynolds' 10-K filing already warns of tariff risks, but a proactive shift to domestic suppliers could turn this from a liability into a compliance win.

Competitive Advantage: Lower Costs, Higher Market Share

The tariffs are a goldmine for companies like Reynolds that can control their supply chains. Imported aluminum now carries a 50% tariff penalty, making U.S.-sourced materials 28-40% cheaper (depending on pre-tariff pricing). This creates a pricing moat against competitors reliant on foreign imports.

Consider the math:
- A competitor paying $1,000/ton for Canadian aluminum now faces a $500 tariff, raising their effective cost to $1,500/ton.
- Reynolds, using U.S.-smelted aluminum, pays $1,000/ton (assuming parity in pre-tariff pricing). This $500/ton savings can be reinvested in marketing or passed to consumers, driving market share gains.

Analysts estimate Reynolds' margins could expand 2-3% if it fully leverages domestic sourcing—a boost that could offset its 2025 EPS guidance of $1.65.

The Stock: A Discounted Opportunity with Catalysts

REYN's stock trades at just 14.3x 2024 EPS ($1.67), well below its IPO price of $26. The market is pricing in pessimism about tariffs, litigation, and stagnant demand. However, the July 9, 2025 deadline for U.S.-U.K. tariff adjustments and Reynolds' potential supply chain shifts create near-term catalysts.

Investment Thesis: Buy on Dip, Target $25+

• Risk/Reward: The stock's current price leaves room for upside if tariffs and litigation risks abate.
• Catalysts:
• Resolution of the class-action lawsuit by Q4 2025.
• Announcements of domestic sourcing partnerships or tariff-exempt production lines.
• Improved 2025 guidance once tariff impacts are quantified.
• Target: $25+ by year-end 2025, reflecting a 18x P/E multiple on upgraded EPS.

Conclusion: A Turnaround in the Making

Reynolds isn't just surviving tariffs—it's weaponizing them. By shifting to domestic aluminum and addressing litigation, the company could emerge with stronger margins, a defensible “Made in USA” brand, and a competitive edge over tariff-strapped rivals. For investors, the current valuation offers a compelling entry point. Buy REYN shares now, and set a price target at $25+, with stops below $14 to hedge against unexpected tariff hikes or litigation setbacks. This is a classic “value with catalyst” play—one that could pay off handsomely by year-end.