How One Company Is Navigating a New Era of Tariff Uncertainty

0:00Thank you.

0:30Jessica Mendoza:CEO Chris Peterson. And if you're listening to this on Spotify, you can watch the interview, too. I do want to address the big news from last week, which is that the Supreme Court ruled that many of the president's global tariffs are illegal. And then he announced a new set of 15 percent tariffs across the board. How are you processing all of this?

0:51Chris Peterson:You know, it's interesting. I was at a big investor conference on Friday and I went on the stage about an hour after the Supreme Court ruling came out. So it was good timing.

1:01Jessica Mendoza:That must have been fun.

1:02Chris Peterson:And I said at the time that effectively, we're going to have to wait and see. It's unclear exactly how all of this is going to play out. The substantial majority of that money that we paid was under the IEPA tariffs, which are the ones that the Supreme Court has ruled not valid. And so there's sort of a couple of questions. Number one is, are we entitled to a refund or not? And, you know, that I think is going to go to a lower court to figure out. But the more important question, to your point, is what is the go forward?

1:36Jessica Mendoza:As the company tries to find its footing in a shaky tariff landscape, it's also doing something else, making more in the U.S. One brand in particular, Sharpie. Sharpie has recently gone from being made overseas into an almost completely American-made product. I talked to Chris about how he pulled that off, whether or not he can do it with his other brands, and how tariffs factor into those plans.

2:04Jessica Mendoza:Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Thursday, February 26. Coming up on the show, one CEO on tariff uncertainty and the realities of manufacturing in America.

2:29Jessica Mendoza:This episode of The Journal is presented by Intuit Enterprise Suite. If your finance team spends more time finding data than using it, if there's one entity here and one here and one here and one here, if scaling your business feels like starting over, you need the Intuit ERP. Intuit Enterprise Suite, the AI native ERP is here. From the makers of QuickBooks. Learn more at Intuit.com slash ERP.

3:22Jessica Mendoza:Lake City Branch. Terms and more at apple.co slash benefits.

3:33Jessica Mendoza:A quick overview of Newell Brands. It's a massive conglomerate based in Atlanta. It owns dozens of consumer brands. In recent years, the company's profits have declined. In its latest earnings, Newell reported a net loss of$315 million, and net sales were down by 2.7%. Chris Peterson stepped in to lead the company as CEO in 2023, and he's been trying to overhaul the company's manufacturing ever since. Today, he says about 57 % of the goods Newell sells in the U.S. are made here. Overseas, what are some of the main countries that you manufacture in?

4:14Chris Peterson:We've made a significant shift in that over the last couple of years. So we used to be heavily reliant on China for manufacturing overseas. Today, we've diversified that to many countries across Southeast Asia and a few in Latin America, like Mexico. And so today, less than 10 percent of our business is sourced from China into the U.S. But we source from China, from India, from Japan, from Vietnam, from Thailand and a number of other countries.

4:47Jessica Mendoza:Do you want to make all your products in the U.S.?

4:50Chris Peterson:Yeah, so we want to make a lot of our products in the U.S. There are a couple, probably our biggest brand that we don't make in the U.S. at this point is Graco, which is the car seat and stroller brand, which is the leading U.S. car seat brand. Most car seats that are sophisticated car seats are all made in China. We work with a partner there who has a very sophisticated manufacturing setup. And that business is highly regulated by NHTSA because you have to pass crash testing safety standards. They've got a subsupplier base that's already in place. So that business would be difficult to move out of China.

5:36Chris Peterson:It would take a lot of investment and a lot of time to do that. So we've chosen not to go after that one. But a lot of the other ones we are going after. And the cycle time advantage of being in the U.S. if you're serving the U.S. consumer is a real thing. You know, it takes us, you know, probably 70 days or 75 days lead time to get a product from Asia to the U.S. If it's a manufactured product in the U.S., our lead time might go down to 7 or 10 days. So it's much faster to react to different demand signals, to be more responsive and agile in how you operate.

6:17Jessica Mendoza:Besides Graco, besides car seats and strollers, are there any brands or products that you wouldn't manufacture in the U.S. or are just too hard for whatever reason?

6:27Chris Peterson:Yeah, there's a few things that we do that require, like sewing, and that's a difficult skill to do in the U.S. It just doesn't really exist here. And I'm not sure that there's that many people that want to go into the sewing, which requires very nimble dexterity. And so there are some things like that that are just better done overseas. But if there are things that we know how to do, that we've built the capability from a core competency how to do, those we're very much focused on bringing back to the U.S.

7:03Jessica Mendoza:Your company paid more than$170 million in tariff duties last year, as you said. Are the tariffs behind why some of your other brands are struggling?

7:13Chris Peterson:Yes, there's no question. So, you know, if you look at what we did when the tariffs came out, there were really three things that we did. The first thing is we tried to say, what could we move from a sourcing standpoint? Were there things we could even accelerate into the U.S.? And we did some of that. We also moved some of our sourcing out of China to other markets in Southeast Asia. The second thing we did was we got focused on productivity. We tried to put more productivity initiatives in place to offset the tariffs, and we did an overhead productivity program to try to reduce costs there. And then the third thing that we did was we actually took three rounds of pricing where we had to raise our consumer prices to, in some cases, for the tariff cost.

8:00Chris Peterson:On that third piece, because our brands generally are the market-leading brands, where we raised price, we probably raised price first. Some of our competitors didn't raise price as fast as we did, and so we lost a little bit of market share for three or four months. We believe that that's now equalized, and we're now on sort of comparable footing, so we feel much better about our pricing position as we head into 2026.

8:29Jessica Mendoza:Mm-hmm. So when the Supreme Court ruled last week, was there any relief for you at all? I would say a little bit, a little bit.

8:38Chris Peterson:I mean, I was not, I was sort of expecting it because if you looked at the poly market, not that that's...

8:45Jessica Mendoza:Everybody looks at poly market.

8:47Chris Peterson:They were predicting 75 % chance, but nobody knew when the ruling was going to come out. But, you know, I think it's still too early to tell because clearly the administration has other tariff authority that they intend to use. And so the real question is, once all of that new tariff authority gets applied, is it different or better or worse than what the old system was? So, you know, we're going to have to remain agile and adjust as the tariff rates change.

9:18Jessica Mendoza:And one thing the Supreme Court justices didn't explicitly address was whether or not there should be tariff refunds. Yes. Would you consider pursuing tariff refund?

9:28Chris Peterson:I would consider it, yes. You know, of our$174 million that we paid last year, the substantial majority of that, as I mentioned, was under the IEPA, which has now been ruled invalid. So we would have a fairly significant claim for a refund. And because we were the ones that paid the tariff, we are the ones that would be entitled to the tariff relief. Now, I don't think anybody has ruled on, are there going to be refunds? And if so, what's the process? That, I think, has been kicked to the court to decide the answer to that. So we'll watch it. I think if we are able to pursue it, we will pursue it.

10:07Chris Peterson:And then I think if we do get the money, I think we'll look to get even sharper on our consumer pricing on some of our goods.

10:17Jessica Mendoza:President Trump has been wanting more companies to manufacture here in the U.S., and he's been using tariffs as a policy to push for that. How much have tariffs motivated your efforts to produce more in the U.S.?

10:29Chris Peterson:It's interesting. We got started about six years ago when I joined this company, seven years ago when I joined the company, on investing really in building out and improving our U.S. manufacturing. So I feel like we were ahead of the curve on this one. So we've invested over$2 billion in our U.S. manufacturing since 2017 to really automate, update, and reskill our manufacturing plants and turn them into a competitive advantage, which I'm sure we'll get into.

11:02Jessica Mendoza:After the break, what it took to bring Sharpie production to the U.S.

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12:21Jessica Mendoza:Well, I want to focus now on one of your brands, one of the ones that you were able to bring manufacturing to the U.S. with. That's Sharpie. Until fairly recently, Sharpie markers were mostly manufactured overseas. Can you bring us back to the moment when you decided to fully bring Sharpie manufacturing back to the U.S.? What were you thinking about at the time?

12:44Chris Peterson:Yeah, so this would have been, we got started really in probably 2019 or 2020. And I had, when I joined the company, I had gone on a tour of our manufacturing plants. And as I mentioned at the time, it was a lot of very manual work that people were doing on what looked like a pretty dated manufacturing footprint. And what I became concerned about was that if that was how we were going to compete, When I went overseas and toured manufacturing plants in Asia and other places, I knew that our U.S. plants were not competitive with that because they had just been underinvested from an automation standpoint was the first thing.

13:26Chris Peterson:The second thing is we had great people in the plants, but we weren't really training the people in higher skill labor. And so I thought there was an opportunity for us to bring manufacturing back to the U.S. in a cost competitive way and create great jobs for the employees that worked there.

13:45Jessica Mendoza:Why Sharpie out of all the brands your company owns?

13:49Chris Peterson:Sharpie is probably the brand that has the most desire from a consumer standpoint of our brands. We've got a lot of great brands, but Sharpie is our brand probably that has the best consumer response to it. Every time we've extended the brand, the brand has resonated with consumers and been very successful, and it's one of the company's largest brands.

14:13Jessica Mendoza:So it was because the brand was popular in the U.S. and not so much because it was necessarily easier to make Sharpies here? That's right.

14:21Chris Peterson:That's right. It wasn't necessarily easier. And in fact, I would say that if you look at that plant that we have in Tennessee, I would say that that plant probably is the most sophisticated writing plant anywhere in the world that anybody has. And so that gives us a now a sustainable competitive advantage.

14:40Jessica Mendoza:And could you say more about the state that that plant in Merrillville was in when you started this project and like what it needed to expand manufacturing the way you envisioned?

14:50Chris Peterson:Yeah, it was, you know, if you walked into the plant back then, which I did, it was sort of a dark plant with a lot of manual work. It was doing a lot of things that were not that strategic. It would have looked like a plant that you might have seen in, you know, the 1990s or the 1980s even that just had been operating the way it had been for many years without really a focus on continuous improvement. And so, you know, we did a lot. If you went into the plant today, it looks 180 degrees different than what it did seven years ago. So the plant today is very bright. Everything is clean. Everything is well positioned.

15:38Chris Peterson:It is highly automated. Today in our Sharpie plant in Maryville, Tennessee, we make about a half a billion Sharpie markers a year, which is a big number. And it only takes one person to operate the line instead of five or six. So it's 20 times more efficient from a human capital standpoint. There are six components that go into a Sharpie permanent marker, and we've also insourced five out of the six components. So we make the components and we do the assembly. And so by bringing more stuff into the plant, we've created more work. We haven't had to add any people because we've automated the work.