The US could see a spike in product recalls across key industries, including food, consumer goods, and automotive, as global supply chains shift under the pressure of tariffs and regulatory changes.
The strain of tariffs could force many companies to source cheaper materials or shift to new suppliers, often without adequate time to vet these sources. In industries where safety and quality are paramount, such as food and automobiles, this can be risky, according to Chris Harvey (pictured), senior vice president of client services at Sedgwick.
“Tariffs are impacting nearly every industry, including automotive, life sciences, consumer products like electronics, toys, appliances, and even food when it comes to ingredient sourcing,” Harvey said. “And when enforcement is lighter, the risk grows even more.”
According to Sedgwick’s latest US Product Recall Index, manufacturers are navigating an increasingly complex landscape, where cost pressures, ingredient substitutions, and reduced oversight are combining to create a perfect storm for product safety failures.
“When companies move too quickly to find alternative suppliers, they can end up with substandard components,” Harvey told Insurance Business. “We’re talking different chemicals, unknown processes, inconsistent quality. That’s where risk creeps in.”
Adding to the uncertainty is a shift in regulatory enforcement. Proposed budget cuts at the US Food and Drug Administration (FDA) and the removal of commissioners from the Consumer Product Safety Commission (CPSC) have signaled a softer regulatory touch, at least temporarily.
Inconsistent inspections and patchy state-level oversight create fertile ground for mistakes or outright neglect, Harvey warned. Some companies may be tempted to cut corners on recalls, offering repairs instead of replacements, or worse, delaying action altogether.
However, with tariffs and supply chain issues, companies can encounter prolonged delays when sourcing adequate replacement parts. Patchy product recall responses can be devastating for firms, and cutting corners could raise their risk of litigation.
“I’ve seen cases where a company does a recall, sends out a replacement product, and that product ends up defective too, requiring a second recall,” Harvey said. “That’s devastating for brand trust.”
Could the US see a dip in product safety reporting or findings? Possibly. “But the modern supply chain includes checks at every level. Retailers test products, too,” Harvey said. “So, there are safeguards.”
Moreover, many US companies also export products to Europe, which has recently tightened product safety regulations. “If a company recalls a product in Europe, they can’t leave it in the US market. It would look terrible,” Harvey said.
The Sedgwick executive doesn’t expect a drop in recall incidents, even with potentially lighter regulatory action.
“I think most companies will still do the right thing. If they have a defective product or something hazardous, they’ll recall it,” Harvey said. “But yes, some may try to exploit a reduced enforcement environment.”
Sedgwick’s data also shows that consumer product recalls reached a 14-year high in Q1, with a 91% increase from the previous quarter. Interestingly, this came with a 44% drop in the number of units affected, reflecting a trend toward smaller, more targeted recalls.
“That’s actually a good trend,” said Harvey. “It means companies are identifying problems earlier and (producing goods) in smaller batches.”
Still, the consumer goods space remains vulnerable, especially with initiatives such as the “Make America Healthy Again” commission, which seeks to ban certain additives in food products. Compliance gaps could lead to more recalls as manufacturers struggle to reformulate products in time.
In the automotive sector, the risk profile is different but equally serious. Tariffs on imported parts can delay repairs and push automakers to source from untested suppliers. And while software updates have made some fixes easier, most still require physical components and dealer visits.
“In most cases, you still need parts,” Harvey said. “And if supply chains are delayed, consumers may have to drive around with defective vehicles.” To mitigate these risks, auto manufacturers must proactively identify and vet backup suppliers before issues arise.
Product recalls can be an opportunity for businesses to build customer trust – if they act decisively and handle the fallout correctly.
Sedgwick shared five key strategies for companies looking to protect themselves in today’s volatile environment:
While lower enforcement may give some companies a false sense of security, the risks are higher than ever, Sedgwick said. Customer expectations are growing, and the legal consequences of missteps can be brutal.
“Even if enforcement dips temporarily, other stakeholders like retailers, consumers, and international regulators will hold you accountable,” Harvey said. “Companies need to stay disciplined. No shortcuts.”
