Trump’s tariffs shake up the cola wars, putting Pepsi at a disadvantage

Trump’s tariffs tilt cola rivalry in Coca-Cola’s favor as Pepsi takes the hit

Irish-made Pepsi concentrate now subject to tariffs, adding pressure amid declining market share

In the latest twist of the U.S.-China trade war and broader tariff policy shake-up, one of America’s most iconic brand battles—Coca-Cola vs. Pepsi—has been thrown off balance. PepsiCo is now at a disadvantage due to a new 10% tariff on soda concentrate imported from Ireland, where the company produces nearly all of the base ingredients for its U.S. sodas, including Pepsi and Mountain Dew.

In contrast, Coca-Cola produces most of its concentrate for the U.S. market in Atlanta and Puerto Rico, insulating it from the tariffs imposed by the Trump administration’s April 2 executive order. The new trade rules are forcing a recalculation of costs and competitive dynamics across the beverage industry.
 

Pepsi’s tax advantage becomes a tariff liability

PepsiCo began producing concentrate in Ireland over 50 years ago, drawn by low corporate tax rates. That strategy, once seen as a financial advantage, has now backfired. With the U.S. imposing a 10% import tariff on soda concentrate from Ireland, Pepsi’s cost structure is under threat, especially as it tries to recover lost ground in the cola market.

Coca-Cola, which also maintains Irish operations, manufactures concentrate for American sodas primarily within U.S. jurisdictions, avoiding these specific tariffs.

“Ireland has long had the tax advantage—until the tariffs hit,” said Carlos Laboy, an analyst at HSBC. “No one could have seen the tariffs coming, but Pepsi clearly is at a disadvantage now.”

U.S. soda rankings and broader market pressures

The timing couldn’t be worse for PepsiCo. After decades of losing market share, the company recently slipped further, with Dr Pepper overtaking Pepsi-Cola as the No. 2 soda in the U.S. PepsiCo is now scrambling to re-energize its domestic beverage division, but tariff-related cost pressures could complicate recovery efforts.

Meanwhile, both Coke and Pepsi face a separate 25% tariff on aluminum imports, which could further raise packaging costs. Coca-Cola CEO James Quincey noted earlier this year that the company may shift more production to plastic bottles or domestic aluminum sourcing to offset the impact.

Impact on bottlers and pricing uncertainty

The tariff changes are also raising concerns among PepsiCo’s network of independent bottlers—many of them small, family-run businesses. These bottlers purchase concentrate in bulk, often in 55-gallon drums or by tanker truck, and say that any cost increases from tariffs will directly erode already slim margins.

PepsiCo has remained silent on whether prices for consumers will rise or if it plans to shift production to mitigate the impact. The company also produces concentrate in Texas, Uruguay, and Singapore, but hasn’t commented on potential changes in sourcing strategy.

Broader tariff consequences across industries

The cola conflict reflects a wider trend as U.S. tariffs alter the playing field in multiple industries based on global supply chains. Levi Strauss faces tariffs on many of its denim imports, while Wrangler, with significant production in Mexico under the USMCA trade agreement, is currently exempt.

In oral care, Crest remains largely domestically produced, while Colgate imports some toothpaste from Mexico—now subject to potential tariff increases.

Keurig Dr Pepper, which recently invested in an Irish concentrate facility, also produces in St. Louis and declined to disclose how much of its product is imported into the U.S.

Strategic and financial implications for PepsiCo

Pepsi’s investment in Ireland continues, with over $189 million committed to its Cork facilities in 2022, including R&D and production. But the company’s reliance on overseas concentrate at a time of rising trade barriers is proving increasingly risky.

While Coca-Cola can maintain stable U.S. pricing and supply chains, PepsiCo faces difficult choices: absorb higher costs, pass them to consumers, or reconfigure its global manufacturing footprint.

As tariff-driven disruptions escalate across sectors, the cola wars are no longer just a brand battle—they're a case study in how global trade policy can shift long-standing market dynamics.

Stay tuned to The Horizons Times for the latest on global trade impacts, corporate strategy, and brand competition in a changing economic landscape.