America’s baby-formula shortage exposes the risks of US-first trade policies and strict regulation

Friday, May 13, 2022 by Robinhood Snacks |

Endless “sold out” shelves… not again. A baby-formula crisis is rippling through the US, forcing parents to ration supplies or drive hours in search of inventory. Over 40% of formula is out of stock nationwide, up 10% from a month ago. Now top formula supplier Abbott Labs says it could take until July to get the product back on shelves. How we got here:

  • In February: The FDA recalled formula brands made at Abbott's Michigan plant after reports that some babies had gotten sick — and even died — from bacterial illnesses traced to the facility. As a result the plant was shut down.
  • This week: Abbott got the OK to resume production in that plant, but only on a case-by-case basis (think: specialty formulas for medical conditions).

Pandemic stockpiles… The plant closure is just part of the story. Worried parents snatched up formula in droves in the early days of Covid. As they worked through their supplies, demand plummeted and formula makers slashed production. Inventory still hasn’t kept up with a resurgence in demand (#supplychain, #laborshortages). Now retailers from Target to CVS are capping how much formula shoppers can buy. On top of that:

  • Regulators are very strict about what goes in formula, and often only US-based ingredients make the cut. Global suppliers that do qualify face a nearly 20% tariff.
  • The result is a tiny domestic industry of formula makers dominated by a handful of companies, like Abbott.

This isn’t just a production issue… it’s a policy issue. The pandemic caused both the Trump and the Biden administrations to emphasize domestic manufacturing (aka: on-shoring). But the worsening formula shortage illustrates the pitfalls of limiting imports of basic necessities. Washington appears to be listening: the White House said yesterday it’s working to reduce red tape and make it easier to import formula.