By Casey Jones
I’m getting a lot of questions about tariffs. “What should we do?” I’ve hesitated to publish because the constant stream of changes (executive orders, memoranda, statements, fact sheets, changes, and delays) has made clarity elusive. In fact, this article may be outdated before you even read it. As of April 2, the White House will unveil a massive tariff plan, which is expected to include tariffs on nearly all imports to the US.
So, how should US-based companies thoughtfully prepare and respond to the changes these tariffs bring? As we explore the answer, it’s helpful to examine what’s common about these tariffs to those from the past as well as what’s different.
Speaking structurally, the tariffs in 2025 don’t look all that different from past rounds. My belief is that these tariffs will create the same kinds of economic effects as we’ve seen before: they’ll raise costs on U.S. companies that rely on products and raw materials from abroad. This will in turn result in higher prices to companies and consumers buying products from those importing organizations. This is already happening.
Now, we could get into a political debate about whether this will drive more domestic manufacturing and sourcing. But even if it does, it won’t happen fast enough to avoid an inflationary impact. Costs are going to go up.
Even if there are domestic alternatives, they’re usually more expensive than imported goods. (If domestic sourcing were cheaper, companies wouldn’t bother with the risks and complexities of importing.) So even if tariffs eventually push buyers toward domestic suppliers, costs will still rise.
In the short- to medium-term, companies have no choice but to import goods at higher costs, leaving two options: either eat the cost or raise prices.
My experience tells me that they’ll eat what they can, but they’ll end up raising prices. To other businesses, to nonprofits, to consumers… prices are going up. That’s not new. That’s the same story as every other round of tariffs.
Ok, so what’s different? In a word: unpredictability. Unpredictability driven by frequent,
wide-ranging announcements and changes to tariff policies happening at an unprecedented pace. Why does that matter? Because markets reward predictability.
Yes, we usually mean the stock market, but this applies to private markets too. In B2B commerce, knowing what to expect calms people down and makes decision-making clearer.
What’s different about this round of tariffs is the uncertainty. Tariffs have been announced, repealed, re-announced, delayed, and revised. The communication around them has been unclear and unpredictable. And uncertainty drives fear.
(I’ve observed this directly over the past 25+ years in pricing, but it’s also supported by well-established and well-researched concepts in psychology and decision theory, such as Intolerance of Uncertainty and Ambiguity Aversion.)
Basically, the less we know about what’s coming, the more risk-averse we get. When things are uncertain, we hunker down. We freeze. We close the checkbook. That’s true for individual people, and it’s true for businesses.
So, these last few months of seesawing on tariffs (and other geopolitical and economic factors) will, in my experience, have a chilling effect on business-to-business activity. I’m already hearing anecdotes about this from our clients. I’m not speaking for the consumer world as that’s not my lane. And I’m not claiming to be an economist. But in my experience, when there’s uncertainty, people get extremely cautious.
Look back at the early pandemic. When everything shut down and we didn’t know what it meant or how long it would last, everyone paused. That kind of fear is chilling. Now, obviously tariffs aren’t COVID, but the uncertainty has a similar effect.
So yes, tariffs might increase your cost of goods by 17% or whatever the number is, based on your sourcing mix. That’s a fact. What’s not a fact is how long that’ll last, or what comes next. And that unknown creates an emotional reaction for sellers and buyers alike.
Fear is always present with pricing. I would argue that fear is the dominant emotion in most pricing decisions. Ask 100 salespeople what they love most about their job, and none of them will say, “I love telling customers the price.”
It’s not the fun part. It’s the fear-laden part.
Now add a whole mess of external, fear-inducing factors, and that fear turns into panic. Your customers are freaked out. They will try to avoid incurring those higher costs through every available strategy: aggressive negotiation, carrying less inventory, pausing planned projects, and canceling budgeted investments. The uncertainty makes them even more reluctant to spend money.
My advice for these tariffs is the same as every inflation-driving circumstance, whether supply chain issues, labor shortages, or rising raw material costs: get ahead of it.
You cannot afford to wring your hands for three to six months, living in spreadsheets trying to assess the impact before you act. This will materially affect your profitability and your ability to serve customers in the short, medium, and long term. The biggest mistake companies make during rapid inflationary periods is a price increase that is too little, too late. The right move for most businesses is to act early; don’t wait and lose weeks or months of margin. And go big enough; don’t put yourself in a position to take action that doesn’t actually address the problem.
Even when people agree that price increases are necessary, they still ask: How?
Do we roll it into the product price? Do we make it a separate surcharge or line item? Will that make it easier to explain to customers?
There are pros and cons to each. Whether or not to show it as a surcharge depends on how much your prices will go up, which will depend on how many of your inputs are affected by tariffs of what magnitude.
If tariffs drive you to announce a very large price increase, you may want to break it out as a separate line item. You can clearly communicate to customers that this is strictly tariff-driven and that you’re doing everything possible internally (operational efficiencies, cost control, etc.) to protect them. You may also make a promise: if tariff policies change, you’ll roll that cost back.
But if it’s not necessary to break it out, roll it into the product price to keep that pricing power even if tariffs end. If you do this, include value-based reasons for the increase, such as investments you’ve made, improved value, and rising costs elsewhere. This positions you to hold onto at least some of the price increase if tariffs are later reduced.
Either way, be clear, be empathetic, and communicate early. (I wrote about how to do this back in 2019, in blog posts about price increases in the wake of tariffs and tariff-related price increase letters, with samples.)
Good pricing strategy is more agnostic to economic conditions than you might think; there are always winners and losers in every market and every economic climate. Best-in-class providers always have pricing power.
The Bottom Line
Cost increases are unavoidable right now. But what is avoidable is panicking and freezing up. Don’t stick your head in the sand hoping tariffs will go away next month. Prepare for the worst. Hope for the best.
You will weather the storm better. There are businesses that survived the Great Depression, the Great Recession, COVID… all of it. The ones that survive make tough calls.
As Ben Horowitz wrote in The Hard Thing About Hard Things,
It’s time to roll a hard six.