How Tariffs Impact Pricing Decisions

I have a new first question for every CPG founder I speak to: How are you (or might you be) affected by the tariffs? Unacceptable answers: ❌ "We're not worried about it." → You should be. Tariffs impact pricing, margins, and supply chain risk. If you haven't analyzed them, that's a red flag. ❌ "I don't know yet." → You don't need perfect answers, but you should be able to estimate based on your current materials and supply chain, and you absolutely must have a plan to get them. ❌ "We'll figure it out if/when it happens after the 90 days." → That's reactive. Investors fund proactive founders who get ahead of problems. ❌ "Our manufacturer/distributor/importer/supplier will handle that." → You're responsible for your unit economics. Push for real answers. You can't wave this away. Acceptable answers are: SOURCING MATERIALS: -My raw materials are sourced from [country], and the current tariff is X% and possibly going to Y%. This will change my margins from A% to B% in a worst-case scenario. - I source my materials from an importer/distributor/supplier, and I've asked them for exact figures. Early calculations show a decline in my gross margin from X% to Y%. MANUFACTURING: - We manufacture in the US and aren't directly impacted, but our packaging components are sourced from [country] and will increase costs by $C. - We're currently offshore. We've run models on relocating to a US partner. Costs would rise by $C per unit and delay production by 4–6 weeks. - We manufacture offshore and plan to continue doing so. Our landed cost will increase by $C per unit due to new tariffs. We've modeled this into our margin assumptions and adjusted pricing, sourcing, and volume targets accordingly. EFFECT ON RETAIL PRICE: - We're raising prices to protect margin, and we believe we can hold demand because we are a premium product/were low to begin with/have a sticky customer base. But we're reducing forecasted units by X%, and we'll hit profitability Y months later. - We're holding prices and accepting lower margins. It's going to slow our path to scale by Z months, and I've updated our capital plan accordingly. ALTERNATIVES: - We've researched new suppliers/manufacturers in A, B, and C. Our best options are [A, B, or C] in the short term and [A, B, or C] in the long term. We've implemented a quarterly sourcing review process to avoid surprises and stay proactive. CASH FLOW IMPACT - Tariffs increase our landed cost by X%, which changes our inventory strategy. We now need $Y more in working capital per order cycle. This shortens our runway by Z months and changes our next raise to A. Of course, these aren't the only acceptable answers, but please note what the acceptable answers have vs. the unacceptable: - Detail - Specific Data - Research-Backed Estimates If you haven't done this work, I suggest preparing this before pitching. PS - Reach out if you need a good fractional CFO recommendation to help you with this. I have several.

𝗖𝗠𝗢’𝘀 𝗣𝗲𝗿𝘀𝗽𝗲𝗰𝘁𝗶𝘃𝗲: 𝗖𝗮𝗻 𝗖𝗣𝗚 𝗯𝗿𝗮𝗻𝗱𝘀 𝗽𝗿𝗼𝘁𝗲𝗰𝘁 𝗺𝗮𝗿𝗴𝗶𝗻𝘀 𝗶𝗻 𝘁𝗵𝗲 𝗻𝗲𝘄 𝘁𝗿𝗮𝗱𝗲 𝗿𝗲𝗮𝗹𝗶𝘁𝘆? (Welcome to 2nd Trump Tariffs Era) Tariffs are back, and they are hitting the bottom line harder than ever. With new trade barriers on China, Canada, and Mexico, CPG brands face a triple threat: rising costs, shrinking consumer demand, and disrupted supply chains. But here’s my question: Are we playing defense, or are we strategically pivoting? From what I can see, data tells us a clear story. Historically, high tariffs = lower trade competitiveness. Let's take a look at the U.S. Average Tariff Rates (1821-2016) and trade balance trends: ✅ When tariffs were high (pre-1940s), trade was limited, and the U.S. maintained a surplus. ✅ Post-1945, lower tariffs (via GATT & WTO) fueled economic expansion and trade growth. ❌ After the 1971 Bretton Woods collapse, trade deficits deepened as low tariffs persisted. 🚨 Today, reintroducing high tariffs could lead to cost-driven inflation, supply shocks, and loss of global competitiveness. ++ 𝗪𝗵𝗮𝘁 𝗧𝗵𝗶𝘀 𝗠𝗲𝗮𝗻𝘀 𝗳𝗼𝗿 𝗖𝗣𝗚𝘀 & 𝗗𝗶𝗴𝗶𝘁𝗮𝗹 𝗖𝗼𝗺𝗺𝗲𝗿𝗰𝗲 ++ - Higher Input Costs → Tariffs on raw materials (aluminum, steel, packaging) increase COGS, cutting into margins. - Consumer Price Sensitivity → Higher shelf prices = lower demand. Consumers switch to private labels, local substitutes, or DTC (Direct-to-Consumer) models. - Erosion of Market Access → Retaliatory tariffs make U.S. brands more expensive abroad, favoring European and Asian competitors. - Disrupted Global Supply Chains → Companies must rethink sourcing, warehousing, and last-mile logistics. ++ 𝗖𝗠𝗢 & 𝗖𝗙𝗢’𝘀 𝗣𝗹𝗮𝘆𝗯𝗼𝗼𝗸 𝗳𝗼𝗿 𝗡𝗮𝘃𝗶𝗴𝗮𝘁𝗶𝗻𝗴 𝗧𝗮𝗿𝗶𝗳𝗳𝘀 ++ 1️⃣Pass-Through Pricing? Be Selective. Don’t just raise prices. Instead, optimize pack sizes, value-tiered offerings, and bundling strategies to maintain affordability. 💡Data-driven pricing elasticity is key—test price sensitivity before making abrupt hikes. 2️⃣ De-Risk Your Supply Chain Nearshoring & Friendshoring → Reduce tariff exposure by shifting suppliers to Mexico, Vietnam, and Eastern Europe instead of China. 💡Dual-sourcing strategies ensure supply continuity amid trade wars. 3️⃣ Digital Commerce is the Safety Net DTC & eCommerce are the antidotes to tariff turmoil. 💡Selling via Amazon, Shopify, or localized fulfillment centers avoids tariff-heavy distribution routes. 💡Localized production + micro-fulfillment hubs = reduced cross-border shipping costs. 4️⃣ Work Capital & FX Strategy Matters More Than Ever Hedging currency risks & cash flow forecasting is critical when tariffs disrupt inventory costs. 𝗧𝗼 𝗮𝗰𝗰𝗲𝘀𝘀 𝗮𝗹𝗹 𝗼𝘂𝗿 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀 𝗳𝗼𝗹𝗹𝗼𝘄 ecommert® 𝗮𝗻𝗱 𝗷𝗼𝗶𝗻 𝟭𝟯,𝟱𝟬𝟬+ 𝗖𝗣𝗚, 𝗿𝗲𝘁𝗮𝗶𝗹, 𝗮𝗻𝗱 𝗠𝗮𝗿𝗧𝗲𝗰𝗵 𝗲𝘅𝗲𝗰𝘂𝘁𝗶𝘃𝗲𝘀 𝘄𝗵𝗼 𝘀𝘂𝗯𝘀𝗰𝗿𝗶𝗯𝗲𝗱 𝘁𝗼 𝗲𝗰𝗼𝗺𝗺𝗲𝗿𝘁® : 𝗖𝗣𝗚 𝗗𝗶𝗴𝗶𝘁𝗮𝗹 𝗚𝗿𝗼𝘄𝘁𝗵 𝗻𝗲𝘄𝘀𝗹𝗲𝘁𝘁𝗲𝗿. #tariffs #CPG #FMCG #CMO

As a pricing expert, I'd like to share my opinions on the new tariffs: + A minimum 10% import tax is now on every item shipped into the US + The top 60 countries we trade with have far higher tariffs (China now up 34%) + Most countries are issuing equal tariffs for US imported goods What typically happens with higher costs is companies in the short-term will usually squeeze margins and suppliers, but in the long term for the companies to stay in a similar operating income will pass the cost onto consumers. Back when a 25% tariff was introduced with China in 2018, we saw prices rise immediately by ~12%, and gradually kept going up. The Federal Bank of New York has studied this and said "U.S. tariffs were almost entirely passed through to U.S. importers and consumers." The average household this year will see an extra $3,800 in annual costs this year, which especially hits lower income households. For companies I generally recommend to understand their price elasticity to make pricing changes, which usually means dynamically increasing pricing by product (versus just doing a blanket 10% increase, for example). There's typically key price bands to maintain (staying below $100, for example) that keep product moving. While I'll be the first to say I don't like higher prices, it's fascinating from a pricing perspective.

So to better understand the impacts of the ongoing tariff/duty conversation, I worked up a few scenarios – the new cycle and the numbers used have the ability to distort the potential outcomes and I needed, for myself, to see the numbers in a way that makes sense to me. I thought there may be others in the network here who would appreciate the same view – again, just to ensure clarity and manage distortion. Let’s invent a product that sells for $100 at retail. This means the retailer probably paid $50 to the brand for said product to achieve what’s commonly referred to as a ‘keystone’ margin (50%). The brand perhaps seeks the same keystone margin, so looked to land the product in the US for $25. The Landed Cost (LDP) is the cost of the product (FOB) + freight + duty + occasional other variables (ie. FSO, Agent Fees, etc). In my model, the FOB for the $100 retail product is $20, and it has a 20% duty and $1 freight, which equals a $25 LDP. Let’s take the same product and apply a different duty schedule to it.  If the duty moves to 40%, the landed cost moves to $29 all else staying the same. This would give the brand a 42% margin if the retailer is keeping the 50% margin. Ok, fair enough. But what if the brand is running a <10% net profit. If COGs essentially increases by 8%, we’re approaching dangerous territory as far as net profit is concerned. If the brand wants to maintain its health, they would have to reprice the wholesale price for the product from $50 to ~$60 to maintain a 50% gross margin. Now that $60 becomes $120 at retail – remembering the retailers’ need for a 50% margin as well. So doubling the tariff in this case increased the retail price by 20%.  This is a VERY simple scenario, with very simple math – in reality there are many, many more variables. But it's important to understand the basics and the impacts. And let me be very clear: a 20% price increase not based on an act of God, like COVID or a GFC, is a certain path to deeply unfortunate outcomes. I don't think most people can easily absorb that kind of hit to their family budgets.

𝗧𝗵𝗲𝘀𝗲 𝗧𝗮𝗿𝗶𝗳𝗳𝘀 𝗔𝗿𝗲 𝗡𝗼𝘁 𝗧𝗵𝗼𝘀𝗲 𝗧𝗵𝗮𝘁 𝗬𝗼𝘂 𝗥𝗲𝗺𝗲𝗺𝗯𝗲𝗿. 2025 𝗶𝘀 𝗡𝗢𝗧 2018. 🚨 Companies like Target and Best Buy are warning that rising costs will be passed on to consumers. But here's what they’re really worried about: these tariffs will erode profits. Passing on all of the extra costs to consumers? That’s a steep hill to climb. A new level of pricing strategy, investment, and expertise will be needed to avoid either a collapse in demand or profits. "Take 7% across the board here and 5.5% there" won’t cut it. ➡️ 𝗖𝗼𝗻𝘀𝘂𝗺𝗲𝗿𝘀 𝗔𝗿𝗲 𝗧𝗮𝗽𝗽𝗲𝗱 𝗢𝘂𝘁 (outside the top 10-20%): After years of inflation, household budgets are stretched thin. Consumers simply aren’t able to absorb more price hikes. ➡️ 𝗖𝗼𝗻𝘀𝘂𝗺𝗽𝘁𝗶𝗼𝗻 𝗜𝗻𝗰𝗿𝗲𝗮𝘀𝗶𝗻𝗴𝗹𝘆 𝗙𝘂𝗲𝗹𝗲𝗱 𝗯𝘆 𝘁𝗵𝗲 𝗥𝗶𝗰𝗵: Segmentation is becoming ever more critical in pricing and beyond. ➡️ 𝗦𝗹𝗼𝘄𝗲𝗿 𝗝𝗼𝗯 𝗚𝗿𝗼𝘄𝘁𝗵: The latest job report shows slower economic growth, fewer new jobs, and stagnant wages — the very factors that previously helped offset inflation. ➡️ 𝗖𝗣𝗚 𝗮𝗻𝗱 𝗢𝘁𝗵𝗲𝗿 𝗖𝗼𝗻𝘀𝘂𝗺𝗲𝗿-𝗙𝗮𝗰𝗶𝗻𝗴 𝗖𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 𝗮𝗿𝗲 𝗦𝘁𝗿𝘂𝗴𝗴𝗹𝗶𝗻𝗴: Many are already reporting declining volumes, and some have quietly (or publicly) started cutting prices—and even jobs. ➡️ 𝗣𝗶𝗰𝗸 𝗬𝗼𝘂𝗿 𝗖𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲: For companies nearing the price-elastic range of the demand curve, additional price hikes could lead to significant demand destruction. Companies must rethink their pricing strategies, with a focus on value creation. Unlike the past "just take more price" environment, the balancing act between offensive and defensive pricing will be tougher. Strategic thinking in offering design, price-pack architecture, and customer segment behavior will need to come before simple price tag changes. For middle-market firms without in-house pricing teams, the right pricing response will benefit from expertise and ready-made toolsets that expedite analysis. Act today or risk being reactive while profitability declines. 🛒 If you’re a consumer, are you seeing your favorite brands react to these changes? 📊 If you’re a firm with exposure, do you have a plan? (DM me / Let’s talk) #pricingstrategy #tariffs #inflation #consumers

Have you ever wondered how trade policies impact the prices of the cars we drive every day? With the U.S. administration imposing a 25% tariff on aluminum and steel, the effects are beginning to ripple through the auto industry, especially for the best-selling truck in America: the Ford F-150. This increase in costs puts automakers in a tough position, either absorb the higher expenses and reduce profit margins or pass the costs on to consumers, potentially raising vehicle prices by hundreds of dollars. In this article, we’ll explore the potential impact of these tariffs on car prices, manufacturing challenges, and what the future might hold for the automotive market. Are we on the brink of a major shift in vehicle pricing? Share your thoughts in the comments! 🔍👇 #FordF150 #Tariffs #SupplyChain #Economy #Inflation Source of picture Ford's official website

Tariffs Drive Producer Prices Higher, Squeezing Profit Margins   The sharp increase in the producer price index in July was a warning not only for the Federal Reserve but also for businesses, as the data suggested that profit margins could soon take a hit.   Producer inflation came in more than double the most pessimistic forecast, sending a clear message that the inflation problem isn’t fading anytime soon. The economy has moved past the first-order effect of tariffs—disruptions to consumer and business behavior through stockpiling and altered spending—and is now confronting the second-order impact on inflation, a risk we have long anticipated.   Equity markets, buoyed in recent months by solid earnings, may face pressure as profit margins shrink after companies absorbed tariff costs for months. The widening gap between consumer and producer price indexes—a proxy for margins—signals that rising costs are likely to spill over into retail prices.   Economics textbooks often suggest businesses hesitate to raise prices for fear of losing market share. But tariffs are a widespread shock: they affect nearly everyone and give companies across industries the justification to push prices higher.