I just completed another round of updates on tariffs and the macro-economic environment with my clients in DTC and restaurants, and I thought I would share my notes with my LinkedIn network as well, given the uniqueness of the situation.

Some key points I developed during the meetings:

• everyone is focusing on the US tariffs but it’s a much broader policy change than that. China has retaliated significantly, Canada and Mexico are in the midst of trade negotiations with the US, while the EU, as always, is taking its time but will undoubtedly react at some point. Follow government websites closely to separate the actual policy changes from the noisy news.
• in the US, the main focus right now is on businesses directly impacted by the tariffs, i.e. businesses that import a significant share of their inputs or products, especially from China. However, every business should be concerned by two indirect effects of tariffs:
  • indirect effects through suppliers (you may not import any goods but your suppliers may, and they will probably raise their prices to you as a result)
  • indirect effects through suppressed demand, especially for all consumer-facing businesses. All the major banks and other macro
• economic forecasters now expect an economic slowdown, if not a full-on recession. Businesses need to act accordingly and manage for a downturn, not for double-digit growth.
• the macro-economic uncertainty is, to some extent, even more of an issue than the tariffs themselves. It forces companies to delay critical decisions, or to make sub-optimal ones.
• to address this uncertainty, my advice to clients is to develop multiple scenarios based on “trigger points”. For instance, what level of tariffs (and associated cost increase) would trigger a 3% price increase? 5%? 10% Likewise for promotions and LTOs: how much traffic/volume (and share) can you afford to lose before having to launch LTOs to recoup at least some of it?
• for businesses significantly and directly exposed to tariffs, raising prices is not an option but a necessity. However, a blanketed increase is never a good solution. Targeted increases, based on data and quantified price elasticity, will minimize the volume impact and help maintain margins.
• everyone seems to be losing sleep over whether to raise everyday price or add a tariff upcharge. There is no universal right or wrong answer here, it depends on the specific situation of your business. I’ve seen clients going either way, and being successful, because the decision they made was backed by data and aligned with their business’ overall strategy and value proposition

Most important of all: don’t panic! Keeping calm and taking the time to analyze how this turmoil impacts your business is the best way to ensure you will make the right decision for your business.

If you need help, or if you simply have questions and would like to have a quick call to discuss it (at no charge of course), please reach out. I’d be happy to help.