Handling tariff turbulence: Strategies for stability amid uncertainty

I’m getting a lot of questions about tariffs. “What should we do?”

This week, the White House unveiled a massive tariff plan that is expected to include tariffs on nearly all imports to the U.S.

So, how should U.S.-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 and what’s different.

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The same old, same old

Speaking structurally, the tariffs in 2025 don’t look all that different from past rounds. I believe these tariffs will create the same economic effects as we’ve seen: They’ll raise costs for U.S. companies that rely on products and raw materials from abroad. This will, in turn, increase prices for 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. Even if it does, it won’t happen fast enough to avoid an inflationary impact. Costs are going to go up.

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: Eat the cost or raise prices.

My experience tells me that companies will do both. Prices are going up. That’s not new. That’s the same story as every other round of tariffs.

Like nothing we’ve ever seen

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 more transparent.

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 Tariffs have been announced, repealed, re-announced, delayed, and revised.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. It’s also supported by well-established and well-researched concepts in psychology and decision theory, such as Intolerance of Uncertainty and Ambiguity Aversion.

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.

These last few months of seesawing on tariffs (and other geopolitical and economic factors) will have a chilling effect on business-to-business activity.

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 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.

But what should I do?

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 3 to 6 months, living in spreadsheets trying to assess the impact before you act. This will materially affect your profitability and 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, depending on how many of your inputs are affected by tariffs of what magnitude.

If tariffs drive you to announce a substantial price increase, you may want to break it out as a separate line item. You can tell 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 promise that you’ll roll that cost back if tariff policies change.

But if breaking it out is unnecessary, 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, 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 in 2019 in blog posts about price increases in the wake of tariffs and tariff-related price increase letters, with samples.)

A 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.

Bold price action communicated with empathy and clarity is the best path forward for companies substantively affected by tariffs.

The bottom line

Cost increases are unavoidable right now. Don’t stick your head in the sand hoping tariffs will go away next month. Prepare for the worst. Hope for the best.

Write the price increase letter.

Decide how much prices are going up and when.

Go sooner than you want to and by more than you think you have to.

You will weather the storm better. The businesses that survived the Great Depression, the Great Recession, and COVID-19 are the ones whose leaders were willing to make tough calls.

As Ben Horowitz wrote in “The Hard Thing About Hard Things,” “Peacetime CEO always has a contingency plan. Wartime CEO knows that sometimes you gotta roll a hard six.”

It’s time to roll a hard six.

This story first appeared on the Boost Profits blog. It has been edited and condensed for clarity.

The information and opinions presented are the author’s own and not those of Vistage Worldwide, Inc.

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