A practical guide for manufacturers, exporters, and retailers to protect margin, support key accounts, and navigate the disruption while charting their way forward.
- Trade turbulence is back and here to stay. In today’s volatile trade environment, tariffs are disrupting long-term planning and exposing rigid supply and commercial models across both importers and exporters.
- Margin defense requires a coordinated, cross-functional response. Pricing, supply chain, tax, and commercial teams must work together to assess exposure, segment risk, and activate response levers with speed and precision.
- Agility is the new advantage. As seen during COVID and inflation cycles, companies with embedded commercial agility—those that can map, decide, and act quickly—will consistently outperform slower peers.
Tariffs Are Back—and the Pressure Is Mounting
Global markets have been shaken in recent weeks as all the major economies including the U.S., China, and the EU engage in a contentious tariff war. The U.S. has slapped China with tariffs as high as 145%, prompting retaliation on American fossil fuels, agricultural machinery, and key mineral exports. The EU, facing 25% tariffs on steel and aluminium and more to come, has responded in kind. This tit-for-tat turmoil is denting investor confidence, fuelling market volatility, and throwing corporate planning into disarray.
In this shifting landscape, no industry is immune — but the impact, and the right response, will differ depending on your position in the value chain.
- Manufacturers and Exporters: Discover targeted guidance for navigating trade turbulence, defending margins, and optimising supply chain strategies.
- Retailers: Explore practical approaches to chart your way forward and enhance resilience in an unpredictable market. To read the Retailers section, simply scroll down below the Manufacturers and Exporters section.
MANUFACTURERS AND EXPORTERS
If you're exporting to the U.S., the impact of tariffs is already being felt—through pricing pressure, delayed orders, and customers actively exploring domestic or lower-tariff alternatives. Leading organizations are responding fast, leveraging a combination of pricing and non-pricing strategies. Depending on whether you're selling directly or via a local entity or subsidiary, additional options come into play. Can certain non-dutiable costs—like marketing or brand services—be unbundled from the invoice to reduce customs value? Can minor product modifications enable reclassification under a lower-duty HTS code? Can your transfer pricing model be adjusted to minimize margin compression? Beyond commercial levers, companies are deploying cross-functional tactics across trade compliance, supply chain, tax, and finance. These include reclassifying goods, accelerating shipments, front-loading inventory, rerouting through lower-tariff jurisdictions, product origin manipulation, and tariff engineering. The most resilient exporters aren’t choosing between price and operations—they’re activating both in a coordinated, strategic way.
In the Short Term, Pricing Is a Key Lever
In this climate, pricing and commercial teams have a pivotal role. Tariff volatility makes pricing a balancing act between near-term margin protection and long-term customer retention. Move too fast and you risk giving away margin needlessly. Move too slow and your customer walks. The game is timing: when to lean in, when to hold ground, and how to avoid setting precedents that erode pricing power.
While deal-level decision-making isn't scalable, a clear framework for guiding commercial teams is. It ensures consistent, defensible actions across markets and accounts—and avoids endless internal debates. To shape the right response, three commercial dimensions need to be assessed:
Product Leverage: Are you selling (input for) a premium or commoditized product? How sensitive are consumers to price increases? How tightly are you locked into your customer (importers) production or value chain? Can you product realistically be substituted domestically? Are competitors circling with lower prices? Products that are highly differentiated or critical inputs are far easier to defend at full price. Premium goods tend to have inelastic demand and can withhold higher taxes/tariffs. For more commoditized or price-sensitive goods, raising prices will erode volume.
Customer Evaluation: How valuable is the account—volume, margins? Is the client small but strategically important (market access, high growth potential, early adopter, innovation/sustainability partner)? How exposed are they to tariffs downstream, and can they pass on the costs? Relationships built over years shouldn’t be compromised by temporary trade policy swings, but neither should every account get indiscriminately subsidized. Not every customer warrants the same support. The goal is to protect the relationships that matter—those aligned with your long-term reshoring, market access, or innovation strategies.
Deal Economics & Flexibility: Where does this deal sit on the margin spectrum—after discounts, rebates, freight, and services? How strong is your bargaining power, and what non-price levers can you pull? Concessions don’t always mean price cuts. In many cases, offering substitute products, adjusting payment terms, offering flexible delivery conditions, rethinking supply routes can provide relief without eroding price integrity.
A Step by Step Approach deciding an apt response for tariffs:
If not tariffs, geopolitical dynamics impacting trade are likely to continue. This framework should not be looked at as a crisis response, rather a muscle/capability that pricing and commercial teams need to embed in their operating rhythm.
Step 1: Map Exposure: Start by identifying all impacted products - raw materials, components, and finished goods – including sourcing, supply chain. Then map this to affected customers and buying segments. Quantify turnover, volumes, and margins exposed. Understand what portion of your total business this represents by product line, application, and customer segment. This will give you a data-driven picture of where the pressure is concentrated.
Step 2: Assess Portfolio Fundamentals: Review impacted products (SKU level) for differentiation, lock-in, substitutability, share of BoM, price elasticity and margin profile; Assign products low-medium-high tariff resilience scores. Similarly, review impacted customers for contribution to revenue/margins, market and supply chain synergy, loyalty, breadth of portfolio innovation profile; Assign customers low-medium-high on strategic impact. Based on this you can devise a 2x2 Risk-classification Model. Not every deal needs the same treatment, nor will you have time to make case-by-case calls on every contract, so build a structured framework for guidance towards sales and commercial teams.
Step 3: Define Response Tactics: Once products and clients have been assigned classifications, plot the deal combination on the quadrant tailor actions for each quadrant:
- Low & No Risk Zone (Low client value, Low – High Product Resilience): Maintain standard pricing with minimal to no concessions. Offer temporary non-price relief if needed (e.g., deferred payment, offer to reroute goods, if feasible). In this zone, the decision can be to start thinking about shifting volume elsewhere.
- Medium Risk Zone (High client value, High Product Resilience): This is the opportunity zone. Focus on locking in long-term strategic value—through volume commitments, exclusivity agreements, co-innovation, or shared cost-reduction initiatives. Use this window to strengthen the partnership and make it harder for competitors to gain a foothold, while offering carefully structured trade concessions in return.
- High Risk Zone – This is the collaborative mitigation zone, potentially requiring larger concessions. Consider mechanisms like tariff-relief funds, flexible terms, and tariff engineering (e.g., modifying product specs or classification). Any support should be conditional—exchange it for locked-in volumes, longer contract durations, or co-investment commitments.
Step 4: Compute the Concession: In all cases, if price or non-price concessions are being considered, running the numbers to compute the NET (not GROSS) DEAL MARGIN after applying all reductions—from COGS to freight to duties to other off-invoice leakages.
- For low-margin or poor performers (relative to peers): limit concessions, focus on cost or efficiency improvements.
- For high-margin or strategic accounts: offer greater flexibility, but avoid dropping them below peer benchmarks. Advanced teams use AI-powered deal scoring tools to pre-flag vulnerable margins and hidden leakages in near-real time.
Step 5: Negotiate and Communicate: Lead early with transparency and intent. Engage customers before they come with demands or competitor quotes. Frame any concession as temporary and conditional—not a pricing reset. Build in a clear expiry date, aligned with contract terms or tariff reversals. And always trade support for value: lock in volumes, extend contract duration, improve terms, or secure strategic commitments. The best commercial leaders frame relief not as a discount, but as a joint business plan.
RETAILERS
For retailers with direct or indirect exposure to the US market, the impact is already evident: pricing pressure, potential delays in shipments due to supply chain disruptions, and consumers exploring domestic or lower-tariff alternatives. Leading retail companies are moving quickly—deploying a mix of pricing and non-pricing strategies to protect their margins. On the operational side, tactics include adjusting pricing strategies, reassessing inventory levels, sourcing products from alternative suppliers or local markets to remain competitive, and implementing promotional offers to retain customer loyalty. The most effective retailers are not choosing between pricing adjustments and operational efficiencies—they're leveraging both to navigate the challenging landscape.
In the Short Term, Pricing Is the Key Lever to Pull
In this climate, pricing, category and marketing teams play a crucial role in retail. Tariff volatility transforms pricing into a balancing act between short-term margin protection and long-term customer loyalty. If retailers move too quickly to raise prices, they risk alienating price-sensitive customers and lose sales. Conversely, moving too slowly could result in reduced margins and unsustainable business performance. The challenge lies in timing & being in control: knowing when to adjust prices, when to maintain current pricing, and how to avoid establishing precedents that could undermine future pricing strategies.
While individual pricing decisions for various products may not be scalable, having a clear framework for guiding retail pricing strategies is essential. This ensures consistent and defensible pricing across different product categories and customer segments, while also minimizing internal disputes. To shape the right response, retailers should assess three key dimensions:
Product Leverage: Are you selling premium or commoditized products? How sensitive are your customers to price increases? Can your products be easily substituted with alternatives from competitors? Differentiated products or premium brands are typically easier to defend against price increases, while price-sensitive or commoditized items may see a drop in sales volume if prices rise.
Product Economics: What is the gross margin for each product category? Retailers need to evaluate how exposed different products are to tariff increases and how those increases will affect overall profitability. Products with higher gross margins should be able to withstand price increases better than lower-margin products. Understanding the economics of each product line allows retailers to strategically decide which items can absorb cost increases and which need to be managed more carefully to protect margins. A key part of this analysis on product economics is also scanning and assessing the impact of tariffs on suppliers, who may be preparing to push increased costs at their end (due to higher input costs, capacity underutilization, etc.) to their vendors.
Pricing Flexibility: How does your pricing strategy fit within the overall margin framework after accounting for discounts, promotions, and operational costs? Retailers must evaluate their negotiation power with suppliers and consider non-price strategies, such as offering product bundles, enhancing customer service, or providing loyalty rewards. These tactics can help maintain customer satisfaction without severely impacting price integrity.
A Step by Step Approach to decide an apt response for tariffs
If not tariffs, then geopolitical dynamics impacting trade are likely to persist. Retailers must view this framework not merely as a reaction to crises but as a vital capability that pricing and marketing teams should integrate into their daily operations. Given that the tariff situation is changing on an almost daily basis, it is essential to have a proactive strategy in place. This approach enables teams to remain agile, ensuring they can respond effectively and thoughtfully to shifts in the trading landscape rather than resorting to knee-jerk reactions.
Step 1: Map Exposure: Start by identifying all impacted products—this includes assessing your inventory of merchandise and any raw materials used in your operations. Next, evaluate whether there is a direct impact on your business (such as exposure to US markets through exports, sourcing from affected regions, or plans for market expansion) or an indirect exposure (through vendors or suppliers who may be impacted by tariffs). Quantify the potential turnover, sales volumes, and profit margins that could be affected, and understand what portion of your total business this represents by product category and market segment. This analysis will provide you with a data-driven perspective on where the pressure lies and help you formulate a strategic response.
Step 2: Devise a Risk-classification Model: Not every product faces the same level of risk from tariffs, and retailers may not have the capacity to evaluate each product on a case-by-case basis. Therefore, it is essential to build a structured framework for guiding pricing and operational strategies. One approach is to create a 2x2 matrix as below:
- Product Resilience to Tariffs (Low to High): This measures how insulated the product is from the impact of tariffs. Products with inelastic demand (premium/niche products) typically score higher, while goods with elastic demand (easily substituted, commoditized products) score lower.
- Product Gross Margin (Low to High): This assesses the profitability of the product. Higher-margin products provide more room for absorbing cost increases due to tariffs, while lower-margin products have less flexibility.
Step 3: Define Response Tactics: Once products and clients have been assigned classifications, plot the deal combination on the quadrant tailor actions for each quadrant:
- High Risk zone (Low resilience to tariffs, low product gross margin): Products in this quadrant are vulnerable to tariffs and provide low profitability. These items are often commoditized and face significant competitive pressure. Consider reducing inventory levels for these products to minimize exposure. Evaluate whether to phase out these items or find alternative suppliers with lower costs to maintain competitiveness. Scouting for suppliers with overcapacity problems could be an attractive alternative, especially in the short-term. Explore bundling with higher-margin products to provide value to customers.
- Medium Risk Zone (Low resilience to tariffs, high product gross margin): These products are not very insulated from tariffs but yield high profitability. Retailers need to be cautious, as price increases could lead to substantial sales declines. Focus on transparent communication with customers regarding any necessary pricing adjustments. Consider offering promotions or loyalty rewards to retain customer interest and encourage purchases. Explore ways to enhance value, such as improved customer service or added benefits.
- No Risk Zone (High resilience to tariffs, high product gross margin) – These products are both resistant to tariffs and offer high profitability. Retailers can leverage these items to maintain overall business health. Use this quadrant to reinforce brand loyalty by highlighting product quality and unique features. Consider strategic marketing campaigns to promote these products. Establish long-term agreements with suppliers to secure pricing stability and explore options for co-investment in marketing or promotions.
- Low Risk Zone (High resilience to tariffs, low product gross margin) – Products in this quadrant are resilient to tariffs but yield low profitability. These may include essential goods that consumers need, regardless of price fluctuations. Maintain pricing stability and focus on increasing operational efficiency to improve margins. Explore opportunities for cost reduction in the supply chain without passing on costs to consumers. Strengthen supplier relationships to ensure consistent product availability.
Step 4: Monitor and adjust pricing strategies: Continuously track the impact of tariffs on product pricing and customer behaviour. Use data analytics to assess sales performance across different product categories, particularly those identified in the risk matrix. Regularly review pricing strategies to ensure they remain competitive while protecting margins. If necessary, implement adaptive pricing mechanisms that allow for quick adjustments in response to tariff changes without alienating customers. This could involve temporary promotions, value-added offerings, or bundling strategies to incentivise purchases while maintaining overall profitability.
Conclusion: Commercial Readiness Over Crisis Response
Tariffs are not merely a one-off disruption—they’re indicative of a shifting global trade landscape. For retailers, the goal isn’t to react impulsively but to be commercially prepared. This involves having a clear framework for determining when to hold firm on prices and when to offer support, all while safeguarding long-term value. It's about instilling discipline into pricing strategies, using data-driven insights to inform decisions, and equipping retail teams with the tools and agility to respond swiftly and effectively.
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Randy Jagt
Contact me about Commercial Excellence, Pricing and Growth Strategy As a seasoned Customer and Digital Strategy partner, Randy brings a wealth of experience with over 20 years of consulting experience across Europe, China, AsiaPacific, US and Developing Markets. Randy leads Deloitte's Future of Food platform which aims to realize the necessary transformation of the food and agri system. Randy is sought for strategy design, business model optimizations and leading complex business and commercial transformations for multinationals.
Shruti Anand
Shruti Anand is a Director in Deloitte Netherlands' Customer Strategy service line, focusing on the ER&I industry. With >10 years of experience, she helps large multinational clients design and implement pricing and margin management practices. Her expertise includes Pricing Strategy, Portfolio Optimization, Margin Management, Pricing Process Design, Pricing Governance, Pricing Digitalization, Pricing Digital Transformations, and Sales Mobilization. Shruti has led global pricing and sales transformations for clients in the Chemicals, Food & Beverage, and Wholesale sectors.
Nikhil Deshpande
Nikhil is a strategy consultant with expertise in pricing and commercial excellence. He has led strategy and transformation projects for several clients in the Consumer industry. He brings consulting experience of more than 12 years across geographies to help clients in developing their commercial and growth strategy, and realizing their transformation agenda.