Tariff Toss-Up

The dust around the latest tariff news won’t settle for some time, which leaves leaders in a bind in terms of their next moves with pricing.

Instead of clarifying the situation, last week’s Supreme Court decision to strike down tariffs, followed by the administration’s imposition of a 15% blanket tariff in response, presented leaders with more questions than answers. While the focus has been on whether firms are entitled to a refund of the roughly $170 billion they’ve already paid in tariffs—or if they will even seek one—any savings they claw back may not trickle down to clients and customers until the fall at the earliest, experts say. “Retailers already ordered goods for the fall at tariff prices, so decreases likely aren’t coming until after that,” says Craig Rowley, a senior client partner in the Retail practice at Korn Ferry. 

Rowley says wholesalers and manufacturers will be the first to see any reductions, but even they won’t reap immediate benefits. The new 15% blanket tariff is effective for a minimum of 150 days and can be extended beyond that deadline by Congress or special executive power. In other words, what happens next is still unknown. “Wholesalers and manufacturers have to reduce their prices before retailers can reduce theirs,” says Rowley.  

But waiting too long is not without its risks. With “affordability” a major concern for businesses and consumers, reducing prices first could be an opportunity to grab market share. Inflation is slowing, but prices haven’t broadly come down—in fact, in many categories, they’re still rising. Only a few firms, mainly in the grocery and packaged-foods sectors, have selectively cut prices on products.  

Pricing strategies relative to tariffs are not simple math, and refund amounts don’t automatically result in an equivalent amount in prices. “It’s a sliding scale,” says Justin Ripley, a senior client partner in the Global Industrial practice at Korn Ferry. Right now, leaders are looking at contracts, figuring out whether to renegotiate (and if so, which provisions), as well as whether supply chains can be adjusted or ramped up to take advantage of where tariffs are shifting. To be sure, unlike when tariffs were first enacted, there doesn’t appear to be a rush back to the negotiating table. 

Ripley says that’s because investors have already priced the impact of tariffs into the market, and firms have already cut costs to address them. One of his clients summed up last week’s serve-and-volley over tariffs as “yet another episode of chaos.” And data shows this feeling is shared by other leaders—72% of trade leaders in a recent survey cited tariff volatility as the No. 1 regulatory risk they’re facing, up from 41% a year ago. In the US, uncertainty tops the list of risks for more than 4 in 10 CEOs, versus just 29% globally. So while it’s certain leaders can bank on tariffs, they remain as unclear as ever about the form they’ll take. “Leaders feel that the unpredictability of policy shifts have made it increasingly difficult to operate their businesses,” says Ripley. 

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