As the new administration signals potential tariff hikes, manufacturers and distributors must act now to safeguard profitability. From pricing strategies to supply chain resilience, Mitch Lee, Profit Evangelist, shares Vendavo’s best tips for preparing.
Economic policy shifts are inevitable in the United States as the new administration settles into the White House. In particular, President Trump’s tariff policies will create ripple effects across the manufacturing and distribution industries, putting margins under immediate pressure. For companies that rely on imported raw materials and finished goods, this is a wake-up call to reassess pricing strategies and operational resilience.
While not a new concept, tariffs have historically been leveraged as both a means to encourage domestic production and a mechanism for political negotiation. Businesses across industries, particularly in manufacturing and distribution, are now assessing potential implications.
With many raw materials and finished goods imported, companies must ask: How will tariffs impact our pricing strategies, supply chains, and overall profitability?
Our pricing and supply chain experts weighed in on the potential ramifications of tariffs to address these questions, offering insight into how businesses can prepare and adapt.
Need a solution to manage tariffs? Get a demo.
How to Adapt to Tariff-Driven Disruption
Unlike inflation, which tends to rise gradually, tariffs hit suddenly and forcefully. Businesses will need to respond quickly – adjusting prices, renegotiating supplier contracts, and potentially reevaluating sourcing strategies.
“The looming tariffs are going to hit the building supplies sector hard. Manufacturers and distributors need to evaluate their price waterfall and P&L now while preparing the market for price increases before tariffs take hold.”
– Dan Cakora, Business Consultant at Vendavo
Here are some tips:
- Evaluate your price waterfall.
Pinpoint where tariffs hit hardest and protect your margins with strategic price adjustments.
- Prime the market for price increases.
Communicate increases early and transparently to keep customer trust intact.
- Play out the scenarios.
Use data-driven models to anticipate impacts and prepare for every possibility.
- Brace for stockpiling.
Handle short-term demand spikes smartly to avoid long-term inventory headaches.
- Break free from single suppliers.
Diversify sourcing, explore reshoring, and build supply chain resilience.
Understanding Pricing Pressure and Consumer Behavior
Tariffs on premium products could shift purchasing behaviors.
“Tariffs on premium products can force customers to rethink their choices. When prices rise, some will trade down to mid-tier brands, while others may pause purchases entirely.”
– Paul Sansom, Business Consultant at Vendavo
This pricing pressure forces companies to rethink their product mix and customer segmentation strategies. Understanding which customers are willing to absorb the price increase and which will trade down is essential to maintaining margins and market share.
Additionally, businesses must consider how competitors will respond. If one company maintains pricing stability despite tariffs, it could gain market share from those forced to raise prices.
Under pricing pressure? Get a demo.
The Need for Agility in a Volatile Market
If tariffs happen, you’ve got a window to make significant operational and capacity-related decisions. It’s not a “set it and forget it” situation.
Companies that can adjust quickly – by leveraging data analytics, scenario modeling, and flexible pricing strategies – will be better positioned to mitigate risk as well as their chances to capture opportunities.
“Policies are going to appear at the drop of a hat and disappear just as quickly. That capability to move fast will be worth a lot.”
– David Anderson, Vice President of Business Consulting at Vendavo
Businesses need systems that allow them to move fast, adapt to sudden policy shifts, and maintain profitability. This includes:
- Leveraging AI-driven pricing solutions to react to market changes
- Automating workflows for faster decision-making
- Developing contingency plans for sourcing and capacity adjustments
Long-Term Supply Chain Considerations
Beyond short-term price adjustments, tariffs raise critical long-term supply chain questions.
“It takes time to build plants and distribution networks. If these tariffs come into play, we’re stuck with them for the time being.”
– Paul Sansom, Business Consultant at Vendavo
Businesses must assess the feasibility of reshoring production, diversifying suppliers, or negotiating strategic partnerships. Supply chain leaders should be engaging in scenario planning now to prepare for potential disruptions.
Additionally, the role of digital transformation in supply chain management is more critical than ever – companies that invest in AI-driven forecasting and procurement tools will have an edge in mitigating tariff-related risks.
Do you need pricing agility? Get a demo.
Turning Tariffs into Opportunities: Domestic and Sustainable Products
With an increased focus on domestic production, some companies may find an unexpected advantage in sustainability initiatives.
“Some customers might be willing to pay a premium for products that are made in the U.S. and meet sustainability standards.”
– Israel Rodrigo, Business Consultant at Vendavo
While tariffs present challenges, they may also create differentiation opportunities for companies that prioritize environmentally friendly and locally sourced products. This could lead to increased investment in green manufacturing processes and sustainable supply chain models, which could further drive consumer demand for responsible sourcing.
The key to success lies in preparation — leveraging data, scenario planning, and pricing agility to maintain profitability.
Looking back, covering costs was a priority during the pandemic, and it will be just as critical in handling tariffs. Companies that proactively assess their position, embrace data-driven strategies, and act decisively will position themselves for long-term growth.
Consider where you were during the pandemic to self-assess. Did you cover your costs? Your response to this question sets the course for your next steps:
- Yes: Build on your success and climb the maturity ladder by optimizing pricing strategies with tools like Deal Price Optimizer and Vendavo Sales Optimizer.
- No: Focus on fixing the fundamentals, from enforcing accountability to streamlining pricing operations with Vendavo Pricepoint and Intelligent CPQ.
- I Don’t Know: Start with the basics – implement reporting systems like Margin Bridge Analyzer or Profit Analyzer to gain visibility into your cost structures and profitability.
While tariffs remain a wildcard, companies that embrace agility and strategic foresight will be best positioned to weather the uncertainty ahead.
How Vendavo Can Help
Navigating tariffs and market volatility requires awareness and action. Vendavo helps businesses build agile pricing and supply chain strategies that drive growth and profitability, even in uncertain times. Our solutions empower companies with advanced analytics, AI-driven pricing insights, and flexible strategies tailored to today’s unpredictable market conditions.
Get in touch with our experts today to see how we can support your business in making smarter, more strategic decisions.