When it comes to the current uncertain economic moment, the most important strategy is to control what you can control in terms of costs, cash, import locations, and perhaps more than anything else, pricing.
To do this, as usual, I turn to Adam Ector. chief executive officer community. With his work at price consultant Simon-Kuchcher & Partners, Echter has become the go-to guy for many CEOs, CFOs and boards who have struggled through Covid, through inflation and now through Trump's tariffs.
He has been consulting the tariff war room of large corporations across the United States for months, constantly making calls at acceleration rates as the president's tariff regime was announced at a much higher level than most everyone thought.
I arrived at him on a road between meetings on Tuesday afternoon and asked for ideas on pricing strategies as Trump's tariffs were open to the public. That's easy, he says: “Don't wait” when it comes to price increases.
“We need to understand how tariffs affect our costs, so we can get it through. “Our position should put us in a position to ask the market, 'What am I really worth?' ”
Tariffs were much higher and were more widespread than expected. How have you seen a change in clients' thinking over the last week or so?
I'm watching shifts in several places. One is that if there was hope that we probably wouldn't need to respond, it was now shattered and people have realized that they have to do something. There is a realization that this is here and will probably not disappear anytime soon. And there's debate as to when it will dissipate or whether it will dissipate, but in the short term they're here. So now it has arrived.
The magnitude order is also attractive. If you go back to the first Trump presidency and return to a 10% extra fee in China, these are like realizing that many companies can absorb it and may be able to pass it on.
We've entered another world, but it's important for people to understand: “What will my volume loss be like?” There are products and services that are completely inelastic against tariffs. If special equipment is required to make something like advanced semiconductor manufacturing, you will need to pass the customs duties and purchase them. There are large categories of such other products. There, businesses can probably pass more or even more than the tariff value.
So, do companies need to understand which categories they are in? Is it a discretionary purpose that when I double my price, people walk, my volume fades, and it's very harmful to my business? Or do I have more stickiness than I trust myself? In the latest examples of such things, you can go back to the inflationary spike. “Oh, that's not possible. I'll never get a 15% price increase, a 20% price increase.”
Then inflation broke out, narrowing margins and after the company went out and made a record price rise, the company got stuck. Yes, the market was not happy, but they did not see a loss of volume that was tense.
Now there are tariffs, so people have to deal with that question. Are you exposed to volume loss? If so, how much would I cost? That's something you don't want to do lightly. It's important to talk to the market and try to understand it systematically.
You have clients who are trying to understand what all this costs them to set a price. But you say it's wrong, right?
yes. Ultimately, we believe that prices and costs are separated, and value and costs are separated. At the end of the day, buyers don't really care about your costs even if they see its value.
All arguments, “We need to understand how tariffs affect our costs, so we need to be able to pass it,” is effectively a derivative of cost-plus prices. Our position is that this should put you in a position where you ask all the markets. “Am I really worth it?”
There was a great example of a tonka truck. The 10% tariff has increased the price of $5-10 on a $30 truck. Do math. They are increasing the fees above customs duties. They use this opportunity to test the price resilience in real time and see where it goes.
Tariffs are very similar to inflation in the sense that inflation spikes people were telling people that they only had three options. Move forward inflation, move accurately inflation, move slower to see what happens. Anyone who moves late will ultimately reduce profitability and put your business at risk. If you're not ahead of these changes, we recommend at least line up.
With tariffs, you cannot get the same generosity during the period, just like inflation. I don't know if people accepted the tariff surcharge in January 2025, but on April 10th, for all intents and purposes, the cat came out of the bag. There's no need to wait to do math at the cost.
This is a general understanding of the minimum tariff of 10%, and if a particular country that provides a substantial amount of input is a tariff of 20, 30, 40, 50%, then you can do math and wait to get a good grasp.
People will understand why it is there. It is significantly less than the customs number in the heading. And looking at 2026 and 2027, you put your business in a stronger position. You may see a loss of volume, but my guess is that you probably don't see much loss.
Betting willingly on the value you offer will put your business in a stronger, long-term position by being a little higher than your price today.
Let me remind you of some of the basics of guiding the times we are in today.
With inflation, we spoke about the importance of being systematic and agile to tools and systems to respond on the top line. We also had to escape the high stability environment of the 2010s and accept that the 2020s have become much more dynamic and that the ability to agile with general pricing is important.
Using a customs environment requires the ability to do the basics. “Can I charge an additional charge on an invoice? Can I charge multiple additional charge on an invoice?” Because if you are constantly trying to update the prices on your list with all the different tariffs and changes that are in motion, it will be incredibly difficult and will confuse everyone.
However, if you have a stable product with balance prices in 2025 and 2026 and this virtual product is exposed to foreign steel, plastic, national duties, etc., you can itemize them on your invoices, while showing that the heading price of the product remains the same. That's how agility looks in this environment for now.
What can you not do now?
It's dangerous to sit there. That was proven inflation in 2022 and 2023. This is proven again. Given the magnitude of these tariffs, it's probably not the right choice, as we're hoping to take a serious approach and that these tariffs will disappear, pass or absorb.
Another thing we are warning about is that we can probably not assume that these duties can be passed to our customers at 100%. If the tariffs are single digits lower, they will have another conversation.
In our last survey, conducted about a month ago, over 50% of executives claimed that they only pass tariffs. I don't think anyone expected these to be as high as they did. So I warn that it is a flawed idea. I don't think you can default to the assumption that you and your product are items that you can pass 100%.
What do you need to do most right now? What's the best advice you have to people as they're starting to take their heads on what to do now?
Don't wait. On the pricing side, the number one talk track I seem to have come across is that everyone wants to understand how tariffs affect their costs. And they want to understand it on a very detailed level. Yes, we recommend that you recognize that customs duties will affect your costs. Its specificity is TBD. But you now have the opportunity to influence your top line and influence your top line by not waiting.
