Tariffs, Pricing and Margins – Will the Customer Say “No Mas”
Written by James Sanders
The August 1st deadline is approaching quickly. If you don’t know the significance of that date, its when President Trump’s tariffs take effect. Will deals get done, will he hold the line? It’s anyone’s guess. The bigger question is will companies pass along these tariffs to their customers?
After a number of years of price increases due to inflation, has the customer said “no mas” or will they accept more. If it’s the former, it means thinner margins for companies. If it’s the latter, inflation issues will be back on the table. Economists are famous for being wrong, but equally as famous for knowing that people have short memories. The answer will likely be somewhere in the middle. However, what is a business to do?
From my experience, a business will almost always pass this increased cost on to their consumer/customer/client. Yes, it is a burden, which is why it is important that a business owner remains focused on justifying their price. The value provided to the end user will almost always justify the price that is charged. When the price paid exceeds the value, competition comes in and the price eventually adjusts. Said another way, this is the way that a capitalist economy handles these issues. It is not a linear adjustment, but it does eventually even out.
As Warren Buffet famously said:
“Price is What Your Pay, Value is What You Get”