What are your biggest pain points so far this year? There are three main economic concerns dominating our conversations with clients and business leaders around the world: tariffs, inflation, and supply chains. As the dynamics around these evolve, ITR Economics is here to provide clarity and data-driven insights to help you navigate the uncertainty with confidence.
Tariffs
Tariffs, and the uncertainty tied to them, are one of the biggest challenges business leaders are struggling with today.
Tariffs will have an impact, but not a catastrophic one.
As of March 2025, tariffs accounted for less than 1% of US Total Retail Sales. While tariffs will contribute to inflation, they are not currently poised to fundamentally disrupt global trade nor lead to businesses overhauling their supply chains.
Even if we wanted to produce more here, the US cannot fully replace imports with domestic production. Many sectors are already running above average capacity utilization rates, and we would run into three major roadblocks to reshore all that we import:
- The magnitude of the investment required
- The time it would take to build the facilities
- Insufficient labor to run the facilities
Pricing Strategies and Inflation
On a macroeconomic scale, the biggest impact of tariffs will be rising inflation. Expect more pronounced inflation to set in later this year.
Price-sensitive customers will likely become increasingly value-conscious as well. When spending money, consumers are putting more emphasis on product quality, longevity, and customer service.
While we encourage businesses to evaluate their ability to raise prices in 2025, how you raise prices should be tailored to your industry and business model. Some companies may benefit from a larger upfront price increase to offset tariffs, while others might benefit more from a gradual approach to maintain competitiveness and potentially gain market share.
How that price increase is enacted can also vary. Some companies are finding success by weaving the increase into their base price, and some have opted to create a separate line item on invoices to single out tariff increases.
Keep in mind that the pressure to raise prices is not just about tariffs. Rising labor, energy, and input costs, are all contributing to the margin squeeze. Even if tariffs were eliminated tomorrow, you would still need to evaluate your pricing strategy.
Supply Chain Disruptions
Tariffs will create both winners and losers.
It is critical to use this time to reposition your business to take advantage of any new opportunities that are a result of tariffs. For example, domestic producers could see increased demand with new customers, even if they are worried about their own input costs rising. Foreign suppliers could potentially see more new business opportunities as firms look to diversify sourcing.
Sourcing materials locally could potentially reduce the impact of international tariffs and simplify supply chains, but this option will not work for everyone. Similarly, holding more inventory than normal is an option to combat supply chain disruptions, but it is not always applicable to all businesses.
While 2025 presents its share of economic headwinds, it also offers opportunities for those who are prepared. Tariffs, supply chain challenges, and inflation are real, but they are all manageable when equipped with the right strategies. At ITR Economics, we are here to help you cut through the noise, focus on the data, and make confident decisions in uncertain times.