US tariffs compel firms to shift tariff burden to buyers

New tariffs imposed by the United States government on goods from China, Mexico, and Canada have prompted a varied response from corporate leaders regarding their financial strategies.

According to a survey conducted by Gartner, a significant majority of Chief Financial Officers (CFOs) and finance leaders are planning to pass the impact of these tariffs onto consumers. The survey involved 192 CFOs and finance leaders from a diverse array of organisations involved in global operations.

Gartner's findings indicate that 59% of CFOs expect their organisations to absorb less than 10% of the tariff impact within their cost base. "CFOs are strategically responding to new tariffs, focusing on cost management and supply chain adjustments to mitigate the financial impacts," said Alexander Bant, Chief of Research in the Gartner Finance practice. "While a majority of CFOs are not expecting their organisations to absorb most tariff related costs, some do, likely indicating varying levels of price sensitivity among customers and suppliers for specific organisations."

Analysis of the report further reveals that customers are likely to face significant cost pass-through, with 30% of respondents planning to pass 91%-100% of the tariff costs onto consumers, and 29% intending to pass on 10% or less. The average pass-through of tariff increases to customers is projected at approximately 73%.

"CFOs are exploring various strategies to minimise the short-term impact of tariffs, including revisiting Harmonised Tariff Schedule (HTS) classifications, leveraging tariff exemptions and free trade areas, and optimising transactional structures to lower the dutiable value of imports," Bant remarked. "Despite these efforts, 45% of CFOs have no immediate plans for tax and duty compliance adjustments, potentially overlooking quick wins."

The findings suggest that financial strategy adjustments are a priority among CFOs. Updates to financial risk assessments, enhancements in forecasting and scenario planning capabilities, and adjustments in pricing strategies are commonly mentioned actions. Cost reduction and transfer pricing strategies also feature prominently.

Furthermore, CFOs are reportedly working closely with supply chain leaders to update risk assessments, explore alternative sourcing strategies, and renegotiate supplier contracts. Reengineering the supply chain is prevalent, with 48% of CFOs looking into alternative sources for components and raw materials, and 41% reevaluating their supply chain network design.

"CFOs are leveraging data and benchmarks to calibrate their tariff response strategies effectively," Bant added. "Continuous updates to scenario plans are essential as the trade environment evolves, ensuring organisations remain resilient and competitive."