Tariffs Show Both Direct and Indirect Consequences on Companies as Decision-Making Slows Amid Uncertainty, Extending Sales Cycles; Companies Using Various Mitigation Methods, Though None Are Bulletproof

 

This is a continuation of the tariffs commentary and analysis from our previous analysis based on Q&A sessions from private and public company investor calls (you can find earlier pieces HERE and HERE. Also, you can follow the Tariff Policy & Impact thread as it evolves HERE.)

We have analyzed and summarized below the key trends how companies are tackling tariffs. We also have dissected the impact by sector and industry, highlighting and quantifying the effects of tariffs for individual companies.

Commentary below relates to transcripts that were issued from April to early May in 2025, reflecting Q+A of transcripts from the fourth quarter of 2024 to the first quarter of 2025 period.
 

 

• Majority of companies plan to tackle impact of tariffs with price passthrough on to the consumer. It is yet to be seen if that will be a broadly successful strategy, as some issuers have seen push back on price increases from clients.
   
• Companies with multi-country operations are shifting some production away from heavily tariffed countries, particularly China. However, prior to April 2 Liberation Day announcement, it was common to shift production to other Asian nations (example Vietnam, Taiwan, Cambodia), which have also become subject to significant tariffs, raising questions about the net-benefit of these costly and time-consuming supply chain shifts purely from a tariff avoidance perspective.
   
• Inventory pull forward seemed to be one of the more effective ways to minimize the impact of tariffs for directly exposed companies. However, these companies indicated inventory levels would cover them until roughly mid-year, with tariff impact hitting the P&L thereafter.
   
• Companies with minimal to no direct tariff exposure, or local U.S. sales anticipate gaining market share from competitors that are more heavily impacted. Nevertheless, even these companies face indirect challenges, including increased client indecisiveness and longer sales cycles due to overall market uncertainty stemming from the tariff environment.

After analyzing more than 170 transcripts from private and public issuers from April to early May – industrials, consumer discretionary and materials companies were atop investors’ minds when it came to tariffs. This is similar to what we have seen in our previous analysis1,2
 

A high number of issuers state price passthrough as one of the main ways of tackling the impact of tariffs. In fact, though, it is questionable and yet to be seen whether this strategy can be broadly applicable in reality. For instance, a company selling agricultural products stated that they had talks with some of their customers about price increases, and in some cases they received push back. Another company in the leisure products space stated that for one of their products, which are mostly manufactured in China, when you take into account all of the moving parts the price increase could reach up to 3x, which is not realistic and would likely kill consumer demand. The previous statement emphasizes the point that management teams simply stating price passthrough onto the consumer may very likely face challenges in protecting margins if that is their only measurement in tackling tariffs.

Some companies that have production and manufacturing in multiple countries or regions have shifted some production accordingly, mainly away from highest tariff affected countries like China. However, the production shifts for a lot of these companies were still in Asian countries, namely Vietnam, Taiwan or Cambodia, which, while cost-effective from a labour standpoint, were also subject to high tariffs (in the 30s to 40s, depending on specific items, exemptions and other factors). To put it in perspective, one management team raised a valid point when it came to supply chain diversification. According to this management team, they heard that some competitors started diversifying their production in 2018 away from China to other Asian countries (that is Vietnam, Taiwan, among others), which takes years to set up, and now those countries have been hit by tariffs as well. Granted, diversifying supply chains have additional benefits outside of avoiding tariffs, and at the same time China has been hit the hardest in terms of tariffs by president Trump and the U.S. administration. However, purely from a tariff standpoint, the years of setting up and operational costs related to moving parts of the supply chain elsewhere raises the question of the net-benefit.

Companies that have exposure to U.S. imposed tariffs seem to have minimized the negative impact the most by pulling forward inventory prior to the onset of tariffs. However, a number of companies stated that they had inventory available to run through up to around the end of the first half of the year, and in the second half the impact of tariffs would be seen on the P&L. As of this writing, however, President Trump and the U.S. administration have made progress by reaching a trade agreement with the U.K. and reaching an agreement with China to reduce tariffs for 90 days. So while these companies will likely experience some sort of a tariff impact on their top-line and/or margins in the second half of the year, it should be of a lesser magnitude than what we’ve seen so far in the first half of 2025, especially for companies highly exposed to Chinese imports, for which tariffs were as high as 145% at one point in April.

Naturally, companies that have minimal-to-no exposure or generate sales locally in the U.S. have stated that they can expect some market share gain, taking away from competitors with exposure outside of the U.S. Nevertheless, these companies were not immune to indirect impacts from tariffs. A few management teams have highlighted increased indecisiveness and longer decision making by their clients before signing contracts due to the increased uncertainty. Consequently, they have seen longer sales cycles and some delayed bookings so far in 2025.
 

In the consumer discretionary sector, a common theme was that the impact of tariffs will likely be split-out in some way by manufacturers or operators partly taking a hit to their margins, while the remainder will be passed on to the consumer.
 

• A company in the casino space had estimated that the tariff impact could approximately have a negative 3% impact on the proforma EBITDA figure.
   
• A specialty retail company stated that around 18% of goods will be impacted by tariffs, which in a worst-case scenario could ultimately have an impact up to $100 million on an unmitigated basis (that’s approximately 1.3% of LTM revenue).
   
• A home furnishing retailer stated that they have brought some inventory forward (around $25 million of strategic inventory build up), and that the tariff impact would have a visible impact on the P&L approximately seven months from the “Liberation Day” tariff announcement. After the seven months, the company’s management stated they would look at price increases.
   
• A company in the leisure product industry stated that tariffs could have an impact on 6% to 8% of COGS, and on a mitigated basis it could be reduced to around 5%. In nominal terms that would be around $20 million, and after mitigation it could potentially come down to around $14 million to $15 million. For the unmitigated portion, the company stated it will use a mixture of manufacturing dynamics, shipping and production shifting (for example, ship the product to a different region where there is already enough demand established, other than the U.S. to avoid tariffs), as well as pricing passthrough.
   
• An auto running gear manufacturer highlighted that the annualized tariff impact could be $40 million, which is just under 2% of their LTM revenue. However, the management team was hesitant to provide any additional color during the call. One thing they did mention was that they had approximately 75 days worth of inventory to run through before additional tariffs announced on Liberation Day would have an impact on their costs and pricing adjustments.
   
• A recreational vehicle retail company based in the U.S. stated that they expect a 2% to 8% price increase due to the onset of tariffs, which they plan to pass through to the end consumer.
   
• A trailer and truck manufacturer quantified the impact from announced tariffs as $13 million (covering direct purchases from overseas vendors, indirect impact on domestic suppliers, and the impact of moving items from Mexico), which is roughly 1% of their LTM revenue.
   
• A premium leather provider for car manufacturers estimated that in a “worst-case” scenario where some of their high-end car manufacturing client revenue would drop by close to a third, the impact on the company’s top line would be 5% to 6%.
   
• A sports equipment manufacturer stated a net impact of $60 million from tariffs for 2025 (or roughly 4% based on their LTM revenue). This assumes tariffs (including 145% China, 25% Mexico, and reciprocal rates like Vietnam going to 46% incremental from July 2) apply as of the time of the investor call. Management mentioned that they have budgeted for this so any of the levy retracement by the U.S. administration would lead to a positive impact on the company’s top line.
   
• A major European auto supplier estimated the impact of tariffs could be up to €165 million, or 1.4% of LTM revenue, assuming to pass this on to the consumer, if needed.

 

The tariff impact appears to be primarily indirect, stemming from broader macroeconomic uncertainty rather than direct costs on their core services. Several companies emphasize that their core business involves digital goods, services or content production, which are generally not subject to the types of tariffs applied to physical goods. However, the recently announced tariffs on movies produced outside the U.S. could change the rhetoric that digital goods will be exempt from tariffs.
 

• Multiple companies in the advertising space specifically have highlighted some delayed decision-making by clients on new contracts or scope expansions due to the highlighted uncertainty of tariffs.
   
• However, there’s some divide between industries. Interestingly, a company in the Cable & Satellite industry stated that some auto companies and dealers were seizing the moment and had launched ad-campaigns with them, potentially trying to convince the consumer to purchase a car before prices increase due to tariffs. On the other hand, management from a broadcasting company stated that they expect a strong comeback from the auto industry in terms of ad-spend in the second half of 2025. Another company said they experienced [“a bit of an air pocket”], but they were adamant on not providing guidance of how the second half of the year could look like.

 

 

• A common method raised during investor calls by management teams when asked about how they are thinking about mitigating the impact of tariffs – is price passthrough onto the customer. However, it is not clear whether it will be as easy in practice. For example, a company selling agricultural products stated that after discussing price increases with their customers, some have pushed back.
   
• A non-U.S. producer of biscuits and foods stated that while the 10% levies on goods will have an impact, they claim that some of it will be passed on, and that it won’t be the biggest challenge for their business.

 

 

• A healthcare equipment company with manufacturing in both the U.S. and China stated that if tariffs were to remain in place, it would have a material negative impact of around $30 million, or 3.3% of annual revenue, if these risks were unmitigated in any way. During the investor call, the management team said they had not taken any drastic measures yet and were monitoring the situation closely, as they believe the tariffs between the U.S. and China were unsustainable for both countries at the time when this investor call was recorded.

 

 

• A global automation solutions provider mentioned that their direct China exposure is $8 million to $9 million. Their initial thoughts around second-level exposure to Asia suggest roughly $75 million is what could potentially be their second level of exposure. In terms of sales coming outside of the U.S., expectation is roughly $120 million of sales coming from Europe into the U.S. in 2025 that could be subject to tariffs (that’s approximately 8.4% of LTM revenue).
   
• The management team of a company in the solar panel installation space said they have forecasted an increase of 25% to 30% in their blended COGS due to the impact of tariffs, mainly coming from tariffs imposed on China and Mexico. Management plans to pass on these increased costs on to the consumer.
   
• Based on the situation as of April 2, a manufacturer of architectural hardware, glass, and glazing products estimated its Chinese tariff exposure at approximately $15 million. This figure was derived from the $28 million in imports from China during 2024. The company noted that its total imports from Asia in 2024 were about $83 million. To mitigate the tariff impact, they are strategically shifting orders from China to countries with a 10% tariff rate. If we were to perform a simple back of the envelope calculation, taking the company-estimated $15 million Chinese tariff exposure, and adding $5.5 million (($83 million minus the $28 million) multiplied by 10%) from the remaining countries with a 10% tariff rate, that would come up to around 1% of LTM revenue.
   

 

• An issuer in the identity technology and payments space stated that they have some tariff exposure due to partial manufacturing in China. The overall estimated impact could be around €50 million. Management stated they have covered roughly €35.5 million, of which €15.5 million was passed on to their clients, leaving the company of approximately €15 million to mitigate. The €50 million represents around 2.1% of the company’s LTM revenue.
   
• Management team from a company operating a contract managing platform echoed what quite a few of companies in other industries with no direct impact from tariffs have stated in their investor calls: no direct exposure from tariffs, but sales cycles are getting slower and longer due to less decisive and more cautious decision making by clients that are impacted by tariffs.
   
• A U.S. based company offering enterprise software planning (ERP) solutions experienced a marginal impact as a consequence of tariffs, highlighting that a few clients outside the U.S. did not want to do business with an American company, implying losses of around $1 million bookings for the first quarter (which is 0.2% of LTM revenue for the company). While the loss was marginal, it highlights a deeper concern for all U.S. companies, which is that tariffs and the policy uncertainty have resulted in foreign business and clients thinking-twice, and in some cases, even walking away.
   

 

• A producer of specialty chemicals and materials stated that their exposure to imported raw materials was less than $10 million (around 0.6% of LTM revenue), though their manufacturing presence in Mexico and Canada is largely protected by USMCA.
   
• Another company in the specialty chemicals industry stated that only 5% of their overall sales is vulnerable to import tariffs in the U.S.