S1E1 – Will Tariffs Impact My Business?

Michael and Avy argue for a third path, one grounded in pricing fundamentals rather than financial modeling alone.

Key takeaways

• Tariffs are happening. The open question is scale, not whether they will land.
• Waiting to react and running endless what-if business cases are both forms of avoidance. Neither one drives a decision.
• A tariff business case built purely on cost and sourcing footprint misses the bigger opportunity: resetting price architecture across the portfolio.
• Historical precedent, from steel tariffs to appliance pricing, shows competitors often use tariffs as cover to raise prices, not just recover cost.
• How much a customer feels a tariff depends on how close the product sits to the end buyer. A furnace feels different than a screw inside a larger assembly.
• Generic tariff scorecards cannot capture the complexity of a specific business, its customers, or its competitors.
• Absorbing cost increases to “protect margin” assumes competitors are not managing their own costs. That assumption rarely holds.
• Tariffs tend to be sticky. Companies that wait it out, or try to catch up later, tend to give away margin they never get back.

Tariffs are happening, the scale is the only question

Michael opens with the debate everyone in commercial leadership was having. Is this real, or is it noise? Avy is direct. It is happening. Some of it has already been implemented. The size and shape of the impact may still be unclear, but the direction is not in doubt.

That certainty matters because it rules out one of the two responses companies were defaulting to.

Two modes of avoidance

Avy describes two groups of companies. The first waits, watches, and plans to react once the picture is clearer. The logic has some appeal. You cannot change what is coming, and worrying about it will not move the number.

The second group is the opposite extreme. Finance teams run scenario after scenario, business case after business case, chasing every possible version of the future. Michael calls this the analysis paralysis trap. At some point, the question stops being about insight and starts being about volume. How many versions of the same model does a team need before it takes action?

Avy frames the excess analysis as a kind of security blanket. Running fifty forecasts creates the illusion of control. It is not control. The scenario a company builds will not be the one that plays out. What actually matters sits outside the spreadsheet: what competitors do, what customers accept, and how the business chooses to position its offer.

Sourcing footprint is not a pricing strategy

One example stands out. A company mapped its tariff exposure SKU by SKU, tracing exactly how much of each item’s cost came from which country, then planned to pass along only the specific cost increase tied to each product’s footprint.

Avy pushes back on that logic. Letting internal manufacturing footprint dictate customer-facing pricing treats a cost exercise as a pricing strategy. It ignores the portfolio-level opportunity: some products can bear a bigger increase, others need to stay competitive, and the right split depends on what competitors are sourcing and how they price, not on where a company’s own supply chain happens to sit.

A reset, not just a pass-through

Michael and Avy call this moment a “get out of jail free card.” A company is not choosing to raise prices unprompted. The tariff gives cover. Customers understand that costs are moving for reasons outside any one supplier’s control.

The appliance industry after the steel tariffs is the case they point to. Samsung and LG raised US prices almost immediately. The surprising part was what domestic producers, who were not directly hit by the tariff, did next. They raised prices too. Extra price on the same unit volume drops straight to profit. Producers that were affected by the tariff also shifted production into the US, and their prices never came back down.

The lesson: tariffs are not only a cost problem to defend against. They are a market-wide reset that companies can choose to lead or simply follow.

Distance from the customer determines how the impact is felt

Avy raises a distinction that shapes how much of a tariff a company can pass on. The closer a product sits to the end customer, the more directly that customer feels the price change. A dishwasher buyer sees the tariff in the sticker price. A supplier providing a small component buried inside a larger assembly has more room, because that cost is a smaller share of what the end customer ultimately pays.

The HVAC example makes the point concrete. A large share of the HVAC systems installed in Canada are made in the US. If tariffs move those input costs, the installer has no reason to absorb it. The consumer feels it directly, in a purchase large enough to notice.

Even companies with no hard goods exposure are not immune. Software companies may not touch tariffs directly, but the knock-on effects, price inflation, shifting customer budgets, and changing demand for the products those customers buy, still reach them indirectly.

Why generic scorecards fall short

Michael raises the wave of tariff “scorecards” circulating at the time, simple checklists meant to tell a company what to do. His view is skeptical. Every business carries too much complexity in its cost structure, its customer base, and its competitive set for a generic framework to produce a real answer. A scorecard might give a rough directional read, but it will not replace the specific analysis a company needs on competition, customer impact, and market positioning.

The trap of protecting margin through cost cuts alone

Avy shares a pattern he has heard from clients: having pushed pricing hard already, some companies plan to hold the line and offset tariff costs purely through footprint changes and cost reduction.

He calls the logic out directly. It assumes competitors have not already been running efficient operations, and that they will not face the same cost pressure. Both companies are incurring the same increase. If one holds back on pricing while the other adjusts, the one holding back is not protecting the market. It is giving away opportunity and holding the wider industry back from a rational reset.

The irony, as Avy points out, is that companies often extend competitors plenty of credit in other conversations, like when a sales team blames a lost deal on a competitor’s stronger offer. The same confidence in a competitor’s capability should apply here too.

Tariffs are sticky

The closing question is whether this is temporary, something to absorb and wait out. Avy answers with history. A tariff dispute between the US and Germany over chicken exports in the 1960s led to a retaliatory tariff on vans. The chicken tariff eventually faded, replaced by a different regulatory barrier. The van tariff never went away.

The takeaway is direct. Treating a tariff-driven cost increase as a temporary surcharge is a mistake. It needs to be built into the base price. Waiting for clarity, or waiting to see what competitors do first, only gives away margin in the meantime, and the industry as a whole ends up worse off.

Time is the real constraint

Michael closes with the point that matters most for anyone still deciding whether to act. The window to move is short. Companies that waited too long to price during COVID spent years trying to catch up afterward, and once customers had adjusted to holding the line, that pushback made recovery even harder.

The message for tariffs is the same. The opportunity is now. Waiting six months to figure it out is waiting too long.