Tariffs Are Here: Who Pays the Price?

They walk through who actually ends up paying when retailers say they will absorb the cost, why treating tariffs as a mix and portfolio decision beats a blanket price increase, and why companies that move too slowly are already behind the customer notification clock. The conversation was prompted by a new round of tariffs that hit with retaliation following almost immediately. Michael and Avy use that backdrop to unpack two pricing trends every commercial leader needs a plan for right now: how fast a tariff shock moves through the market, and what separates companies that protect their margin from those that erode it.

Key Takeaways

• Tariffs are back and retaliation is already on the table, so companies should plan for a sustained disruption rather than a quick, short-term fix.
• The peanut butter spread, applying the added cost evenly across every product, is the easy shortcut. It is rarely the right one.
• When a retailer says it will manage or absorb the cost, that pressure typically does not disappear. It gets pushed upstream onto suppliers instead.
• Holding price to protect share while costs rise is effectively an investment decision, and it needs the same ROI scrutiny as any other investment.
• Customer notification requirements of sixty to ninety days mean many B2B companies are already behind before they start reacting.
• Companies that use the moment to rethink mix and portfolio, not just raise prices, come out ahead of those that default to a blanket increase.

Tariffs Are Here, and This Time Retaliation Came Fast

The last round of tariffs ended with a last minute reprieve, so there was reason to expect a similar outcome this time. Instead, the tariffs took effect and retaliation followed almost immediately. Michael and Avy agree this is now a structural feature of doing business, not a one-off event. Even if a short-term resolution gets reached, the pattern suggests it will not be the last round.

The early market reaction backs that up. Retailers were already talking publicly about price increases within days, and grocery executives were flagging that produce sourced from Mexico, including staples like avocados and strawberries, would move quickly. When the reaction is that fast, the window to plan a considered response is much shorter than most companies assume.

Why the Peanut Butter Spread Is the Wrong Default

Faced with a sudden cost increase, the instinct for many companies is to spread the tariff evenly across the portfolio and move on. Michael and Avy both push back on that as a default. It is fast, but it skips the analysis that determines where a price increase actually holds and where it does not.

The better path sits between two extremes. On one side is the peanut butter spread, a reactive, one-size-fits-all increase. On the other is analysis paralysis, running scenarios for months while the market moves without you. The right approach does the work to understand elasticity, portfolio impact, and which customers can absorb an increase, but compresses that work into a matter of weeks, not quarters.

Who Actually Pays: The Margin Pool Problem

One of the clearest examples in the episode is what happens when a retailer raises its price ahead of its suppliers. If a retailer moves first, a manufacturer supplying that retailer has effectively missed the window to protect its own margin. The retailer can either squeeze the supplier’s cost further or raise its own price even higher and make the supplier’s product uncompetitive on shelf.

That dynamic explains why a retailer’s public promise to manage the cost or absorb it rather than raise prices is not necessarily good news for its suppliers. Large companies are not in the habit of letting a cost increase erode their own bottom line. If the retailer is not passing the cost to the end customer, that pressure has to land somewhere else in the chain, and it usually lands on the supplier.

Holding Price Is Still an Investment Decision

When a company says it plans to manage its way through tariffs without raising price, it is effectively investing in the gap between its price and a competitor’s. That investment is only worth making if it is expected to convert into volume, and it comes with real risk. If the strategy works and starts pulling share from competitors, those competitors will respond, and the result can be an industry-wide price war that erodes value for everyone, not just the company that started it.

Michael and Avy point to a past example from the home fixtures category, where a company adjusted its supply footprint after a prior tariff round and took three years to recover the market share it lost in the process. The lesson is that a purely financial or supply chain fix, made without a clear view of the commercial consequences, can cost far more than the tariff itself.

The Market Is Shrinking, Not Just Repricing

A tariff-driven price increase does not just move where profit sits inside a supply chain. It also reduces how much the end customer can afford to buy, because disposable income has not grown to match the new prices. That means every company in a category is now fighting over a smaller pie, even the ones that successfully protect or grow their share.

This matters just as much for B2B relationships. A commercial customer with a fixed budget is not going to increase that budget just because a supplier’s costs went up. The companies that adapt well are rethinking what they offer within that same budget, not simply asking the customer to absorb a higher price for the same thing.

The Execution Clock Is Already Running

Many B2B contracts require sixty to ninety days of notice before a price change takes effect. That means companies that are only now starting to analyze their tariff exposure are already behind the timeline needed to act. Michael and Avy are direct about the trade-off this creates: the analysis has to happen, but it cannot take six or eighteen months. A realistic target is closer to four to six weeks of focused work before a decision gets made and communicated.

What This Means for Pricing Leaders

The core message of this episode is that a tariff shock is not just a cost problem. It is a pricing, mix, and execution problem that has to be solved together. Companies that default to an across-the-board increase or a purely cost-driven fix are trading a fast decision for a slower, more expensive recovery later.

Michael and Avy frame the choice simply. Companies can get ahead of the disruption and be proactive, using the moment to rework mix, terms, and portfolio in a way that protects margin and share. Or they can wait, let retailers and competitors make the decisions for them, and end up reacting to a position that was already lost.