How U.S. Companies Should Respond to the New Trump Tariffs

Tariffs for one, tariffs for all

On Feb. 1 President Donald Trump made good on a longstanding campaign promise to impose additional tariffs on China, and new ones on Canada and Mexico. China will be hit with 10% tariffs, while Washington’s North American trading partners will be hit with more substantial 25% tariffs, some of which could be effective as early as Feb. 4. Their implementation continues a long-running trade war that began in 2018, and which has largely been argued to increase prices for U.S. consumers.

The tariffs — and companies’ responses to them — are on U.S. consumers’ radar

While U.S. trade policy is not normally front and center for American consumers, a majority have heard “a lot” or “some” about Trump’s latest tariff packages. And with price increases for consumer goods again on the table as a result of the new tariffs, we expect U.S. consumers will be paying attention to how U.S. companies respond to them.

The biggest risk to corporate reputation comes from price transmission

More U.S. consumers than not continue to expect the tariffs will harm their household finances, in line with the common wisdom that tariffs are inflationary.

U.S. consumers’ tolerance for price increases is also at a low ebb. Consumers’ experience with inflation over the last few years has been starkly different than it was leading up to the last time tariffs were implemented in 2018, suggesting price increases from tariffs may be met with more resistance in 2025. Across various product categories, certain items face more pushback from consumers than others, with everyday items that have already registered rapid price growth in recent years eliciting the strongest opposition. Price sensitivity, which measures consumers’ likelihood of walking away from a purchase due to higher than expected pricing, also corresponds with the relative degree of tariff skepticism by income group, with lower and middle income consumers showing more opposition to raising tariffs on household goods compared with higher earners.

And as our previous work has shown, many consumers — and especially Republicans — generally underestimate how much Trump’s various tariff proposals will cause their household expenses to rise. We expect this to raise the likelihood that consumers face sticker shock in the context of the newly announced tariffs and additional ones that are likely to follow.

What’s more, if consumers do perceive rising prices as a result of the tariffs, roughly one third (34%) say they’d hold U.S. companies responsible for them, while substantially more say they would hold the Trump administration, Congress, or foreign governments responsible. This presents non-trivial risks for companies who are grappling with how much of the tariff-related costs they’ll be able to safely pass onto consumers. This is particularly the case for those serving predominantly Republican consumers, who are somewhat more likely to single out U.S. companies for blame.

Few consumers are financially ready to face additional price increases

Complicating matters further, relatively few consumers have taken steps to prepare for the tariffs in advance aside from trying to set aside additional savings.

Among the behavioral responses asked about, the most commonly cited preparatory action by consumers was saving more money. However, the rapid pace of policy changes has left little time for consumers to accumulate a buffer. While Trump’s stated intentions to impose tariffs have been public for months, consumers were either unwilling or unable to increase their savings rate through at least the end of 2024: Data from the Bureau of Economic Analysis released last week showed that the seasonally-adjusted savings rate actually declined in both November — the month Trump was elected — and again in December, when it hit its lowest level (3.8%) since 2022. Since reaching a recent high of 103.5 on Jan. 25, the 5-day moving average of Morning Consult’s U.S. Index of Consumer Sentiment (ICS) fell to 99.9 on Feb. 3 as U.S. adults seemed to grow less confident in economic and financial stability going forward. The decline is mainly driven by concern about future conditions, reversing the initial optimism that followed the election and supporting our assessment that consumers may be inclined to lean into savings as well as preemptively cut discretionary expenditures in anticipation of future challenges such as cost increases from additional tariffs. 

Taken together, Americans’ attitudes on this front pose clear risks for consumer-facing U.S. brands. In a nutshell: U.S. consumers are paying attention to the tariffs, expect them to increase household expenses, have done little to prepare for them financially, and are somewhat willing to blame U.S. companies for the fallout.

Corporate efforts to limit price increases for consumers and message their commitment to revitalizing the U.S. economy are crucial first-line defenses

Given these dynamics, companies are right to worry that tariff-related price increases could cause some consumers to sour on their brands and dent their reputation. For companies that can afford to do so and/or have pricing power with suppliers, the safest near-term option to limit reputational blowback — which may ultimately be unrealistic for many companies for contractual or other reasons — is to hold prices steady, either by absorbing the cost of the tariffs or by negotiating terms with overseas partners to decrease costs. Companies should also consider expanding inventories ahead of potential future rounds of U.S. tariffs targeting other countries.

For companies with pricing power along these lines — and for those that must ultimately pass at least some of the cost of the tariffs onto U.S. consumers — we additionally advise adopting clear messaging about their commitment to sustaining and revitalizing the U.S. economy. While few consumers overall think tariffs benefit their household expenses, somewhat larger shares think they benefit the U.S. economy for all tariff packages we examine, offering a partial explanation for why a fair number of consumers continue to say they support the tariffs despite their pocketbook impact (see further discussion below).

Brands should also lean into messaging which conveys that U.S. companies — and not foreign ones —- are ultimately responsible for paying the upfront costs of the tariffs to the U.S. government. At the moment, only 1 in 5 U.S. consumers believe that U.S. companies are primarily responsible for paying those costs, compared with substantially higher shares who cite foreign companies and governments. While the latter sometimes occurs, it’s the exception rather than the rule.

This presents a ready-made opportunity for U.S. companies to turn a “corporate hardship” narrative to their advantage by positioning themselves as a stoic American brand, specifically by emphasizing their commitment to bearing tariff-related costs in order to both shield U.S. consumers from added expenses and help the U.S. economy. It’s also in line with consumers’ ongoing enthusiasm for “Made in America” product narratives.

A forward-looking playbook for dealing with tariffs

On the whole, the latest Trump tariffs pose both reputational and material challenges for U.S. companies who are debating how much of the cost of the tariffs to absorb (if any) and who are wargaming messaging strategies targeting U.S. consumers.

As the tariffs begin to roll out, our data nevertheless suggests that companies have a straightforward and actionable three-part strategy at their disposal:

1. Absorb the cost of the tariffs when feasible (and for as long as possible), or alternatively, communicate actively when you are not able to maintain stable pricing for consumers in cases where tariff-related costs can’t be absorbed across the board.
2. Message your commitment to the U.S. economy and to American consumers.
3. Turn corporate hardship narratives to your advantage by leaning into alternative positioning as a stoic American brand, while emphasizing your commitment to bear costs on consumers’ behalf if and when feasible.

Alongside this strategy, companies should also keep in mind several nuances in our data that may give them leverage to push for tariff exemptions or engage the U.S. government on the trajectory of its future tariff policy more broadly.

First, for companies subject to tariffs on imports from Canada and Mexico, more U.S. consumers than not think these tariffs will harm the U.S. economy, in addition to harming their own household finances, suggesting consumers see little benefit to America from these tariffs specifically (at least as far as household finances and the overall economy are concerned). 

Second and relatedly, among U.S. adults overall, only the 10% China tariffs secure the support of a plurality (43% support, compared with 33% in opposition); this contrasts with the tariffs on Canada and Mexico, which more adults than not oppose (32-35% support, compared with 45-42% in opposition).

Third, our data shows that consumer confidence has fallen sharply amid news of the new tariffs’ rollout. Should confidence continue to fall, companies seeking to push the administration to consider an alternative course may find leverage in noting that U.S. consumers are more likely to hold the Trump administration itself responsible for any tariff-related price increases than anyone else. This includes Republicans, who are substantially more likely to hold the Trump administration responsible than that of his predecessor.

Finally, educating consumers about who actually pays tariffs to the U.S. government may also yield reputational dividends: Making consumers aware that it’s actually U.S. companies who pay the tariffs may engender a bit of sympathy toward companies in cases where passing on some tariff-related costs is unavoidable.

With this strategy in mind, it’s worth engaging in long-term planning now: While it’s entirely possible the newly announced tariffs on Mexico and Canada may be short-lived if Trump’s as yet unarticulated demands regarding immigration and fentanyl are met, it is far from clear what such a deal would look like and when it would take place. And with new tariffs targeting the European Union on the horizon and discussions of universal tariffs still ongoing, it’s safer to assume that tariffs are here to stay and plan accordingly. 

Strategies to avoid

On the flip side of the ledger, one strategy we do not currently advise is leaning into messaging that conveys the additional strain the tariffs are expected to place on consumers’ household finances. For Republican consumers specifically, our prior research suggests such a messaging strategy can backfire, ultimately causing consumers to double down on their support for the tariffs and making U.S. companies an easy scapegoat for both consumer and government-led ire. By contrast, broader narratives that lean into the Trump administration’s messaging about placing American first — in line with the three-point strategy outlined above — are likely to remain safer bets for companies weighing their options.