Strategic Pricing: Navigating Tariffs To Protect Profitability

Editor’s note: In an effort to help our community better future proof its supply chains, navigate tariffs and lead during rising economic uncertainty, we’ve partnered with the team at AlixPartners. More information, insights and ideas >

As global trade policies evolve, tariffs are once again emerging as a disruptive force, adding cost, compressing margins, and introducing uncertainty across industries. While many companies focus on operational or sourcing adjustments in response, pricing remains one of the most powerful (yet underutilized) levers for defending profitability.

In moments of disruption, speed and precision matter. That’s why we developed a “profit protection” playbook, anchored in actionable pricing strategies that help companies navigate tariff exposure and uncertainty—quickly and strategically. This article zooms in on the pricing lever, outlining the steps businesses can take to protect margin and respond with confidence, especially in the face of U.S. tariff changes. 

Start with profitability diagnostics

Before taking pricing action, companies must first understand where they are most exposed. This means performing detailed diagnostics to identify shifts in customer and product profitability in different post-tariff scenarios. Tariffs may impact some products or segments disproportionately, depending on the sourcing mix and margin structure. By surfacing these hidden fault lines, companies can prioritize efforts where pricing moves will have the greatest impact and where the risk of erosion is highest. 

Pricing according to the market situation

Tariffs have a ripple effect across supply chains, cost structures, and ultimately, pricing strategies. While many organizations instinctively seek to pass through increased costs to consumers, this tactic is increasingly fraught in today’s economic climate. In categories where lower-cost, imported goods dominate, tariffs can drive up baseline costs, not only for individual companies, but for entire industries, making it more expensive to produce and sell the same products. 

At the same time, macroeconomic factors such as elevated inflation, fluctuating interest rates and declining consumer confidence are pressuring household budgets. Our analysis suggests that discretionary spending—on categories like travel, gifting, shopping and savings—could decline by 15–25 percent during downturns (Figure 1). Consumers are not just cutting back; they are reprioritizing. This means pricing actions must be grounded in real-time insights into consumer behavior, competitive moves and broader economic indicators, not just cost recovery.

To succeed, companies can model how demand will shift at different price points and plan accordingly. This requires blending category-level data with firm-specific insights and historical elasticity curves. In many cases, traditional assumptions around “price inelasticity” no longer hold, especially for mid-tier or value-positioned brands.

Tailor responses by category and customer segment

Tariff impacts are not evenly distributed, and your pricing strategy should reflect that. A one-size-fits-all approach risks eroding both volume and margin. Instead, leading companies are segmenting their pricing strategies by product category, customer archetype and price tier.

For example, premium and brand-driven products often enjoy more pricing power, as loyal consumers may accept modest increases in exchange for perceived quality or exclusivity. Conversely, highly commoditized or entry-level products are more vulnerable to demand loss if prices rise sharply. In these cases, companies may need to consider alternative tactics, such as value-pack formats, tiered pricing or selective promotions, to maintain share and profitability (Figure 2).

Customer segmentation is equally critical. Consumer responses can range from accepting price increases (essential or brand-driven), delaying/switching (discretionary), to continuing purchasing despite hikes (loyalty, sentiment or limited options). Lower-income consumers are more exposed to economic pressures and may react more sensitively to even small price hikes. Business-to-business buyers (B2B), meanwhile, may have greater tolerance for increases but demand more transparency and justification. Understanding who your customers are, how they behave under pressure, and what alternatives they have is essential for calibrating pricing moves that protect revenue without damaging brand equity.

Scenarios for future-state elasticity curves

Build scenario-driven pricing playbooks

Given the pace and unpredictability of policy changes, pricing agility is no longer optional—it’s a core competitive capability. Companies that build pricing playbooks now could have a distinct advantage when clarity emerges. These playbooks should include clearly defined corridors of price actions (e.g., +15–25 percent), linked to pre-modeled scenarios around demand elasticity, competitor reactions and margin implications.

For instance, if tariffs hit a key product line, what is the volume impact of a 10 percent price hike vs. a 20 percent one? What happens if competitors absorb the costs instead? How does customer behavior shift if disposable income drops further? With the right tools—like our Commercial Workbench—these scenarios can be modeled in days, not weeks, enabling faster, more confident decisions.

This scenario-based approach reduces decision latency and ensures alignment across functions. Pricing, sales, supply chain, and finance teams can work from a shared playbook that balances margin defense with customer retention and market positioning.

Pricing as part of an integrated profit protection strategy

In the face of rising tariffs and mounting macroeconomic pressures, the most resilient companies won’t rely on pricing or cost containment in isolation, but rather on a coordinated strategy that brings these levers together. Sourcing adjustments and cost-reduction initiatives can stabilize the cost base, while intelligent, data-driven pricing ensures that value is preserved—and in some cases, unlocked—across customer segments.

The key is integration. A cross-functional view that combines insights from procurement, finance, commercial and supply chain functions allows businesses to assess trade-offs, model scenarios holistically and execute with agility. By tailoring pricing actions to category dynamics, aligning them with sourcing moves and grounding decisions in robust scenario planning, companies can protect profitability without sacrificing competitiveness. In a volatile and fast-moving environment, this cohesive approach isn’t just effective, it’s essential.