Pricing and Tariffs Explained: What Businesses Need to Know

Global tariff policy is shifting fast in 2025, creating major uncertainty for businesses. On April 2, the U.S. announced a universal 10% tariff on all imports, plus steep “reciprocal” duties—China now faces 54%, and the EU and Japan 20–24%. A 25% tariff on imported cars also took effect April 3. These follow earlier Q1 moves like February’s 10% China tariff and a 10% Canadian energy duty.

Each headline like this sends ripples through global supply chains, forcing manufacturers and distributors to scramble. With geopolitical tensions high, businesses are bracing for even more changes. A recent Zilliant webinar, Pricing Pulse: Inflation 2025 - Buckle Up for the Next Price Surge, warned that tariffs and protectionist policies could spur another wave of price increases in 2025, contributing to “round two” of inflation. In an environment where duties can rise, fall, or be reconfigured overnight, pricing professionals must navigate the volatility with care. 

This blog will break down what tariffs are, how they impact B2B pricing and margins, and strategies to manage tariffs effectively. Keep reading for a clear explanation of tariffs and practical tips so you can protect your business’s profitability even as tariff uncertainty continues.

What Exactly Are Tariffs, and How Do They Work?

At its core, a tariff is a tax on goods as they cross national borders – usually a tax on imports, but sometimes on exports. Governments impose tariffs to raise the cost of foreign products in order to protect domestic industries or influence trade balances. In practice, while the tariff is levied at the border (paid initially by the importer of record), the cost ultimately gets passed down the supply chain. Importers typically add the tariff cost into the price they charge the next buyer—whether that’s a distributor, manufacturer, or end-customer—meaning business customers and consumers ultimately bear the cost in the form of higher prices.

Tariff policies can be complex. Each tariff usually targets specific products defined by Harmonized Tariff Schedule (HTS) codes, which are standardized codes that classify goods by type. A tariff will also specify the country of origin it applies to (e.g. “10% on steel from Country X”), the rate (often a percentage of the goods’ value), and any exclusions—products that are exempt. Importantly, the list of exempted products often changes monthly as governments adjust policy. In other words, a product might be subject to the tariff one month and exempt the next, or vice versa, depending on evolving trade negotiations and exemption lists.

For businesses, this ever-shifting landscape creates a significant administrative burden. Nearly every manufacturer or distributor that sources globally feels the impact of tariffs in some way, and many have had to dedicate extra resources solely to tariff management. It’s not uncommon for companies to assign one or more full-time employees to track tariff code changes, file the proper paperwork, and ensure compliance with the latest rules. This is tedious but critical work – any mistake (like misclassifying a product’s HTS code or missing a new tariff update) can result in hefty fines or unexpected margin erosion if the company ends up paying more duty than anticipated. Some B2B firms have pulled pricing team members off their regular duties to manage tariffs, as keeping up with monthly HTS code changes can turn into a full-time job. All of this effort goes into answering a basic but essential question: Which of our products are affected by tariffs this month, and by how much?

The Impact of Tariffs on B2B Pricing, Costs and Margins

When tariffs hit, they directly raise the cost of affected imported goods, and that increase in cost works its way through the supply chain. 

Profit Margin Pressure

For a B2B company a tariff can suddenly make your raw materials, components, or finished products more expensive overnight. This puts immediate pressure on profit margins. Companies are then faced with a tough decision on pricing strategy: How do we respond to this higher cost? In general, businesses have a few options, none of them easy:

• Pass the cost increase on in full to customers by raising prices commensurately. This protects your margin but risks reducing sales volume if customers balk at the higher prices. It requires confidence and clear communication from your sales teams to justify the price change, so customers understand it’s driven by government policy, not greed.
• Pass on only part of the cost (absorb the rest of the increase yourself). This can preserve customer goodwill and volume but erodes your margins. Essentially, you’re taking a financial hit to keep prices somewhat competitive.
• Find an alternative supply not subject to the tariff (e.g. source from a different country or supplier). This can avoid the tariff cost, but it’s often a slow, disruptive process with its own expenses, such as new supplier contracts, qualifying new materials, potential supply chain delays, etc. It’s not a quick fix, especially if the tariff took effect immediately and you have orders to fill in the meantime.

Often, companies will use a mix of these approaches depending on the situation. There’s no one-size-fits-all answer, because it depends on your market and how price-sensitive your customers are. If your competitors are all raising prices due to the tariff, passing the cost through might be feasible. But if the market is tight, you might opt to eat some of the cost increase to avoid losing business. This is where careful analysis is needed (we’ll discuss strategies shortly).

Multi-Stage Supply Chains Disruptions

Another complicating factor is that tariffs can impact multi-stage supply chains in non-obvious ways. If you manufacture products with many components (a Bill of Materials), a tariff might apply to only one of those components. The net effect on your finished good’s cost is proportional to that component’s share. 

For example, if a certain raw material now has a 25% tariff but it makes up, say, 30% of your product’s total cost, the product’s cost doesn’t rise 25% – it rises about 7.5% (25% of the 30% portion). You then have to decide how much of that 7.5% increase to pass on in your pricing. This sounds straightforward in theory, but in practice determining the exact cost impact across hundreds or thousands of products, each with different compositions, is a massive analytical challenge. 

We’ve illustrated this complexity in our “Talking Tariffs” blog series: many deals have tariff-related cost hikes only on a portion of the components, making it tricky to calculate the right price increase for the end product. It requires granular cost tracking and sometimes even customer education (your customers might not realize that only part of a product is affected by the tariff).

All told, managing tariffs is layered on top of all the usual pricing work B2B companies do (quoting prices, managing contracts, updating lists, etc.). It can quickly become overwhelming –more bluntly put, it’s “a nightmare.” The constant cost fluctuations and the administrative overhead of tariffs can muddy the waters of any coherent pricing strategy. If not handled well, tariffs can lead to margin leakage (if costs go up but prices don’t follow sufficiently) or competitive missteps (if you raise prices too much and lose business, or too little and hurt profits). In the worst case, companies might delay necessary price adjustments simply because it’s too complex to figure out, which results in real money lost every day the new tariffs are in effect.

Strategies for Navigating Tariffs and Protecting Your Margins

Tariffs aren’t going away anytime soon – and neither is the uncertainty that comes with them. However, there are proactive pricing strategies and best practices that can help manufacturers and distributors cushion the impact, manage risk, and even find opportunity in the chaos. Here are some key strategies to consider:

Be Intentional with Cost Pass-Through

Don’t take a blanket approach to raising prices; instead, adjust prices thoughtfully based on customer and product sensitivity. In a perfect world, you’d pass 100% of any tariff-induced cost increase straight to your customers to maintain your margin. In reality, your ability to do that will vary. For some price-sensitive segments you might only pass along a portion of the increase, while for less sensitive markets you might pass along the full amount or even slightly more if the market allows. 

The key is to analyze price elasticity and competitive dynamics by segment. Which products or customers will tolerate a price hike without reducing volume, and which won’t? Once you determine the optimal pass-through rate (whether it’s 50%, 80%, 100%, etc.), you need the tools to execute it quickly. This is where having a flexible price management system pays off: it allows you to update prices at scale, targeting specific product categories or customer groups, in one central place. Instead of scrambling through spreadsheets, a modern pricing tool lets you apply a tariff-driven increase uniformly and push updated prices out to all your channels with transparency. That means your sales reps, eCommerce site, and quoting systems all reflect the changes, along with clear communication of what portion of the price is due to tariffs. Being intentional and fast with cost pass-through can actually turn tariffs into an opportunity to fine-tune your pricing strategy rather than just a threat to react to.

Provide Data-Driven Guidance to Sales (and Enforce It)

During periods of tariff volatility, it’s more important than ever to keep your pricing strategy unified across the organization. Your sales teams are on the front lines with customers, and they need to handle tariff-related price changes confidently and consistently. One best practice is to use price optimization tools to generate market-aligned price recommendations for each selling situation, and present those to reps as a range or target price when they quote. This helps salespeople understand what the “right” price is (accounting for the higher costs) and gives them a justified number to share with customers, rather than guessing or, worse, preemptively discounting out of fear. By providing data-driven price guidance you maintain control and avoid a free-for-all where reps might undercut pricing out of panic. 

Of course, there will be exceptions and special cases; for that, implement a clear deal review/approval workflow. A good deal management process (often supported by software) lets reps request an exception (say, a discount to appease a large customer) which management can evaluate and approve or adjust. This ensures any deviation from plan is tracked and deliberate. We advise that having a deal management tool in place provides “smooth and actionable visibility” into override requests and their impact. In short, arm your sales team with knowledge and guardrails: explain the why behind price changes (tariffs), give them optimized price points to use, and require approval for unplanned discounting. This way, you can hold the line on margins without alienating customers.

Leverage Analytics to Stay Agile

Tariffs create winners and losers in your product portfolio—some SKUs or segments will be hit hard, others not at all. Use analytics to identify where the impact is greatest. For example, which product categories are seeing the biggest cost increases from current tariffs? Which customer segments buy those products most heavily? By using a visual analytics or business intelligence tool, you can zero in on the pockets of your business that are most affected. Perhaps you’ll find that a certain product family that’s core to a few major accounts has become 15% more expensive due to tariffs – that’s a red flag to address with targeted pricing or customer communication. On the other hand, maybe some products aren’t impacted by tariffs at all – could there be an opportunity to emphasize or substitute those in the sales mix to preserve volume? The idea is to clearly understand the landscape: which items or customers are high-risk for margin loss, and which are relatively safe. Armed with these insights, you can make smarter pricing moves to balance profitability and customer retention. 

Data can also help you monitor how well your tariff surcharges or adjustments are sticking. If volume is plummeting in one category after a price hike, you may need to revisit your strategy there. In short, stay data-driven and nimble. Tariff impacts can change month-to-month, so a robust analytics capability is your early warning system and steering wheel.

Don’t Go It Alone – Use the Right Tools and Partners

Given the complexity of tariff management, technology is your friend. Many B2B firms are turning to specialized pricing software (like price management and optimization tools) to automate a lot of the heavy lifting – from tracking cost changes to updating thousands of prices, and even optimizing those prices based on algorithms. The benefits of these tools can be game-changing: a centralized system to store all your product and tariff data, instant visibility into which prices include a tariff component, and the ability to recalculate and roll out price changes in minutes rather than weeks. 

Software alone isn’t a silver bullet. It’s crucial to choose the right partner to implement and support these solutions. At Zilliant we understand that pricing is not one-size-fits-all. Every industry and company have unique needs, so you want a partner with deep industry expertise who will stay engaged beyond just installing the software. Look for a provider (and consultants) who understand distribution or manufacturing, who can configure the tools to handle tariff-specific scenarios (like excluding certain customers or handling rebates on tariffed items), and who will work with you to refine strategies as conditions evolve. In times of upheaval, your pricing team might be stretched thin just managing day-to-day fires, so having a trusted partner and modern tools can relieve a lot of the burden. The ideal combination is technology + expertise: a pricing system that automates manual tasks and provides insights, coupled with experts who help you interpret the data and strategize. This ensures you’re not missing opportunities or risks that a busy internal team might overlook. In summary, invest in capabilities that make tariff management easier – it will pay off every time there’s a new trade twist. 

Plan for Tariff Changes (Even Their Removal)

Finally, keep one eye on the horizon. Tariffs that exist today might be gone tomorrow – and that transition can be as disruptive as their introduction. It may sound paradoxical, but the end of a tariff can also be a threat to your pricing and margins if you aren’t prepared. Imagine you’ve been paying a tariff on a key imported component for a year, and you’ve built that into your costs (and prices). If suddenly that tariff is lifted, you could be left with high-cost inventory that was acquired under the tariff regime. Customers will know the tariff went away and will expect prices to come down accordingly. Any stock you have on hand that includes the “old” tariff cost is now overpriced in the market – what Zilliant poignantly called “zombified inventory”, because it’s carrying costs from the dead tariff era. The risk is you’ll either take a margin hit (if you discount those items to move them) or a volume hit (if customers refuse to buy at the older high price) – either way, margin erosion looms. 

To avoid being “caught holding the bag when tariffs are repealed,” businesses should strategize well before tariffs expire. If there are hints that a tariff might be rolled back, consider gradually adjusting your prices or clearing inventory in advance so you’re not stuck with a warehouse full of overpriced goods. Coordinate with your procurement and supply chain teams too: you might slow down purchasing of tariff-affected items as a sunset approaches and align with sales leadership on how to communicate any price decreases or policy changes to customers. Essentially, have a game plan for the post-tariff world. By scenario-planning these decisions, you can transition smoothly and even use the end of tariffs as a moment to build goodwill with customers. 

The main point: tariff volatility is here to stay, whether it’s new tariffs being imposed or old tariffs being removed. Pricing leaders must incorporate that into long-term planning, not just react in the moment.

Conclusion: Staying Agile Amid Tariff Uncertainty

Even as some economic pressures (like general inflation) show signs of moderating in 2025, tariffs remain a wildcard that pricing professionals cannot ignore. Trade policies can shift quickly, and each change can send cost shocks through your business. The silver lining is that with the right approach, you can manage tariff volatility instead of being victim to it. 

As Zilliant’s experts have noted, it’s critical to maintain vigilant pricing strategies and preparation for unforeseen pressures, especially with new political administrations and policies coming into play. That means keeping leadership informed, staying on top of external developments, and equipping your team with the data and tools to pivot fast. 

By understanding what tariffs are and how they operate, monitoring their impact on your cost structure, and employing smart pricing and margin management strategies, you can navigate this tumultuous tariff environment with confidence. Tariffs will continue to be a pricing concern, but with proactive planning and the right pricing tactics, B2B companies in manufacturing and distribution can weather the storm – and even find ways to thrive despite the turbulence. In an uncertain global trade climate, agility and informed strategy are a pricing team’s best armor.

Concerned about tariff uncertainty? Contact us today to learn how Zilliant can equip you with the right pricing tools to protect your business.