Tariffs Dominate Earnings Calls: Firms Brace for Fallout

As the new year unfolds, companies are grappling with an old challenge: tariffs. The specter of increased tariffs, particularly those targeting China, Mexico, and Canada, has dominated earnings calls, with firms bracing for potential disruptions and cost increases. In this article, we delve into the concerns expressed by companies, the industries most vulnerable to tariffs, and the strategies they employ to mitigate risks.

Tariffs: A Growing Concern

The share of global business leaders citing changes in trade policy and relationships as the biggest risk to economic growth over the next 12 months more than doubled between September and December 2024. Only geopolitical instability and conflict ranked higher (Zero100, 2025). This growing concern is reflected in the increasing frequency of tariff discussions on earnings calls. In the first half of 2024, 138 Fortune 500 companies (representing 28% of the Fortune 500) discussed the impact of tariffs, with that number rising to 158 companies (40% of recorded calls) by June (U.S. Chamber of Commerce, August 29, 2019).



Industries Most Vulnerable to Tariffs

Retail and manufacturing companies are particularly vulnerable to tariffs, with specialty retail, automotive, chemicals, and apparel and footwear firms being the most vocal about their concerns. These industries are worried about financial pressure, supply chain disruption, uncertainty, delayed transactions, and pass-through costs to consumers (U.S. Chamber of Commerce, August 29, 2019).

For example, Tesla's CFO, Vaibhav Taneja, stated on the company's earnings call that tariffs could impact the company's profitability, as they are still reliant on parts from across the world for all their businesses (CNBC, January 29, 2025). Similarly, Canada Goose, a retailer of high-end outerwear, is vulnerable to tariffs on Canadian goods, which could disrupt its supply chain and potentially increase prices.

Strategies to Mitigate Tariff Risks

Companies have been adapting their supply chain strategies to mitigate the risks associated with tariffs. Some effective strategies include:

1. Diversifying suppliers and sourcing locations: Companies have been diversifying their supplier base and sourcing locations to reduce their exposure to tariffs. This helps them avoid or minimize tariffs by sourcing products from countries that are not subject to tariffs or have lower tariff rates.
2. Relocating production facilities: Some companies have chosen to relocate their production facilities to countries that are not subject to tariffs or have lower tariff rates. This strategy helps them avoid tariffs and maintain their competitiveness in the global market.
3. Stockpiling inventory: Companies have been stockpiling inventory from suppliers in at-risk countries as a short-term and lower-cost option to avoid tariffs. However, this strategy may not be widely adopted due to the potential for increased storage and holding costs.
4. Hiring lobbyists and engaging in political advocacy: Companies have been hiring lobbyists to engage with policymakers and influence trade policies. This strategy aims to persuade politicians and the president's inner circle against introducing new tariffs or, if they do, to grant exemptions.
5. Investing in supply chain resilience: Companies have been investing in supply chain resilience strategies to minimize the cost-inflation pain if new tariffs are implemented. This includes building a robust plan to mitigate the impact of tariffs and ensuring that supply chains are agile and adaptable to changes in the trade environment.

In conclusion, tariffs remain a significant concern for companies, particularly those in the retail and manufacturing sectors. As the new year unfolds, firms are bracing for potential disruptions and cost increases, adopting various strategies to mitigate the risks associated with tariffs. By staying informed and adapting their supply chain strategies, companies can better navigate the uncertainties and challenges posed by tariffs.