Ongoing trade tensions resulting from the Trump Administration’s stance on global tariffs continue to rattle companies and markets. Recent developments are widely seen as driving a deeper, long-term shift in global trade, overhauling decades of free trade agreements, and leaving corporates to mull how best to tackle the financial burden.
According to an early March poll conducted by Gartner, a sharp divide is emerging in the strategies devised to achieve that. The poll said the most recent round of tariffs imposed by the US on goods from China, Mexico and Canada, which took effect on March 4, created “substantial uncertainty” regarding the appropriate corporate response.
When asked how they are strategizing around trade disruptions, most chief financial officers said they are planning to pass through either minimal or almost all tariff impacts, with few organizations in the middle. Among the CFOs that plan to pass along more than 10% of the effects, the average pass-through to customers is 73% of the tariff increase.
“While a majority of CFOs are not expecting their organizations to absorb most tariff-related costs, some do, likely indicating varying levels of price sensitivity among customers and suppliers for specific organizations,” said Alexander Bant, Chief of Research in the Gartner Finance practice.
The poll, conducted among 200 CFOs from a cross-industry group of organizations with global operations, reveals that most CFOs do not plan to absorb any tariff increase in their cost base, with 59% expecting to absorb less than 10% of the tariff impact.
When asked about cost-sharing with suppliers, 54% of CFOs expect minimal (0%-10%) cost-sharing opportunities, and just 15% foresee sharing more than half of the tariff impact. To help address tariff increases, companies are updating risk assessments, improve forecasting and scenario planning, and adjust product pricing strategies. Many are also working with supply chain functions to explore alternative sourcing strategies for components and raw materials, as well as renegotiating supplier contracts. In January, World Economic Forum economists predicted that growing global fragmentation would drive up prices for consumers and costs for businesses—a forecast that has already proven accurate. They also estimated that this trend could persist for at least three years.
