Consider the state of mind of 200,000 mid-sized companies that account for one-third of private sector GDP and employment in the United States. These middle-market firms, which span construction, retail trade, healthcare and manufacturing, among other industries, have seen their confidence in handling tariffs collapse.
For goods companies, the share of product leaders feeling “highly certain” they can cope with the levies crashed to 5% in April from 37% in March and 40% in February, according to a forthcoming exclusive report from PYMNTS Intelligence.
With annual revenues between $10 million and $1 billion, mid-sized goods and retail companies are scrapping or delaying product launches, ripping up long-term strategy playbooks, pivoting to focus on short-term operations and seeking new ways to source overseas supplies. Nearly 4 in 10 goods firms have already postponed, canceled or reworked product launches or market strategies due to pressure from tariffs, per the report.
While the firms represent 3% of all U.S. companies, according to the National Center for the Middle Market research center at The Ohio State University, they employ roughly 48 million Americans, giving them outsized influence and a role as a key barometer of the economy.
The White House’s levies against nearly all countries including China and the European Union go through near-weekly changes, with new tariffs announced, then paused, delayed or rolled back. For the first time, no product executives at middle-market goods firms said they expect a mostly or completely positive financial impact from tariffs, a decline from 35% in February, according to the forthcoming report. Instead, more than half of product executives in the goods segment anticipate a mostly or completely negative financial outcome.
Will companies have to raise their prices, turning off consumers? It’s challenging for a business to predict supply and demand, but the policy ping-ponging is making things worse.
Short-Term Fixes
Tariffs are changing how companies plan, develop and produce products, from consumer electronics to clothing. About 1 in 4 product leaders reported switching their product designs, pricing or go-to-market strategies, according to the report, which surveyed 60 heads of product, chief product officers and vice presidents of product at middle-market goods and retail firms in the first half of April.
Another 14% delayed or canceled product development outright. The pivots signal disruption to companies’ strategic growth initiatives and near-term operational stability. Every executive surveyed reported at least some impact from tariffs, per the report.
Much of this dislocation is directly tied to rising costs for goods and raw materials from foreign suppliers, as well as sourcing constraints, with smaller firms less able to easily switch their supply chains and negotiate bulk discounts. Over half of goods firms reported either having to modify their existing supply chains or absorb price hikes on imported materials and goods.
The report found that 8 in 10 product leaders said tariffs have forced them to redirect their focus to short-term fixes over long-term strategies.
AI to the Rescue?
Amid the turmoil, some companies are accelerating their adoption of artificial intelligence to sort out their imports of foreign materials, supplies, components and goods. Nearly 2 in 3 goods and retail firms are accelerating their adoption of AI to optimize their supply chains, reduce labor costs, offset pricing pressures, seek out more viable supply chains, find lower-priced inputs and find more reliability and efficiency in their foreign supply, the report revealed. For businesses, tariffs are a real-life field experiment.
However, while the technology is usually touted as transformational, firms are deploying it as a defensive tactic rather than as a long-term strategy to remake their operations, according to the report. Fewer than half of product leaders are accelerating their use of AI specifically to offset cost increases directly, indicating that many firms are still absorbing margin pressure, rather than automating around it.
In any case, AI costs money, and the report revealed that the uncertainty caused by tariffs has constrained the ability of roughly 3 in 10 firms to fund AI and automation projects at all.
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