As tariffs harden into economic reality, mid-market companies face a double whammy. By August, nine in 10 goods firms had raised prices and 75% had seen profit margins slip over the past 12 months due to macroeconomic volatility, including tariffs. More than seven in 10 services firms also boosted prices, with over half posting margin declines. Thanks to softening demand, product leaders are discontinuing or redesigning products rather than increasing prices further. Uncertainty over how the Trump administration’s global trade agenda will impact business operations hasn’t subsided, but the majority of product heads across goods and services companies now regard the levies on most countries as a long-term shift in U.S. trade policy. They may not like it, but after months of policy flip-flops and legal challenges, many still ongoing, they’re more certain in their outlooks, and many have already adjusted their operations. Tariffs are the new status quo.
Meanwhile, another macroeconomic challenge is emerging: heightened uncertainty about regulations on everything from wages and data privacy to cybersecurity and artificial intelligence.
The share of goods sector firms reporting high uncertainty about how a host of regulations will affect their businesses spiked to 45% in July 2025 from 15% in August 2024, a threefold jump year over year. More than seven in 10, or 75%, of goods firm executives now report at least a medium level of regulatory uncertainty. At services companies, three in four say the same. Regulatory issues prompting concern over the last 12 months through July 2025 span labor, wage and consumer protection laws, taxes, and data privacy and cybersecurity rules.
With tariffs, a form of trade regulation, seemingly “baked” into corporate outlooks, many middle-market companies now face a one-two punch. The hit on one side: product profit margins pressured by slower demand for goods and services. The hit from the other side: heightened uncertainty about the impact of other regulations on long-term planning and strategic investments. Collectively, firms are feeling macroeconomic volatility and pressure from more than just tariffs.
These are some of the findings detailed in “Profit Slips, Policy Shifts: Product Leaders Navigate the Crossfire.” This edition of The Certainty Project examines how mid-market product executives are navigating tariffs, regulatory uncertainty and softening consumer and business demand as the levies begin to bite. It draws on insights from a survey of 60 heads of product at U.S. companies with annual revenues of $100 million to $1 billion that was conducted from July 21, 2025, to July 30, 2025.
Heads of Product Feel Stuck
Price hikes due to tariffs and other macroeconomic factors have failed to protect profit margins.
Three-quarters of mid-market goods executives surveyed estimate that widespread macroeconomic volatility has cut into profit margins on their lines of business over the last 12 months. At four in 10 goods firms, 12-month product profit margins have slimmed between more than 4% and up to 7%. Services companies are also hurting: Nearly half, or 48%, have seen profit margins dwindle as much. For many firms, these declines may be enough to dent a year’s worth of growth and set up smaller growth going forward.
The drop-off comes as many companies have raised their prices, a move that has deterred cost-conscious consumers. More than seven in 10 mid-sized firms across all sectors and industries, including 90% of goods firms, reported raising prices for consumers and businesses within the last 12 months due to macroeconomic conditions, including tariffs. Four in 10 goods firms have hiked prices by up to 5%, while slightly more have raised prices by up to 10%. The steeper price tags come as 85% of goods firms report paying higher prices to their suppliers. At services firms, 72% have boosted their prices, including one in eight by more than 10%. Service companies tend not to import foreign materials and supplies, but the goods-company clients some of them serve do, turning indirect exposure to tariffs into a front-line hit to their core businesses.
Softer demand is closing the door on further price increases.
Nearly one in seven goods firms increased prices in the last 12 months due to tariffs. End costs can rise for many reasons, including inflation of prices for raw materials, labor, supply chain shortages and increased consumer demand. It’s clear that raising end-user prices has failed to protect product profit margins. But the picture is more nuanced. Adding to the pressure is declining demand, with all companies surveyed reporting weakening demand across both business and consumer segments.
Just over three in four goods firms reported a “slight” decrease in demand from business customers since August 2024. The pullback by individual consumers was nearly identical, at 75%. Services companies reported the same retreat, though on a smaller scale. Nearly four in 10 services firms said demand from business customers had declined slightly, while 42% reported the same trend with individual consumers. These widespread drop-offs leave fewer customers, whether businesses or individuals, willing to absorb higher sticker prices.
For heads of product, these factors have collectively created a potential trap. Price increases are cutting into product profit margins as consumers pull back. Further hikes could exacerbate that dynamic. As a result, many product executives are weighing the few alternatives they have left: product redesigns using less costly materials or processes and discontinuations.
Mid-market executives are discontinuing or redesigning products before further raising prices.
Nearly all mid-market firms have taken some action within the last 12 months in response to tariffs, with goods firms leading the way. All goods sector product executives surveyed reported taking at least one step to mitigate the impact of the levies, underscoring just how pervasive tariff strain has become. The most common moves were product discontinuation and redesign—changes that have reconfigured product lines. These actions have taken priority over further price hikes, highlighting how companies are seeking ways to avoid alienating customers.
It may not necessarily work. One-quarter of goods firms said they had discontinued products directly hit by tariffs. Such cutbacks result in stockouts that remove items from shelves entirely, potentially alienating consumers and eroding trust in a brand. Product redesign followed closely. One in five goods firms said they had reworked products to use alternative materials or production methods. Larger goods companies tend to have more foreign suppliers, and bigger headaches as they adjust their operations. Either way, both steps suggest that mid-market executives now see shrinking or reshaping their product portfolios as safer alternatives to charging consumers and business customers even more. Only 15% of goods firms reported raising prices as their primary action.
Companies have also tried to manage higher production and operating costs by other means. For example, 20% negotiated with their suppliers for better pricing. Relatively few leaned on tariff exemptions or inventory stockpiling, signaling that firms view operational shifts and product reconfiguration as their main defenses.
Tariffs Now Seen as a Long-Term Reality
Most executives now think tariffs are permanent.
Tariffs now appear entrenched in mid-market firm planning. Nearly half of product executives, or 48%, described the U.S.’s “reciprocal” levies on most nations as a long-term policy strategy of the U.S. government, not a temporary disruption. That means tariffs are now becoming part of their long-range operational forecasting. Another 45% called them a mix of short- and long-term strategies. Just 7% still frame them as a short-term tactic, even amid Trump’s frequent changes to negotiating positions with major trading partners.
Goods firms appear slightly more optimistic. Just over one in three product heads at goods firms see tariffs as permanent, compared to 52% in services. Services firms, less reliant on imports but still impacted by the trade agenda because many of the companies they work for are importers, appear more willing to see tariffs as a lasting feature.
A firm’s level of uncertainty affects whether it believes tariffs will be permanent.
How uncertain a company is about its business prospects in general correlates with its view of how long tariffs will last. Among product executives with a low level of operational uncertainty, meaning they have more confidence in their business’s future, 62% said tariffs are permanent. None of these executives think the levies are a short-term policy tactic. Larger goods companies tend to have more foreign suppliers, and bigger headaches as they adjust their operations.
By contrast, half of the less-confident executives with a high level of operational uncertainty think tariffs are a long-term policy shift. Notably, one in five executives in this group regard tariffs as a short-term change. The more uncertain a company is about its operating environment, the more likely it is not to take tariffs as a long-term change seriously. Conversely, the more clear-eyed a company is about its future, the more likely it is to see the Trump administration’s trade agenda as a strategic policy shift aimed at the long horizon.
In sum, very few product executives overall—7%—regard tariffs as a short-term shift. The rest are roughly evenly split between seeing them as either a long-term disruption or a mix of long-term and short-term. Taken together, the data suggest that tariffs are now a structural operational factor for most firms, shaping sourcing, operations and pricing strategies.
The New Spoiler: Heightened Regulatory Uncertainty
As if the disruption fueled by global tariffs weren’t enough, mid-market companies are now waking up to the uncertainty posed by a host of regulations other than trade. But what is most top of mind depends on which sector they’re in.
Regulatory uncertainty refers to ambiguities and unknowns that appear when rules are in development, under legal challenge, unevenly applied or likely to change. That climate makes it tougher for businesses to carry out forecasting, plan investments and manage compliance. Smaller businesses typically allocate fewer resources to those functions, making them disproportionately likely to experience adverse effects. Academic research finds that surges in policy uncertainty are linked with drops in overall business investment, slower employment growth, delayed innovation and muted economic output.
For goods firms, tax and labor rules dominate the list of regulatory concerns. Half of the executives surveyed cited concerns about tax laws in the past 12 months. Those worries may now be largely gone, thanks to the “One Big Beautiful Bill Act” signed into law on July 4, weeks after our survey closed. The pro-business law expanded deductions for domestic R&D expenses, reinstated and expanded full depreciation for an asset’s cost in the year it is purchased and placed into service, made permanent a 20% deduction for owners of passthrough businesses run through limited liability companies, partnerships and the like, and expanded tax credits for businesses to help employees.
But other regulatory concerns persist. With profit margins under pressure due to tariffs, the added concerns fuel new layers of business uncertainty. The Trump administration’s crackdown on undocumented immigrants has further pressured tight labor markets in agriculture, construction and hospitality. More than 20 states, including Arizona, California and Florida, have enacted minimum wage laws this year. A bipartisan bill to raise the minimum wage to $15 an hour come 2026 was introduced in June.
Regulatory uncertainty correlates with shrinking profit margins.
Against that backdrop, more than half, or 55%, of mid-market goods firms surveyed pointed to wage and labor regulations, both federal and state, as major risks. Any increases in employee and labor costs would cut directly into operating costs, just as tariffs have already pressured product margins. Four in 10 goods firms also point to regulatory uncertainty surrounding consumer protection laws. The breadth of regulatory issues captures just how exposed goods producers are to both policy and global trade friction.
Services firms have different regulatory concerns. Their most cited worry is AI oversight. Forty percent now call AI regulation, for which the United States hasn’t yet developed comprehensive rules, a leading source of uncertainty, up from 16% a year ago. The concern comes as many companies have accelerated their use of AI to cope with tariff-related disruptions to their operations. One in three also highlight evolving data privacy rules, while another third cite regulations governing worker benefits. These concerns reflect the growing role of AI and digital governance in service firms’ operational outlooks. Six in 10 services firms say that regulatory uncertainty is creating long-term planning difficulties, compared to half of goods firms.
Both goods and services firms also report delaying investment decisions and/or spending more on compliance and risk management, as well as leveraging supply chain tools. But the goods-versus-services divergence over AI highlights an emerging fault line. Both sectors carry the weight of tariff policies, with goods firms on the front line. But services firms are disproportionately wrestling with evolving oversight of data and automation.
Firms facing either high or moderate regulatory uncertainty are the most exposed to revenue hits: 73% in that group reported shrinking profit margins on product lines, compared with just 20% of low-uncertainty peers. This suggests that policy unpredictability and supply shocks have started to reinforce each other. When tariffs emerged, many firms simply passed along costs, but weak demand and shifting rules are now undercutting those efforts and heightening exposure to the impact of regulatory uncertainty.
Regulation turns from background noise to structural headwind.
Regulatory uncertainty has become a defining headwind shaping product and pricing decisions. While the comparison isn’t exact, three in four product executives now report at least mid-level regulatory uncertainty, compared to 56% of CFOs who reported the same a year ago.
The rise in high-uncertainty responses illustrates the shift most clearly. In August 2024, just 23% of executives cited high regulatory uncertainty. By July 2025, that figure held steady at 25% across the full sample. Yet this aggregate conceals sharper spikes in key segments. Among goods firms, the share citing high regulatory uncertainty nearly quadrupled to 45% this summer from 12% last year. The upwards swing signals how tariffs, tax laws and labor rules have redefined operating assumptions for product leaders.
By contrast, the share of services firms citing high regulatory uncertainty has fallen considerably in the last 12 months.
Executives reporting high-level uncertainty on this front fell to 16% from 28% year-over-year. Now, 60% of heads of product in the sector report mid-level regulatory uncertainty—a 28 percentage point increase over the period.
Executives in firms facing greater macroeconomic volatility were nearly four times more likely to cite high regulatory uncertainty than peers with steadier operations. Likewise, 44% of those in high-uncertainty environments reported strong regulatory strain, compared with just 10% in low-uncertainty firms. This link shows how regulatory uncertainty magnifies operational instability, creating a feedback loop in which pressured operations and policy risk reinforce each other.
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Methodology
This edition of the 2025 Certainty Project, “Profit Slips, Policy Shifts: Product Leaders Navigate the Crossfire,” is based on a survey conducted from July 21, 2025, through July 30, 2025. It examines how mid-market product executives respond to regulatory uncertainty, including tariffs and emerging AI rules, amid weakening demand and shrinking margins. The survey collected responses from 60 heads of product at U.S. companies with annual revenues between $100 million and $1 billion, spanning both goods and services sectors.
