Businesses Face Hard Decisions as Tariffs Drive Up Costs

After a summer in “wait-and-see” mode, American businesses have begun making difficult, tariff-related decisions.

That’s according to a report Saturday (Aug. 9) by the New York Times (NYT), which illustrates the situation with the example of Barry Barr, owner of outdoor apparel company KAVU True Outdoor Wear. Following months of spending cuts, the latest round of tariffs made him realize he would have to hike prices and lay off workers in the coming months.

“There will be some tough decisions to be made for sure,” he said. “You have to put your big-kid pants on and do it.”

Barr’s approach, the NYT said, is indicative of a strategic shift happening at companies around the U.S.

“We kind of saw this summer as a holding period for a lot of firms,” Courtney Shupert, an economist at MacroPolicy Perspectives, told the NYT. “Firms were saying, ‘Let’s wait and see if demand is going to be stronger or weaker.’”

In the case of Barr’s business, the tariffs tacked on a 46% levy on goods from Vietnam and 26% on those from India. The company at first chose to absorb the baseline 10% tariff, but had to consider other solutions as the situation persisted.

“There’s absolutely no way I can make a profit this year absorbing all these tariffs,” Barr said. “It’s bigger than any tax bill I’ve had to pay.”

Forthcoming research by PYMNTS Intelligence shows that American business executives are no longer holding out hope that the White House’s world trade regime will soon change.

More than half of all senior product executives at U.S. firms with up to $1 billion in annual revenues view the tariffs as a long-term shift by the U.S. government. And nearly one in every two see the “reciprocal” duties as embodying a strategic policy shift that is part long-term, part short-term.

“Only 7% regard tariffs as a flash-in-the-plan negotiating tactic that will pass. For the majority of middle-market companies, higher costs for imports are now baked into their mindsets — and, likely, their future operations,” PYMNTS wrote last week.

Additional research from PYMNTS Intelligence shows that a full 100% of the largest companies were preparing themselves for negative impacts from the tariffs, such as costs associated with reorienting supply chains, shortages or delays in acquiring products and difficulties with exports. These large firms also expect potential layoffs or a slowdown in hiring.