Services Companies Shrug Off Tariffs

Consider the stress of middle-market companies like retailer Warby Parker, which sources a lot of its eyewear from China, one of America’s largest trading partners and a major focus of the United States’ global trade war. U.S. tariffs on nearly all foreign countries are making the eyeglasses it sells online and in more than 300 brick-and-mortar stores across the country more expensive, a pocketbook demand that consumers may not see eye to eye with. They’re also fueling unanswered questions about what the future holds, especially as the U.S. engages in trade talks with China following constantly shifting levy pronouncements.

Middle-market companies like Warby Parker, meaning those with annual revenues between $100 million and $1 billion, obviously aren’t happy about the uncertainty that the ever-shifting tariffs agenda has created. But they’re getting used to feeling distressed. Exactly 1 in 3 such companies reported feeling high uncertainty about the tariff-inflected business environment in May, the same number as in April, according to a forthcoming PYMNTS Intelligence report. Those companies typically work with large numbers of international suppliers, leaving them exposed to the complexity of rejiggering complex supply chains across multiple countries.

By contrast, just 19% of services companies reported that same intense angst last month, nearly half the 37% in April. Services firms are now the least stressed out they’ve been since February 2024, when PYMNTS Intelligence began tracking the data.

But just because a company isn’t “highly uncertain” about the business landscape doesn’t mean it’s not stressed to some degree.

For middle-market goods companies, splits between high, medium and low uncertainty are now even, with 33% of surveyed CFOs putting their companies into one of those three categories.

By contrast, the divide in outlooks at services firms is more varied. Half reported being medium-stressed last month, up from 37% the month prior. Those with a low level of uncertainty nudged up in May to 31% from 27% in April. The differences between goods and services companies comes even as many of the latter rely on goods companies for their bread-and-butter business, leaving them indirectly but nonetheless exposed to the effects of higher costs for imported goods and raw materials.

Here’s where things also get interesting. The majority, 85%, of executives at both goods and services companies that say they’re dealing with high levels of operational uncertainty said in May that the impact of tariffs would be mostly or completely negative on their companies and the broader business landscape. That more than double the level in April. How are 2 in 3 in that position coping? By shifting their focus to short-term operational fixes and pivoting away from longer-term technology initiatives. Half of services companies in that position are doing the same.

Read the report to learn more about the concrete moves middle-market goods and services companies are making to cope with changes in the global trade order.

Key takeaways:

Tale of two sectors: Goods firms are getting used — for now — to their direct exposure to supply chain disruptions and raw material costs, with 1 in 3 highly uncertain about the business environment in May, the same as in April.

Only 1 in 5 services companies, which don’t typically face direct exposure to tariffs because they don’t import raw materials and goods, are now highly uncertain about the impact of the levies on their businesses, roughly half the level in May.

High anxiety: Businesses already operating under high levels of uncertainty are overwhelmingly pessimistic about the financial implications of potential tariffs, with 85% anticipating negative or completely negative outcomes in May, double April’s level.

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