When the topic of tariffs comes up, the conversation often centers on economics, politics, and international trade relationships. We’ll leave those discussions to the experts while we look at tariffs through a customer experience lens. The impacts reach far beyond price increases.
Let’s start with the basics. Tariffs are essentially taxes on imported goods. While they’re intended to protect domestic industries by making foreign products more expensive, the reality is that much of that cost flows downstream to the end consumer.
Here’s a simplified example of how tariffs work in practice:
Without tariffs, a foreign company could sell widgets to a U.S. retailer for $1,000, and the retailer could then sell them to consumers for $1,100, making $100 in profit.
When a 10 percent tariff is added, the U.S. retailer likely tries to negotiate a reduced cost from the supplier in order to share the burden. Let’s say the supplier drops their price by $10; the U.S. retailer now pays $990 to the supplier plus a $99 tariff to the government, for a total of $1,089.
To maintain their profit margins, the retailer would have raise the price to $1,189. But they don’t; they only raise it to $1,179 so that they too share some of the burden.
The result? Consumers end up paying $79 more – a little more than 7 percent – and they absorb about 80 percent of the tariff cost (the other 20 percent is split between the supplier and the retailer).
This isn’t theoretical; when a 20 percent tariff was placed on washing machines in 2018, prices spiked for consumers, according to research by two University of Chicago professors and a Federal Reserve Board Economist. In that case, the tariffs were placed globally, which was a change from implementing them on one or more particular countries.
The University of Chicago, in a writeup about the research, explained the impact this way:
Each time the U.S. would take aim at a particular country, manufacturers would quickly move their production facilities to another country and resume business. The positive unintended consequence of this ‘country hopping’ was that prices actually declined as manufacturers improved their efficiency with each move. That changed when global tariffs on washing machines were applied in early 2018. Prices of washing machines climbed about 12 percent for U.S. consumers as foreign manufacturers could no longer shift production to other countries.
The customer impact can go far beyond just paying more. Let’s explore how tariffs affect the entire customer experience.
When tariffs hit, companies scramble to adjust their supply chains. This might mean finding new suppliers, which takes time and can lead to product shortages or
inconsistent quality.
Customers walking into their favorite stores looking for specific products may find them out of stock – or worse, discontinued. These disruptions damage customer trust and confidence in brands they’ve been loyal to for years.
When retailers absorb even a portion of tariff costs (like in our example where the retailer took on 10 percent of the tariff), they need to find ways to make up for that reduced profit margin. This often means cutting corners elsewhere:
These changes might seem small individually, but together they create a noticeably diminished customer experience.
Perhaps the most overlooked impact is on the human interactions that make up so much of the customer experience. If tariffs force companies to implement hiring freezes or reduce staff, the remaining employees face increased pressure and workloads.
We all know how employee experience can affect customer experience. Overworked, stressed employees simply can’t deliver the same level of service as those who have adequate resources and support. The friendly, helpful face of the brand becomes strained, and customers feel it immediately.
When companies are focused on managing increased costs from tariffs, resources get diverted from innovation and experience improvements. The funds that might have gone to developing new products, enhancing digital interfaces, or training staff on better service techniques instead go toward simply maintaining the status quo.
This stagnation might not be immediately obvious to customers, but over time, they’ll notice that their favorite brands aren’t evolving or improving the way they once did.
During tariff-induced disruptions (or really any crisis), transparent communication becomes crucial for maintaining customer relationships. Businesses that openly explain price increases or product changes due to tariffs can preserve customer trust during challenging times.
This transparency should extend beyond simple notifications. Companies can share their impact-reduction efforts, timelines for changes, and market factors. Smart retailers can highlight cost-saving measures like efficiency improvements, margin cuts, or supply chain adjustments.
Employee training becomes critical here, ensuring frontline staff can articulate consistent, accurate messages about tariff impacts. Employees who can explain
changes confidently and knowledgeably can turn potentially negative customer interactions into opportunities for building deeper connections.
Retail giant Walmart demonstrated effective tariff communication during previous trade tensions with China. During the 2018-2019 U.S.-China trade tensions, Walmart acknowledged that tariffs on Chinese imports would likely lead to higher prices for consumers. The company noted efforts to minimize price increases by leveraging supply chain efficiencies and negotiating with suppliers.
History has shown that both businesses and consumers are remarkably adaptable. From September 11th to multiple recessions to COVID-19, companies have found ways to navigate difficult circumstances while still meeting customer needs.
Smart companies see tariffs not just as obstacles but as opportunities to reevaluate
their entire customer journey. They might:
From a customer experience perspective, external forces like tariffs can significantly shape the relationship between companies and their customers. While tariffs certainly present challenges, the businesses that focus on maintaining a positive customer experience despite these pressures will be the ones that thrive in the long run.
It’s often a question of how well a company manages to weather the storm in the case of customer experience – whether or not there is a storm at all.
Related: Devaluing Loyalty Programs – Many companies are making loyalty programs less rewarding, frustrating their most dedicated customers. Find out why this is a risky move and how it impacts customer experience.
Dan Gingiss is a customer experience keynote speaker who creates a remarkable experience for audiences while teaching them to do the same for their customers.