Insights

Tariffs are one of the oldest macroeconomic tools employed by nations to pull the levers of global trade. As with any other decision, there are significant effects to not just the macroeconomy but the microeconomic units within the nation. Anyone who pays attention to the news cycle is aware of the tariffs and  ongoing trade tensions across the globe.

It would be rather obvious for us to say that businesses and industries that engage in global trade are impacted by tariffs, since the incidence of the tariff (tax) falls on domestic businesses and consumers. Still though, in our research we have found that many business leaders that are not directly exposed to tariffs have no strategic architecture or plan in place to navigate the landscape. Many business owners assume that not importing any goods insulates them from the effects of tariffs, but we have found this to be unstrategic.

Typically, the importing firm (supplier) absorbs some of the tariff and passes it on to their business customers through price increases, reduction in service and output levels, and renegotiation of contracts to protect their margins. More than the tariff itself, these secondary supplier adjustments disrupt operations. Tariffs also distort sourcing and inventory decisions. Businesses are typically reactive to tariffs so they increase safety stock, rush to alternative suppliers, or lock onto unfavorable contracts to manage  uncertainty. While stabilizing in the short term, these moves often raise costs, tie up capital, and reduce flexibility.

But tariffs do not just impact product-based firms. Service firms are often affected indirectly through higher operating costs, constrained client budgets, and shifting demand patterns. When manufacturers, distributors, and retailers face margin pressure, discretionary spending on consulting, marketing, technology, and professional services is often reduced first. The data suggests that tariffs also influence corporate behavior. Uncertainty encourages firms to delay expansion, pause hiring, and reduce long-term investments. These second-order effects slow economic activity and reshape client priorities, affecting even businesses with no physical exposure to global trade.

For most organizations, tariffs are framed as external constraints. In practice, they create strategic choices. Changes in trade policy alter cost structures, supplier dynamics, competitive positioning, and pricing power. For firms that understand these shifts, tariffs are not merely absorbed, they are incorporated into long-term advantage. The challenge is that each response carries tradeoffs. At Zion Strategy, we approach tariff exposure as a strategic design problem rather than a compliance or procurement issue. We work with leadership teams to evaluate how policy-driven volatility interacts with operations, revenue models, and competitive dynamics.

Our work focuses on helping firms convert uncertainty into structured advantage without sacrificing optionality or long-term positioning. How this is applied varies by organization and requires disciplined, context-specific analysis.