Tariffs & trade developments—week of 5/12

Retailers and brands begin to adapt to tariffs  

After the latest US-China agreement lowered the US tariff rate on products coming from China to 30% and also lowered the de-minimus tax on low-value imports to 54%, brands are quickly responding to secure inventory while they rework global supply chains and rethink portfolios.  

Retailers acknowledge rising costs  

On May 1, Amazon stated they had “not seen the average selling price of retail items appreciably go up yet." but did hint that costs were increasing due to tariffs in many categories. Two weeks later during its own earnings call, Walmart acknowledged that the new tariffs would have a direct impact on the company’s cost of goods, especially in categories such as electronics, apparel, home goods, and baby, and that it will start increasing prices later in May.  

While the largest challenges are presented to those categories reliant on Chinese manufacturing, it will also impact grocery categories, particularly products like coffee, avocados, and bananas, that must be imported to the US from different climates. We expect retailers to absorb some of these costs, pass some onto consumers, and manage any margin shortcomings by adapting assortment with more profitable items in other areas.

Future brand adaptations are underway

The tariff rollback with China was a welcomed boost for brands, who are using this as an opportunity to bring much more inventory into the US. Many brands were particularly concerned about product availability for the quickly approaching back-to-school season, while others are securing inventory to last the remainder of 2025 as a hedge against future tariff uncertainty.  

Beyond the short-term adaptations, we continue to see more brands shifting production for US-bound products to markets like India, Vietnam, and Mexico. In aggregate, this also means more Chinese manufacturing capacity will produce goods destined for Europe and Latin America. While brands can reverse many of these choices, they are likely to drive some permanent structural changes to individual and global supply chains.  

Brands are also using this as an opportunity to reevaluate their portfolio priorities. Naturally, brands are leaning into products less impacted by tariffs while deprioritizing those with rising costs. We’ve seen new product launches and campaigns being delayed or scaled back, and SKUs that have historically been margin-challenged are increasingly being rationalized or cancelled altogether.  

Questions brands should be asking to future-proof their business

While most businesses remain laser-focused on evaluating cost impacts and diversifying their manufacturing, leading brands should also be preparing for longer-term questions about go-to-market priorities and the increasing retailer focus on profitability.  

• How will you balance inventory needs with growth opportunities in your key markets and channels as your global supply chain is tested?

• How will you prioritize customers as they increasingly ask you to absorb costs?

• How will you prioritize different items as retailers rework mix to manage profitability?

• Do you know how each item in your portfolio contributes to you retailer’s margin?

• Do lower-margin items play an important role in overall brand growth?

• How are you monitoring competitor adjustments to price, pack, and brand?

• How will you identify whitespaces while other brands in your category also potentially make big changes?

• Is your channel strategy organized, particularly online, where retailer price-matching could drive rapid and unforeseen disruption?

• Is your team equipped to negotiate using all the levers that Amazon or leading omnichannel retailers like Walmart allow?

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