The 2025 tariff squeeze: How smart brands can protect margins to win the shelf 

Yesterday, President Donald Trump signed a broad “reciprocal tariff” policy, setting a 10% baseline tariff on imports. The plan includes steep tariffs: 34% on China, 20% on the EU, 46% on Vietnam and 32% on Taiwan—which means the 2025 retail landscape just got a lot more brutal. 

Brands that aren’t already preparing for the massive margin squeeze are in for a rude awakening, as these tariffs are set to slash brand profitability, with no easy workaround as both China and Vietnam are impacted. Brands will be forced to raise prices, leading to lower demand and increased private label competition. Meanwhile, retailers like Walmart are demanding steep discounts, further squeezing margins. Supply chain adjustments won’t be enough to absorb the hit, which means the next 12 months will determine who wins and who fades away.

How Trump’s tariffs will hit brands harder than ever

Certainly, the last few years have been volatile, but tariffs introduce a new level of pressure on brands already navigating inflation, retailer consolidation and shifting consumer behavior. Here’s what’s coming next:

Profit erosion

Brands could see up to 30% of their profitability wiped out by tariffs. Unlike in previous years, this time there’s no way to dodge the impact—factories in China and Vietnam are refusing to absorb the costs, and U.S. manufacturers will have no choice but to pass them along.

Demand shock & private label pressure

Higher prices mean lower unit sales. As brands raise prices to offset tariff costs, consumers will shift even more aggressively toward private labels. Shoppers have already proven they’ll switch when premium prices climb too high. Expect that trend to accelerate. 

Retailer squeeze

Retailers see the writing on the wall and are already making their moves. Walmart, for example, is demanding brands discount premium products by 30% for months at a time. The goal? To reposition those products as non-premium and drive even more consumers toward private labels. Other retailers, like Home Depot, are using Everyday Low Price (EDLP) strategies and heavy promotions to clear inventory before tariffs take effect. The message is clear: brands will be expected to absorb the hit.

How brands can navigate the chaos

This isn’t a time for hesitation. The brands that win in 2025 will be the ones that act now, not the ones that wait to see how things shake out. Here’s what the smartest brands are already doing:

• Mastering forecasting – Overstocking or running out of stock in this environment is a disaster. Brands need accurate sell-through predictions to avoid costly missteps.
• Resisting retailer pressure – Giving in to every retailer discount request means permanently losing pricing power. Smart brands are pushing back and negotiating better terms.
• Optimizing assortment & brand strategy – Not all products should get the same investment. Focusing on high-margin SKUs and pack sizes will be critical.
• Aligning marketing & sales – The smartest brands are already making sure CMOs and sales teams are aligned on driving high-profitability SKUs through retail media.
• Rethinking media strategy – Vanity metrics don’t matter in a world where profitability is under siege. The focus needs to shift to effective spend of retail media that truly drives incremental revenue of high margin SKUs.
• Cutting non-essential spending – This is the year to scrutinize every expense. Non-working dollars need to be cut, and every investment must have clear, measurable ROI.

The bottom line

The brands that win won’t just react; they’ll get aggressive now. That means nailing forecasting to avoid the death spiral of overstocking or stockouts, pushing back against unsustainable retailer demands and rethinking digital strategy to focus on market share and conversion … not vanity metrics. Every dollar will need to prove its ROI, and brands that continue to waste spend on outdated playbooks will be the first to fall.

The next 12 months will separate leaders from laggards. Brands that prepare now will protect margins, outmaneuver competitors and emerge stronger. The ones that don’t? They’ll be the ones looking for a lifeline in 2025.

Want to talk more about how we’re helping brands navigate this? Get in touch.