A new round of tariffs is forcing global brands to rethink their pricing strategies. The United States has announced sweeping import duties – raising tariffs on Chinese electric vehicles to 100%, with additional increases targeting semiconductors, critical minerals, solar cells, and steel. While reminiscent of the 2018 trade tensions, these measures land at a more fragile economic moment. Other countries are expected to respond, further tightening the vise on businesses already navigating slim margins and inflation-fatigued consumers.

Though tariffs are levied on importers, their cost typically travels downstream, landing with the end consumer. The difference this time is timing. These duties follow nearly four years of relentless inflation, with household budgets already strained by higher prices on everything from groceries to rent.

In March 2024, the Federal Reserve Bank of New York reported that median household expectations for inflation remained stuck at 3% – a full percentage point above the central bank’s target. At the same time, spending growth has softened. Consumers aren’t just noticing higher prices. They’re changing how they shop.

According to PwC’s Global Consumer Insights Pulse Survey, 69% of shoppers said they’ve reduced non-essential spending due to rising prices. Nearly one in three said they’d switched to cheaper brands or private labels. Forty-three percent reported actively seeking out discounts or promotions.

The dilemma for brands is clear. Raise prices and risk losing share to lower-cost rivals, or absorb the tariffs and compress margins already under strain. Neither path is easy – especially in categories where loyalty is thin and substitutes are plentiful.

However, there is an opportunity – if brands have the right tools. Pricing isn’t guesswork. With behavioral research and elasticity modeling, businesses can test how consumers respond to different price points long before making changes. In markets where product origin influences perception, measuring how price interacts with sentiment and substitution has never been more critical.

Pricing Models for Navigating Demand Shifts

The pricing question isn’t binary. It’s not just whether to raise prices – but when, where, and for whom. Brands that are navigating this moment well aren’t reacting. They’re measuring.

Where the Pressure Hits First

These price hikes aren’t hypothetical. They’ve already begun to ripple through procurement and supply chains. In May, the US approved sweeping tariff increases on $18 billion worth of Chinese imports. The most visible: electric vehicle tariffs jumped from 25% to 100%. Other affected goods include semiconductors, batteries, medical equipment, and industrial metals. While the policy aims to safeguard strategic sectors, the short-term effect is clear – brands that depend on global sourcing are now facing higher input costs almost overnight.

For US-based manufacturers reliant on overseas inputs, the new tariffs are immediately disruptive. In sectors like electronics and electric vehicles – where China dominates component supply – there are few near-term alternatives. Benchmark Mineral Intelligence reports that China accounts for more than 70% of global battery cell production and over 80% of refined lithium. Reorienting supply chains isn’t just expensive. It’s logistically constrained.

Other categories – apparel, home goods, and consumer electronics – face similar vulnerabilities. The American Apparel & Footwear Association estimates that 40% of all clothing sold in the US  still comes from China. Even brands that have diversified sourcing rarely achieve full exits. Standing up new capacity requires capital, workforce training, and time – particularly when quality control and speed to market are critical.

Retailers, too, are under pressure – especially in categories where shelf prices are watched closely and loyalty runs thin. In recent earnings calls, both Walmart and Costco flagged tariff-related risks. Walmart said it was actively scenario-planning for affected segments like electronics, appliances, and furniture. These are areas where private-label competition is fierce and price sensitivity is high. Passing along cost increases without losing volume is far from simple.

In food and beverage, tariff exposure goes beyond ingredients – it extends to packaging, machinery, and imported inputs across the value chain. Margins are already thin, and pricing missteps are less forgivable. While grocery inflation has eased since its 2022 peak, consumer memory is long. Kantar data shows that even small price hikes in 2024 prompted shoppers in the UK to trade down, boosting private-label share across nearly every category.

For many brands, the challenge isn’t just cost – it’s timing. Companies entered 2024 anticipating relief after three years of inflation. Instead, tariffs introduced fresh volatility at the exact moment consumers have become more price-sensitive – and less tolerant of surprises at the register.

Calibrating the Right Price

Inside boardrooms and pricing teams, one question repeatedly surfaces: How much can we raise prices before we lose the customer? Instinct won’t cut it. Brands need to quantify demand before it disappears.

At its heart, price sensitivity is about perception – how much a product feels worth paying for and how much slack a brand has before customers balk. That perception isn’t fixed. It shifts depending on the brand, the category, the context, and what else is on the shelf. This is why pricing research has moved from nice-to-have to necessity for companies under policy or cost pressure.

One of the most enduring tools is the Van Westendorp Price Sensitivity Meter. Developed in the 1970s, it remains in use because of its clarity: consumers are asked when a product feels like a bargain, too cheap to trust, starting to feel expensive, or too pricey to consider. From this, brands map an acceptable price range – a range that has narrowed in recent years as consumers react to repeated cost shocks, from freight to fuel to tariffs.

In categories like electronics, beauty, and automotive, price is only part of the equation. To understand what really drives purchase decisions, many brands turn to conjoint analysis – a survey-based method that models how consumers weigh trade-offs between price, brand, features, country of origin, and other factors. By asking shoppers to choose between product bundles, researchers can identify which elements hold the most value.

If shoppers consistently choose a slightly more expensive product because of its origin, that insight can help brands assess whether absorbing tariffs – or moving production – is worth it. It also flags which segments are less price-sensitive and more loyal, a crucial distinction when margins are thin and every unit matters.

Another widely used method is Gabor-Granger pricing, which measures purchase intent at different price points to estimate elasticity. It’s often used when decisions need to be made quickly or across a large product portfolio. While it doesn’t account for competitors, it can show where price increases are likely to hit hardest – or go unnoticed.

Many companies are now layering these models with real-time data – from loyalty programs, e-commerce behavior, and even point-of-sale heat maps – to fine-tune pricing down to the SKU. A 2023 McKinsey report found that brands using dynamic, data-informed pricing strategies saw profit lifts of 2% to 7%, even in flat-growth environments.

Pricing is no longer just a finance exercise. It now draws from behavioral science, brand strategy, and competitive analysis. When costs move quickly – and tariff rules shift with little warning – brands that understand what drives the willingness to pay are better equipped to make smart, fast decisions.

Strategy Under Pressure

A poorly timed price move doesn’t just hurt margins – it can shift entire market dynamics. Over the past five years, brands across sectors have faced rising costs, disrupted supply chains, and increasingly price-sensitive consumers. Some adjusted early and carefully. Others misjudged their customers – and paid for it. The gap between them highlights how well-informed pricing can build trust, while a misstep can fast-track brand erosion.

In 2018, Whirlpool welcomed tariffs on imported steel, betting they would level the playing field for domestic manufacturers. But as raw material costs climbed, so did Whirlpool’s prices – while rivals adjusted sourcing and held firm. By mid-2019, demand had slipped in the company’s key North American appliance segment. Shipments fell, and its early advantage vanished. Whirlpool had overestimated the power of patriotic branding and underestimated how quickly price gaps could trigger customer defection.

Uniqlo took a different path. In 2022, its parent company, Fast Retailing, raised prices only on high-demand products like its HEATTECH thermal line – leaving basics untouched. Executives framed the move not as a response to inflation, but as a reflection of better materials and improved quality. That message was delivered consistently to both consumers and investors. By the end of fiscal 2023, Fast Retailing had posted record profits, and Uniqlo remained one of Japan’s most trusted brands.

PepsiCo chose a quieter strategy. Faced with rising input costs in its Frito-Lay division, the company trimmed pack sizes while keeping sticker prices unchanged – a textbook case of shrinkflation. It didn’t announce the change, but shoppers picked up on it. Social media backlash followed, but unit economics held steady. In 2022 and 2023, PepsiCo posted revenue growth of 8.7% and 9.5%, crediting “responsible pricing” and sustained brand investment.”

In many markets, price tension didn’t boost brands – it boosted private labels. In the UK, store-brand sales surged as national brands introduced a string of small, poorly communicated price increases. Tesco’s Clubcard data revealed that consumers weren’t simply trading down – they were abandoning brands that no longer justified their price. By late 2023, Kantar reported that private labels made up over 52% of UK grocery sales, a level last reached during the global financial crisis.

These case studies don’t share a common tactic. What they share is calibration. The brands that got it right knew how far they could go – and with which segments. Some paired pricing shifts with clear messaging. Others moved quietly, trusting in long-term loyalty. But all respected the limits of what their customers would accept.

Good pricing does more than protect margins. It builds trust, reinforces perceived quality, and – most importantly – avoids unpleasant surprises. In markets where small increases can trigger a switch, clarity and timing matter as much as the number on the tag.

The Strategic Trade-Offs

Companies squeezed between rising costs and price-sensitive customers tend to reach for one of four levers: absorb the cost, raise the price, shrink the product, or redesign it. None are simple. Each carries risk. And the real challenge isn’t which tactic to use – but how to execute it without weakening brand equity or long-term pricing power.

Absorbing higher costs can maintain customer goodwill – but it’s rarely sustainable. In low-margin sectors like grocery and apparel, taking on even a 10% cost increase from tariffs or wages can wipe out profits. It might buy time, but without gains in volume, efficiency, or product mix, it’s a short-term fix with long-term limits.

Shrinkflation – reducing pack sizes while keeping prices flat – remains a go-to strategy in food and household goods. It works best where packaging disguises quantity changes and price comparisons happen by eye, not unit weight. But shoppers notice. A survey found that 64% of US  consumers viewed shrinkflation negatively, and nearly half said it made them more likely to switch brands. The fallout is often reputational, not immediate – but in a loyalty-fragile market, perception matters.

For some brands, reshoring or diversifying supply chains is a way to hedge against tariff risk. Apple, for example, has invested heavily in moving production from China to India and Vietnam – not just for tariff relief, but to reduce geopolitical exposure. These shifts are slow and costly. Quality control, lead times, and logistics all become more complex. For most mid-sized firms, the barrier isn’t intent – it’s feasibility.

Dynamic pricing, once used mainly by airlines and ride-hailing apps, is gaining ground in retail. Powered by real-time data, it lets brands adjust prices based on demand, inventory, or market conditions. While rare in physical stores, it’s now common online. Amazon’s algorithm reportedly makes millions of daily changes to test what shoppers will tolerate. The danger lies in consistency. If pricing feels arbitrary or unfair, trust can fray – especially in categories where stability has long been the norm.

Some brands are taking a tiered approach. They hold prices steady on high-volume, price-sensitive products while testing increases on premium or niche lines. Others bundle extras – free shipping, loyalty rewards, extended warranties – to reframe value without raising list prices. These tactics don’t erase costs, but they redirect attention from the price tag to the perceived benefit.

These strategies differ in form but share one thing: insight. Brands that understand where price elasticity stretches – but doesn’t snap – are far better equipped to make changes that hold. That understanding doesn’t come from spreadsheets alone. It comes from consistently measuring how real consumers respond in the moment.

Price isn’t just a number. It’s a signal – to customers, competitors, and shareholders – of what a brand values, and how well it understands its market.

Pricing in a Slower Growth World

There is no universal playbook for navigating price hikes during a period of soft demand. But companies that treat pricing as a strategic discipline – grounded in research, not reaction – tend to make fewer missteps.

Several patterns are emerging. First, the most resilient brands treat pricing as part of product development – not something tacked on after costs are tallied. They design with trade-offs in mind: what customers see, what they value, and what they’ll pay more for. In these organizations, pricing sits alongside marketing, insights, and supply chain – not in a siloed finance function.

Second, short-term fixes are being replaced with structured testing. Companies that previously treated pricing research as an annual or ad-hoc exercise are now investing in more frequent, faster measurement – integrating survey-based models with real-time sales and competitive data. This shift isn’t about chasing perfect precision. It’s about reducing guesswork.

Third, regional variation is back in focus. After years of global price harmonization, more brands are returning to market-by-market pricing. Tariff impacts, consumer sentiment, and price sensitivity differ dramatically between the US, Southeast Asia, and Europe. A strategy that works in Singapore may unravel in Texas. Research agencies are increasingly being asked to localize price testing and conjoint simulations – especially for product lines being repositioned or repackaged due to input cost changes.

There’s also more internal scrutiny. Boards and shareholders are asking tougher questions about the long-term effects of pricing actions. What’s the risk of training customers to wait for discounts? Are private-label defections reversible? Are loyalty gains being offset by unit loss? The pressure is no longer just to raise prices – but to prove that doing so won’t damage the brand a year from now.

For leadership teams, pricing has become a balancing act between margin and momentum. Push too hard, and customers disappear. Hold back too much, and financials fall short. The brands that get it right are not guessing where the line is. They’re measuring it – then acting with discipline.

In an environment shaped by shifting costs, tariff risk, and consumer fatigue, pricing is no longer a lever to pull. It’s a strategy to build.

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