Tariff Renewal Raises Real Question of Who Can Bear the Cost

The specter of a global trade war once again raised its head over the weekend. The immediate takeaway of the tariff news was familiar: uncertainty is back, and companies must prepare to weather it.

But a more consequential issue lurks. The central question of the threatened trade escalation between the U.S. and Europe is not whether firms can withstand tariff volatility, but whether the economic system that absorbs its effects, chiefly consumers, can continue to do so. Supply chain preparedness may determine which companies avoid operational disruption, but it does not resolve the underlying macro arithmetic of higher costs in an already strained demand environment.

President Donald Trump on Saturday (Jan. 17) announced that eight European countries would face escalating tariffs starting at 10% on Feb. 1 and rising to 25% on June 1 if the U.S. is not allowed to purchase Denmark’s semi-autonomous territory of Greenland. In response, the European nations are weighing the use of a “trade bazooka” known as the “Anti-Coercion Instrument” (ACI). Under the ACI, the EU could curb U.S. companies’ access to its market by barring them from public procurement opportunities, imposing export and import controls on goods and services, and potentially introducing restrictions on foreign direct investment within the bloc.

Well-known European brands such as Leica, Louis Vuitton, Le Creuset, and Hermès have been cited by a Sunday (Jan. 18) report as potentially exposed because of their reliance on European production.

Consumer goods, however, represent only a visible edge of a deeper structural issue. Europe remains a critical supplier of high-value manufactured inputs to the United States, including industrial equipment, specialty chemicals, medical devices and pharmaceuticals. In many of these sectors, substitution is slow, regulatory hurdles are high, and costs are difficult to compress.

Whether this period marks another manageable phase of adjustment or the point at which accumulated trade friction constrains demand more sharply remains an open question. What is clear is that “weathering” tariffs no longer means emerging unscathed. It means navigating a narrowing channel between margin preservation and consumer tolerance.

That channel is not an infinite one.

More here: B2B Logistics Resets for 2026 as Old Pricing Models Break Down

Supply Chain Resilience Does Not Mean Cost Absorption

Public companies do not exist to absorb costs indefinitely. Their financial structures, incentive systems and shareholder expectations are built around margin preservation. When tariffs raise input prices, firms may delay the impact through inventory buffers or contract terms, but those are temporary measures. Over time, higher costs must be reconciled through pricing, product changes or reduced investment.

The years’ worth of data in the PYMNTS Intelligence 2025 Uncertainty Project found that companies that treated tariffs as a procurement problem struggled to respond effectively and with a longer-term view to operational uncertainties. Those that embedded trade considerations into broader spend governance frameworks were comparatively able to adapt more effectively.

At the same time, a company that avoids factory shutdowns, stockouts, or emergency sourcing is rightly considered well managed. But if it maintains margins by passing costs downstream, the burden has not disappeared; it has merely shifted.

This distinction may become important in the current macroeconomic context. Consumers are already contending with elevated prices for essentials, higher borrowing costs and limited real wage growth. Another layer of tariff-driven inflation, even if applied incrementally, risks meeting resistance that earlier price increases did not.

See also: CFOs Rewrote the Playbook on Supply Chain Risk in 2025

Supplier Renegotiation and the Limits of Leverage

In the June CAIO Report, “The Enterprise Reset: Tariffs, Uncertainty and the Limits of Operational Response,” PYMNTS Intelligence found 60% of firms reported that they are addressing today’s tariff-induced challenges through tighter partner coordination, smarter sourcing contract terms, more dynamic price modeling and greater alignment between finance and procurement functions.

Still, renegotiation redistributes pressure within the supply chain; it does not remove it. Suppliers facing their own rising costs such as energy, labor and compliance can have limited capacity to absorb additional burdens. In many cases, renegotiation simply delays pass-through or reallocates it across tiers.

The process can preserve relationships and reduce volatility, which has real value. But it also reveals the finite nature of leverage. When tariffs affect entire regions or industries, there is little surplus left to extract. Ultimately, the aggregate cost must land somewhere.

The cumulative effect of tariffs, supply chain reconfiguration and inflation may ultimately be to position the consumer as the system’s primary shock absorber. Companies that are described as “weathering” trade uncertainty may often do so by managing the pace and presentation of price increases rather than by absorbing them.

This is where the metaphor of resilience begins to strain. A system in which every shock is passed downstream without relief is not resilient; it is brittle. It may function smoothly until it fails, at which point adjustment is abrupt rather than gradual.

The renewed tariff debate therefore can function as a stress test not only for corporate supply chains, but for trade policy as a whole. In this sense, the companies potentially best prepared for tariff volatility are not necessarily those most insulated from its effects. They may be those able to delay and manage the transmission of those effects to the consumers who ultimately absorb the consequences.