Trade Promotion Management Strategy: Navigating Tariffs with Price and Promotion Optimization Software

Nearly half of all the goods imported by the United States come from China, Mexico, and Canada. While projected tariffs could generate over $100 billion in revenue for the US Government, consumer goods companies across the Americas face unprecedented challenges in navigating the changes (assuming tariffs go into effect and are not merely a negotiating tactic) in the coming months, and potentially, years.

Historically, how have tariffs been used, and what has been the impact on the US?

The United States has a complex history with trade tariffs, dating back to the nation's founding. Tariffs were a key part of our beginnings, starting with the first major tariff legislation in 1789. Tariffs made up 50-90% of the federal government's revenues up till 1913 when the 16th amendment allowed for the levying of income taxes.  As a result, the financial impact of tariffs declined to 1-2% of federal revenue by the 70s.  Tariffs have also been used to protect US industries, like textiles,  since the industrial revolution and this philosophy of protectionism held on until the 1930s. The Smoot-Hawley tariff of 1930 was the last tariff of this era, a 20% increased duty on imported goods that was intended to protect American farmers, ed to a 65% reduction in global trade.  This spurred American isolationism, European tariff retaliation, and historians credit the tariff with deepening the great depression.  In response, FDR signed the Reciprocal trade agreements act of 1934 which reduced tariff levels and helped liberalize trade.  After World War II, this trend continued with the General Agreement on Tariffs and Trade in 1947 which was signed by 23 countries in order to reduce barriers to international trade.  These efforts have been continued in the modern era by the World Trade organization which has extended GATT starting in 1995.  As a result of GATT and its meetings the average global tariff rate felL from 22% to 5%.  

In more recent times, the global economy has become so interconnected that it can be argued that tariffs are more problematic as they create barriers to trade and have boomerang impacts. Let’s take a look at our more recent history.

Recent Tariffs (2018-present)

The modern era of trade tensions began in 2018 with a significant shift toward protectionist policies. In 2018, tariffs on Chinese goods created retaliatory tariffs on agriculture from the US. US agricultural business with China fell significantly and caused the federal government $28 billion in bailouts. Similarly, tariffs on steel, aluminum, lumber and energy from Canada and Mexcio increased prices. It is important to note that these tariffs were continued and added to through the subsequent administration.

More recently, the Biden administration imposed a 50% tariff on Chinese semiconductors and tightened export curbs in an effort to protect the US from dependence on foreign chips (both from an economic and national security standpoint) as domestic production spurred from the Chips act will take hold. 

There are winners and losers in tariff scenarios. Historically, companies that can pivot quickly, diversify their operations and reduce their dependency on any particular region can emerge stronger. Global supply chains must continue to strive for flexibility and resilience.

What is happening now with tariffs in the US?

Analysis of recent tariff developments reveals significant implications for North American trade. We must expect complex operational challenges as cross-border operations face rapidly changing cost structures directly impacting product margins. Companies will have to quickly decide how much the consumer can absorb vs how much margin reduction must be absorbed. Alternative sourcing structures will need to be analyzed and supply chains restructured accordingly. Consumer sentiment across borders will need to be monitored in response to increased international tensions and rhetoric. The cumulative effect has created a dynamic market environment where traditional pricing and operational strategies require significant adaptation.

What do experts think the impact of tariffs will be on the consumer goods industry?

Economic experts are warning that the ongoing impact of the Trump-era tariffs on Chinese imports will continue to affect the consumer packaged goods (CPG) industry, potentially leading to higher prices for everyday items. Since the tariffs were first imposed, companies in the CPG sector have faced higher costs for raw materials, packaging, and finished goods imported from China.. This is especially true for products like food, toiletries, household goods, and over-the-counter medications, all of which rely heavily on imports. For instance, Mattel recently indicated that it may raise prices on popular items like Barbie dolls due to the increased cost of Chinese-made parts. Similarly, the National Retail Federation (NRF) has highlighted that these tariffs directly contribute to higher consumer prices, which is burdensome for American families already feeling the effects of inflation. In addition to price hikes, tariffs have also resulted in supply chain disruptions, with companies struggling to secure timely deliveries of goods and components. As a result, the increased cost of doing business has forced many companies to pass those expenses onto consumers. The longer the tariffs remain in place, experts warn, the more likely it is that the CPG industry will face lasting challenges, including reduced demand for products, as consumers adjust their spending habits to accommodate higher prices.

What should Consumer Goods companies do to prepare for the tariff age - 2025-2029?

Companies must develop comprehensive strategies to prepare for a potentially tumultuous period in the next few years:

1. Supply Chain Optimization

Some manufacturers began preparing for more tariffs well before the last election by” stockpiling parts and delaying expansions”. According to a September NY Times article (Businesses Are Already Girding for the Next Phase of the U.S.-China Trade War, NY Times 8/24) , while others took a wait and see approach. All, however, need to prepare now for the reality that increased tariffs, and the threat of increased tariffs, will continue.  

• Diversify supplier networks across multiple regions

• Implement dynamic inventory management systems

• Develop alternative sourcing strategies

2. Pricing and Promotion Strategy Evolution

Price management will be even more active, ongoing and vital if proposed tariffs become a reality, and understanding and predicting the interplay between shelf and promoted pricing, volume and profit to enable agility in the marketplace will be required. The need to evaluate short-term promotional strategies vs longer-term pricing actions and making data-based decisions will increase, with less analytic time. In order to prepare for this:

• Develop market-specific pricing strategies

• Continuously update and monitor price elasticity

• Leverage data-driven insights and trade promotion optimization to identify opportunities to restructure promoted pricing offers to maintain as much profitability as possible with minimal impact to consumer demand.

• Collaborate with retail partners to develop strategies that enable both parties to weather the storm together.

• Increase communication with consumers - be transparent about cost pressures

3. Technology Integration

Technology will play a crucial role in implementing the above. The effectiveness of all activities across the organization will need to be maximized with lightning speed. Some technology considerations:

• Adopt AI-driven decision support systems

• Forecast with laser-precision

• Implement real-time market monitoring tools

• Develop predictive analytics capabilities

• Utilize AI Assistants (Agents) to increase productivity of current work force

How can CPGvision trade and revenue management platform help consumer goods companies successfully compete in a tariff environment?

CPGvision's platform provides essential capabilities for navigating these challenges:

1. AI assisted trade management

Throughout 2025, CPGvision will be incorporating AI Agents to help do the non-value added work involved with managing and optimizing trade. From monitoring data health, providing executional actions, matching deductions and planning and optimizing promotions, our Agents will boost both productivity and job satisfaction across the user base. Stay tuned!

2. Real-Time Pricing Intelligence

CPGvision has been a leader in systematically incorporating price elasticity analytics into trade and revenue optimization. We offer:

• Advanced AI-driven price optimization models

• Revenue growth optimization balancing volume and profit

• Integrated scenario planning at the global and local level

3. Go-to-Market Strategy Solution

CPGvision leverages AI-powered predictive insights for actionable go-to-market strategy development:

• Multi-variable scenario modeling

• Impact assessment across markets and products

• Granular level results

• Performance tracking analytics

4. Promotional Strategy Optimization

Use the power of CPGvision TPO to evaluate ways to deliver value to your consumers and collaborate with retail customers to provide the best end result through various pricing and COGs changes. Our solutio provides:

• Scenario planning incorporating price changes and baseline impacts

• Compare multiple scenarios with side-by-side KPIs

• Rapid predictive optimization capabilities

• ROI forecasting tools

5. Work with the most experienced team in the industry

We specialize in consumer goods! Our team of CPG professionals has deep industry experience and knowledge of:

• Trade promotion management best practices

• Revenue growth management strategy

• Price and promotional optimization experience

• Data science that is not source constrained

Platform Differentiators

CPGvision stands out as the solution of choice to survive in the tariff age. With CPGvision you gain real-time and ongoing insights into pricing impacts and promotional performance, enabling you to pivot and adjust as necessary. Some areas where CPGvision stands above the TPM, TPO and RGM competition”

Technical Capabilities

• A solution architected for large data set models

• Flexible, non-constraint-based modeling

• Multi-source data integration

• Machine learning-powered sensitivity prediction

• Real-time alert systems

• In-app collaborative tools

Strategic Advantages

• Comprehensive visualization tools

• Adaptable pricing models

• Integrated market intelligence

• Predictive analytics capabilities

• AI Agent assistance

Conclusion

CPGvision provides an essential solution for preparing for the challenges ahead. By providing advanced analytics, real-time price and promotion insights, and comprehensive planning tools, the platform enables consumer goods companies to maintain profitability and competitive advantage despite market uncertainties.

The key to success lies in combining technological capabilities with strategic foresight. Companies that leverage these tools effectively will be better positioned to navigate the complex landscape of international trade and emerge stronger from current and future tariff challenges.

Links and articles for further reading:

• Brookings Institution: “China’s retaliatory tariffs will hurt Trump-voting counties most

• Brookings Institution: "The Impact of US-China Trade Relations on Global Supply Chains"

• IMF Working Paper: "The Economic Impact of Trade Conflicts"

• McKinsey Global Institute: "Risk, Resilience, and Rebalancing in Global Value Chains" 

• Deloitte Consumer Industry Center: "The Future of Retail Supply Chains" 

• Kearney: "Reshoring Index Shows Record Shift in Manufacturing"

• Dobson, John M. Two Centuries of Tariffs. United States International Trade Commission, 1976.

• Investopedia - What Is the General Agreement on Tariffs and Trade (GATT)?

• Reuters - Biden launches new Chinese chips trade probe, will hand off to Trump