Crunching numbers in a tariff storm

New tariff orders and policy threats have thrown traditional forecasting into disarray for finance chiefs. As companies prepare quarterly guidance, many now confront the challenge of how best to address potential cost pressures from shifting trade policies.

Historically, CFOs invest extensive time crafting scenarios to forecast sales and profits. Recently, however, unpredictable tariff announcements—ranging from a 25% import tax on goods from Mexico and Canada (now on a temporary pause) to potential duties on automobiles, semiconductors, and pharmaceuticals—have unsettled these models.

The evolving nature of these tariffs has left executives uncertain about the extent of disclosure necessary to satisfy investors while managing internal expectations.

Some firms have chosen to incorporate estimated tariff impacts into their guidance. For example, certain companies have modeled the effects of additional costs from imports originating in Mexico, Canada, and China.

In one case, a restaurant chain’s finance team worked intensively during a weekend to determine that, if implemented, tariffs could increase its cost of sales by roughly 60 basis points. Ultimately, however, this firm decided against including those figures in its formal projections, citing the inherent uncertainties and the recent pause in tariff implementation.

Other companies have taken a more cautious route by omitting these estimates from their guidance entirely. The divergent approaches reflect a broader industry debate: while some executives are comfortable factoring in the potential impacts of tariff shifts, others prefer to offer qualitative risk disclosures without committing to specific numbers.

This ongoing dilemma is not entirely new. CFOs, having navigated previous periods of significant economic uncertainty—from the Covid-19 pandemic to the financial crisis of 2008–09—are increasingly relying on risk management expertise honed during those challenging times. Many are now bolstering their efforts by engaging with policy advisors and lobbyists in Washington, seeking clearer insights into how future tariff decisions may unfold.

Meanwhile, companies in sectors ranging from industrial technology to consumer goods are weighing the benefits of early disclosure against the risks of overcommitting to projections in an environment where policy can change rapidly. With some firms deferring detailed commentary until more clarity emerges, the decision on how much to reveal remains a delicate balancing act.