News

An early take on tariffs, counsel for public companies

03rd April 2025

In an April 2 White House Speech and signing ceremony President Trump made the economic and political case for sweeping tariffs to be imposed on a host of nations and imports (referencing 25 percent automotive tariffs, and levies on dairy, meat and other industries) effective at midnight on April 2, 2025. At the center of the President’s rationale is i) that these tariffs are reciprocal, ii) they will stimulate domestic manufacturing and other sectors; and iii) will compel nations to rethink or dismantle their own import tariffs in the hope of negotiating lower entry costs to the U.S. market. That third point is significant – it suggests that the President is open to negotiation even though other nations have promised retaliatory levies on U.S. exports.

H/Advisors Abernathy Investor Communications Recommendations:

Investors are expecting more specific details from issuers regarding potential tariff impacts.

Prepare for detailed and pointed questions from investors and analysts. The “closely monitoring” and “wait and see” posture used during year-end earnings will no longer be sufficient if you have substantial exposure to targeted countries or participate in a sector with a complex global supply chain (such as automotive or electronic devices). Investors will expect management to communicate, at least in broad strokes, the analysis you’ve performed, as well as the size and scope of the potential impact, what immediate steps you are taking to address, and what longer-term actions you are assessing to protect the business and/or whether you expect bilateral negotiation to mitigate the levies.

Re-examine guidance and disclosures.

If adjusting guidance, provide a look behind the numbers describing how you arrived at updated figures. Outline underlying assumptions and key swing factors. Consider additional disclosures to support an understanding of cause/effect variables. Importantly, to avoid confusion about your key growth drivers, do not revise guidance based on speculation or fear, but rather when you expect tangible impacts to your business.

Control discussion of tariff topics on earnings calls by including in prepared remarks.

Companies are well-served by taking control of how the financial community is interpreting complexity in their results. A brief section in prepared remarks stating the facts, expected impact, near-term actions and providing management’s perspective of long-term options can help address the issue on your terms instead of in response to a pointed question.

Carefully balance the need to dimension potential impacts of tariffs with prematurely disclosing operational changes under consideration.

Planning, building and staffing domestic production is a multi-year endeavor regardless of your industry. The teams assessing options may determine that near-term costs to make operational changes exceed excess costs from tariffs, which may or may not persist. To limit supply chain disruption, focus on optionality rather than disclosing specific long-term plans at this time. Furthermore, overhauling long-term strategy in response to what could be medium-term political trends can signal risk for investors.

Consider what the transactional nature of this administration means for you.

What immediate actions are you taking already, or able to take, in terms of negotiating, influencing negotiations, nearshoring, friendshoring, investing domestically or job creation that would be beneficial for decisionmakers in D.C. to know about? Do you know how to reach them? Who are your allies?

Begin internal discussions to prepare for scenarios that may arise in Q2.

Decisions regarding pre-announcing results or withdrawing guidance are complicated and involve numerous internal teams and outside advisors. For most companies, taking either action right now is neither necessary nor advisable. But if market conditions worsen or if visibility is further challenged, these options may become prudent. Begin discussing those criteria, trigger points and mechanics now so you are prepared to act swiftly if necessary.

Remember internal stakeholders.

While tariffs continue to lead the global news dialogue, expect that employees, customers and suppliers will have questions and even some anxiety about what this means for them. Resist the instinct to over-communicate, but instead identify moments when your company will be high-profile on this topic (i.e. earnings or when targeted by executive action). Speak directly to these groups with clear messages, honesty about what is known and unknown, and reiterate confidence in the path ahead.