How Industry Analysts Factor Tariffs into Market Forecasts

Shifting trade policies have created a new wave of uncertainty for businesses across multiple industries. Drawing on years of experience, The Freedonia Group’s industry analysts carefully evaluate the potential impacts of these tariffs, maintaining an objective perspective amidst often sensationalized media coverage.  

In this article, we discuss key considerations analysts use to assess the impact of tariffs. Understanding how these tariffs and regulatory changes are factored into market forecasts can help you mitigate risks and make confident, informed business decisions. 

The Delicate Balance of Market Forecasting 

Market forecasts consider a variety of factors, including quantitative data like macroeconomic indicators, usage rates, and purchase habits, as well as qualitative information such as regulatory factors, to estimate market growth over a set period. 

"In every forecast, we always consider regulations and tariffs, but quantifying the impact is challenging," explains Teresa Hayes, Executive Vice President at The Freedonia Group. "There's significant posturing and negotiation tactics involved with tariffs, which adds layers of complexity." 

Freedonia’s research presents a nuanced picture with multiple scenarios as part of the analysis. As Hayes notes, "We carefully articulate our assumptions and explain alternative outcomes if those assumptions don't materialize." 

Recognizing the Power of Market Inertia 

Long-time analysts understand that markets do not always experience the dramatic shifts that headlines might suggest. 

"We have to be cautious about making radical changes to our market forecasts based on regulatory announcements," Hayes emphasizes. "We look for underlying trends and predict the overall direction of the market, but the demand never drops to zero because of a ban or tariff." 

It’s important to recognize that political timelines do not usually match up neatly with a company’s capital investments and long-term strategic plan. Companies may not be able to make U-turn adjustments. 

"Establishing a new manufacturing plant typically requires 5-6 years," Hayes points out. "Political environments change every 4 years or less. Some market adjustments happen quickly, but major industrial shifts simply can't, which naturally moderates the impact of policy changes." 

Monitoring Near-Term Shifts 

Companies respond to tariffs, or the threat of tariffs, in several ways. Jennifer Christ, Manager of Consumer & Commercial Research at The Freedonia Group, points out, "As part of our analysis, we closely monitor near-term trade patterns and buying behavior. Many companies engage in stockpiling when tariff changes appear imminent. Other companies may simply ‘eat’ the cost of tariffs by absorbing it or passing it along to customers, because it’s cheaper or at least less complex than changing their supply chain." 

The Value of Customized Strategic Insights 

During periods of flux, traditional forecasting methods may need supplementation from more in-depth primary research. 

"In addition to our off-the-shelf studies, we can provide voice-of-market insights to show how customers are reacting to changes," says Lee Steinbock, Director at Freedonia Custom Research. "During COVID, we conducted rapid-response studies for several clients that helped them to gain valuable insights and navigate the uncertainty." 

Experience as the Ultimate Differentiator 

Perhaps the most valuable asset in forecasting through regulatory uncertainty is the sound judgment that comes only through experience. 

"Many of us have been analyzing markets for decades," notes Gleb Mytko, Global Industry Analyst at Freedonia. "We've weathered the Great Recession, COVID disruptions, rising geopolitical tensions, and countless regulatory shifts. This experience helps us assess potential impacts with greater confidence and a sense of perspective." 

Because Freedonia has tracked specific markets for years, we have built a robust foundation of insights for every new edition of our studies. Our data is known for its consistency and reliability. By analyzing near-term shifts while maintaining a focus on long-term market fundamentals, we help businesses gain much-needed clarity during times of turmoil. 

For More Information 

Sign up to download the latest edition of our short-run US economic forecast or the slide deck for our short-run global economic forecast, developed by Freedonia’s in-house economics team. 

About the blogger: Sarah Schmidt is a Managing Editor at The Freedonia Group, a premier international business research company.