How to Handle 1Q25’s Economic Uncertainty
From global politics and on-again-off-again tariffs to “resets” of retailer-vendor relationships, the beginning of 2025 has been nothing short of a rollercoaster for brands.
As a result, we’ve had countless conversations with our client brands that start with a variant of the same question:
What should we be doing?
The short answer is that there is no short answer. Every brand is different. Every fulfillment operation is different. But most critically, the dust is far from settled. Tariff proclamations are changing every day. Slapped on one day; stayed the next. Retailers are unveiling new, bold “master plans” to provide “clarity” on vendor strategy.
But since the question persists, here’s what we’re telling clients…
Sit Tight
We’re in the first 100 days of the new administration and as we’ve all seen, it is making good on (most of) its campaign promises. Economic policy implementation has been bumpier than that of other policies, due much in part to the many moving parts of a global commercial and political economy. So as tomorrow’s headline counters today’s, we’re telling brands to sit tight. Any hedging you might want to act on (say, threatened duties on Chinese goods) could come back to bite you.
Canada will soon have a new Prime Minister. The U.S. and Mexico are initiating a series of negotiations between the two countries, with the first conversation aiming to bring clarity to recent tariff talk. The U.S. will continue to float potential tariffs on Chinese goods, only to delay them. Now is precisely the time to let things sort themselves out.
“Look at what has happened with de minimis this month,” says Capacity’s VP of Logistics, Tony Ruiz. “Just a few days after terminating de minimis for packages originating from China the termination was paused. Brands that made kneejerk reactions in that window – like raising consumer prices or expediting shipping – moved too quickly and are paying for it.”
The market will react and react and react to all of this until…
But Then the Dust Will Settle
Right now, we’re encouraging clients to look towards the horizon, post-100 days.
“Start scenario planning for May and June,” says Ruiz. “Then, based on what the reality of the situation is, try to figure out how you’re going to make your operation work, quarter by quarter. What types of products are you shipping? How are you shipping? DDP? DDU? And of course… price.”
If 2016 though 2020 taught us anything it’s that while the dust may “settle,” it’s unlikely that near-term economic policy will ever crystal clear.
“We’re working with our clients, helping them to see around corners as best we can,” says Ruiz. “It’s scenario planning: If A happens, we’ll do B. If X happens, we’ll do Y. It’s going to be this way for a while, but once we get to late spring, we should have a firmer sense of what the landscape will look like.”
Economic Policy Continuity Planning is Just Like Every Other Type of Continuity Planning
Planning for economic uncertainties is just as hard as planning for an earthquake or a hurricane – but that doesn’t mean you shouldn’t do it. Now is precisely the time to talk to your fulfillment partner to work through contingencies and start figuring out how you’re going to maintain operational excellence in what’s sure to be a wild time.