For years, I have been interested in and have also given presentations about pricing. It’s an exciting topic because we all want to make as much as possible while still being competitive. In most markets, supply and demand set the baseline for prices on everything from print to cars to grocery products, but competition also plays a role. However, every time I speak to PSPs and Converters and ask them if they can increase prices, they say ‘no,’ but when I ask if they could consult with each client and argue for a 1-2% price increase, the response is almost always, “yes.”

By Editor Morten B. Reitoft

Prices are, however, not fixed, and when the US threatens and imposes tariffs on almost everything, we initially get nervous and start thinking about how it will influence our sales. All taxes and prices immediately influence the market, but the longer a tax or tariff is imposed, the market adapts.

The market immediately reacted when the US imposed the so-called Chicken Tax in 1964. The Spanish-produced Ford pickup had its backseats removed, made a few other design changes, was categorized differently, and avoided the 25% tax. Mercedes sent assembly kits to the US and avoided the tariff by assembling their lightweight vans in the US—and then the market adapted.

The rest of the market stopped producing these vehicles for the US market and focused on markets where they could compete on even terms—leaving that market segment to the US manufacturers. That has most likely given the Americans worse vans because competition was artificially suppressed.

Markets react slowly, so when tariffs are imposed on April 2nd, with only a few weeks' lead time, they can’t adapt fast enough, but they will. What is maybe worse even thinking about is that 100% American cars will also get a higher price tag - because, why shouldn’t Tesla, GM, Ford, etc. adapt to the competitive situation and increase prices - simply because the playing field has changed. So prices will increase and not only foreign products, but ALL products. The result is higher consumer prices and higher inflation, and I wouldn’t be surprised to see changes in interest rates to stabilize the abovementioned changes!

This will also happen this time, so after some time, American consumers will have to accept that cars outside America are more expensive. However, the price difference will not even come close to the 25% tariff imposed by Trump. For customers, it’s only whether the price difference is big enough to choose a car over the price.

So what about print? A few things will likely happen. The demand for new investments in the US will slow down for a while, but when a press needs to be replaced, it must be, regardless of tariffs. Another almost inevitable outcome is that the OEMs will investigate the supply chain to see if a product can be sold at a lower price. As the US administration’s objective is to move labor to the US, I believe the printing industry will be hit harder, as I can’t imagine any of the major OEMs moving their production to the US to avoid tariffs (each of the markets are simply too small for having its own Heidelberg (as an example). If the US entity were only to assemble parts, the parts would still be subject to tariffs. If an OEM decided to move the full or part of the production to the US, the products would still be tariffed, as they are built with parts from the outside, so the printing industry must foresee that printing presses will become more expensive.

So, what can a print OEM do? The US market is the single most significant market for almost everybody. The first thing is to adapt to a new reality. The second is to see where and, if possible, to offset the expected loss, and the third is to look into the long-term effects/speculations of where this will end. If tariffs are mainly a tool for negotiating ‘deals,’ as many claim is Trump’s incentive, many of these tariffs may have a short life and only influence sales and pricing shortly.

Some will also see that they have become too dependent on the US and will probably, like Canada, work hard to balance sales and be less dependent on one country (despite its financial and economic strength).

If tariffs are the standard, like the Chicken tax, you must look more into the competitive situation - do you have direct competitors in the US? How do your competitors abroad act? And if competitors don’t lower prices - and there isn’t any domestic competition, customers will absorb the prices, as it has always been, and you will again be able to sell into the US - but at prices that are higher than in the rest of the world - how the Americans will see this, is of course, a different question!

Some American companies selling internationally may even have the incentive to move production out of the US. If a company like HP is hit hard by steel tariffs, why shouldn’t it consider producing some of its technology in Israel or other countries with better business conditions?

Strategizing emerging markets is now more critical than ever. The potential in Africa, Latin America, India, and Asia might be much more significant than the American market. Still, it will require massive investments in sales, marketing, R&D, and even the examination of current business models. Can you do this today if you ask yourself that problematic question?

So, how should a company react to the proposed and imposed tariffs? Well, it will influence your business and change the market dynamic, as free trade will disappear (replaced with Planned Economy, what!) —even though most analysts find globalization the number one reason for the massive growth the world has seen over the past decades.

You can imagine why companies source from China, Korea, Vietnam, India, Mexico, and more because of prices. Low prices and the high availability of goods and labor can be used to create new products, which again will lead to new products and services of higher value that can be sold. If you buy all the parts in a computer, none of them will make sense to the layman, but the combined product is what we are willing to pay for with a considerable margin. That’s how capitalism works.