Financial Forecasting in the Age of Tariffs: Navigating Uncertainty and Strategic Planning

In today's globalized economy, tariffs have become a significant factor influencing financial forecasting and strategic planning for businesses worldwide. The tariff landscape has been notably shaped by the policies of U.S. President Donald J. Trump, who famously described "tariff" as the most beautiful word in the dictionary. His administration's aggressive stance on trade led to a series of back-and-forth tariff conflicts, particularly with major trading partners like China and the European Union. These actions have set a precedent for ongoing geopolitical tensions and trade policy shifts, requiring companies to adapt to the evolving landscape to maintain their competitive edge and ensure financial stability. This blog post explores the implications of tariffs on financial forecasting and offers strategies for CFOs to navigate these challenges effectively.

Understanding the Impact of Tariffs

Tariffs, essentially taxes imposed on imported goods, can have far-reaching effects on businesses. For German companies, particularly in the automotive sector, tariffs imposed by the U.S. have led to increased costs for exporting vehicles and parts. For instance, a German car manufacturer exporting to the U.S. faces a 25% tariff on automotive imports, which directly increases the cost of goods sold. This not only affects pricing strategies but also impacts the company's competitive position in the U.S. market.

Additionally, tariffs influence supply chains by necessitating adjustments in sourcing and logistics. German companies, might face tariffs on imported components from China, leading to increased production costs and potential delays in manufacturing. This requires strategic reevaluation of supply chain operations to mitigate tariff impacts and maintain efficiency.

For CFOs, understanding these impacts is crucial for accurate financial forecasting and strategic decision-making. Tariffs can significantly affect a company's profit and loss statements, balance sheets, and liquidity positions. Understanding these financial impacts allows CFOs to develop informed strategies to navigate the complexities of tariffs, ensuring their organizations remain financially robust in a challenging global trade environment.

Current Developments in Tariff Policies

As of early July, the U.S. tariff environment remains highly dynamic and continues to impact global trade, particularly for German businesses operating across borders. The U.S. government has implemented targeted tariffs in key sectors such as automotive, steel, and aluminum, drawing on legal tools like the Trade Act and the International Emergency Economic Powers Act. These began as sector-specific measures and have since expanded to include country-specific tariffs introduced in April.

Importantly, a key tariff memorandum is scheduled to expire on July 9. If not extended or revised, this could trigger a significant increase in tariffs—from 10% to as high as 20%. However, how this will unfold remains uncertain.

This evolving backdrop underscores the VUCA (Volatility, Uncertainty, Complexity, Ambiguity) nature of global trade policy—and why finance leaders must remain agile and closely aligned with policy developments.

How to act

In the face of tariff volatility, CFOs and finance teams must adopt a strategic approach to effectively manage financial impacts and maintain business resilience. The key lies in leveraging integrated, data-driven forecasts and simulations to craft actionable strategies. By utilizing both external data, such as historical trade patterns and country-specific risk factors, alongside internal company data, CFOs can gain a comprehensive understanding of tariff impacts and develop robust forecasting models.

Source: PwC (2025)

1. Dynamic Tariff Impact Analysis: Conducting a thorough tariff impact analysis is crucial for grasping the financial implications of both current and anticipated tariffs. This process involves constructing detailed models, defining potential scenarios, and employing competitive intelligence to guide decision-making. By quantifying these impacts, CFOs can communicate effectively with stakeholders and devise well-informed strategies.

2. Scenario Planning and Risk Management: CFOs should engage in scenario planning to foresee various tariff-related outcomes and their financial repercussions. By simulating different scenarios, companies can pinpoint potential risks and opportunities, enabling them to prioritize strategic actions and allocate resources efficiently.

3. Supply Chain Optimization: Tariffs can significantly disrupt supply chains, prompting a reevaluation of sourcing strategies. CFOs should consider options such as tariff engineering, duty drawbacks, and utilizing free trade zones to reduce costs and improve operational efficiency. Additionally, analyzing import data and refining customs processes can help avoid unnecessary tariff expenses.

4. Legal and Contractual Review: It is essential to review contracts and INCOTERMs to ascertain who is responsible for tariff costs. Ensuring transparency in tariff calculations and verifying the accuracy of tariff classifications can prevent unforeseen financial liabilities.

By adopting these strategies, CFOs and finance functions can effectively navigate the complexities of tariff volatility, ensuring their organizations remain financially robust and strategically agile in an ever-changing global trade environment.

Conclusion

In the age of tariffs, financial forecasting requires a strategic approach that accounts for geopolitical uncertainties and regulatory changes. By leveraging data-driven models, scenario planning, and proactive risk management, CFOs can navigate the complexities of tariffs and ensure their organizations remain financially robust. As global trade dynamics continue to evolve, staying informed and adaptable will be key to thriving in this challenging environment.

For CFOs, the ability to forecast accurately and respond strategically to tariff impacts is not just a necessity—it's an opportunity to drive innovation and strengthen their company's position in the global market. By embracing these strategies, businesses can turn the challenges of tariffs into catalysts for growth and success. 

While this article has emphasized transparency in financial forecasting, the consequences of tariffs extend further, impacting cost management, working capital optimization, cash management, and other related areas.

About the authors

Sebastian and Malte are Senior Managers in PwC's Finance Transformation team, specializing in Performance Management. They are dedicated to transforming these areas to boost organizational performance, for instance by developing corporate steering models and designing data architectures that support strategic decision-making.