Tariff Tag-Teams: Why Deductions Are the Hidden Hit to Your Bottom Line

When tariffs go up, most suppliers see it coming. You prep for cost increases, update your pricing models, and maybe even renegotiate with your vendors. It’s loud. It’s disruptive. It’s visible.

But what about the silent killer on your P&L?

Deductions.

While you’re dealing with a 12% spike in landed cost due to tariffs, your finance team might also be coding away $10K, $20K, even $50K per quarter in “unrecoverable” retailer deductions. It’s the stuff that doesn’t make the headlines—but quietly eats away your margin.

Let’s take a fictional example. A Midwest snack company gets hit with new tariffs on packaging film imported from China—driving up their COGS by 15%. They brace for impact. But what really stings? They uncover $72,000 in invalid shortage deductions buried in their books from the past 12 months. That’s money they never budgeted for. Never even questioned.

This is where most brands go wrong. They treat deductions as a cost of doing business. But in high-tariff environments, everything should be questioned. Especially line items that fly under the radar.

Here’s the math: Let’s say your gross margin is 30%. To recover $72,000 lost to deductions, you'd need to sell $240,000 more in product just to break even. Or you could recover it.

The bottom line? Tariffs punch you in the gut. Deductions finish the job—unless you do something about it.

Take Action:

 Tariffs are loud. Deductions are quiet. But both matter. If you’re navigating a cost spike, don’t leave recovery money on the table. We can help.

Contact us