In addition to making American products less attractive in China, Trump's tariffs increase the cost-of-goods for any U.S.-based company whose products or components are manufactured in China.

Normally, vendors would simply raise prices to compensate. But that's not happening, according to Dr.  P.K. Kannan at the University of Maryland's Robert H. Smith School of Business. Apparently even the huge retailers (like Target and Walmart) are "taking every step necessary to prevent raising prices."

What's up with that? Kannan believes that retailers understand that over the past few decades of globalization, consumers have come to expect low prices, thereby making price jumps "a last resort because, in short, we're too cheap."

With all due respect, that's a dumb strategy. While buyers may like and expect a low price, what actually constitutes "a low price" is very much in the eye of the individual beholder. That's where marketing comes in.

When it comes to pricing, the main function of marketing is managing customer expectations. And since the tariffs are a well-known economic factor, they provide a perfect excuse for you to raise price and come out looking good while you do it.

In a previous post, I provided the three basic guidelines for raising your price without alienating customers. Here's a quick summary:

  1. Have a Credible Reason. Customers aren't stupid. They know that sometimes companies must raise their price. The trick is providing a reason better than "because we want more money." A frank admission that your costs are going up is perfectly acceptable, especially if there's a well-publicized backstory (like a trade war.)
  2. Provide Plenty of Warning. Customers hate surprises. In your regular communications with your customers (ads, newsletters, social media) explain what's going on and gradually build your case for a price increase. Keeping customers informed and involved makes it less likely they'll bolt (or hold back from buying) when they learn they'll have to pay more.
  3. Give Existing Customers a Discount. For example, if to remain profitable, you must raise your average price by 15 percent, raise your price 20% for new customers but only 10% for current customers. Giving current customers favorable treatment shows you value them and are committed to giving them the best deal possible.

With those basic principles in mind, here's how to turn tariffs to your marketing advantage. This is best illustrated by example.

First example. Let's suppose you're a retailer. Rather than assume customers won't tolerate a price increase, you might run ads like:

Tariffs will mean higher prices, so do your Christmas shopping NOW.

This marketing message accomplished a great deal. First, it helps you clear your inventory and capture wallet share early in the season. The message also warns buyers that you may be raising prices, thereby lessening buyer surprise when you're actually do so.

More important, this "buy now" message affixes blame for the higher prices where it belongs: on the tariffs. This positioning against a known economic problem prevents buyers from assuming that you're merely getting greedy.

Second example. Let's suppose you're a business-to-business provider. Rather than surprise clients with a sudden price increase, send them a letter that:

  1. Reminds them that we're in a trade war.
  2. Warns them that it's affecting your cost-of-goods.
  3. Explains the Herculean efforts you've undertaken to avoid raising prices.
  4. Promise them an "existing customer" discount if you actually increase your price.

Once again, this approach affixes blame where it belongs (on the tariffs) and shows that you're trying to shield your customers from the impact of those tariffs on their own businesses. That makes you a hero... even as your hiking your price.