Tariffs Test Margins While Companies Invest to Protect Profitability, Study Finds

According to “How Middle-Market Business Uncertainty Rewrote 2025,” tariffs, shifting policy signals and uneven global demand combined to make uncertainty the defining feature of 2025 for middle-market firms, as PYMNTS Intelligence found. The report is part of PYMNTS Intelligence’s Certainty Project and examines how companies adjusted product, operational and financial strategies under persistent tariff pressure.

The findings are based on a survey of 60 CFOs at U.S.-based middle-market companies with annual revenues between $100 million and $1 billion, conducted from Nov. 20 to Nov. 26. By focusing on CFO perspectives, the study captures how tariff volatility is translated directly into financial planning, cost structures and investment decisions.

Uncertainty Hits Goods Firms Harder Than Services

The data shows a sharp divide between goods-producing firms and services providers. More than one-third of CFOs at goods firms reported high operational uncertainty by late 2025, matching peak levels earlier in the year and rising sharply from pre-tariff conditions. Services firms, by contrast, were far more insulated, with a majority reporting low uncertainty levels.

That asymmetry reflects the reality of tariffs’ direct exposure. Goods firms face higher input costs, supply-chain disruptions and pricing pressure that services firms can often avoid. As a result, uncertainty for manufacturers and distributors shifted from background risk to a day-to-day operating constraint by mid-2025.

Margin Pressure Becomes The Financial Fault Line

Nowhere is the impact clearer than on margins. More than four in 10 CFOs at goods companies reported declining operating margins in 2025, while only 12% saw improvements. Services firms fared better but were hardly immune, with more reporting margin declines than gains.

Uncertainty, rather than sector or size alone, emerged as the dominant factor. More than three-quarters of firms operating under high uncertainty reported margin deterioration, compared with roughly one-fifth or fewer among low- and medium-uncertainty companies. Larger firms proved better positioned to cushion the blow, often by raising prices or exiting underperforming product lines.

How Companies Are Countering Tariff-Driven Margin Stress

Facing sustained pressure, companies shifted into what PYMNTS Intelligence describes as “reset mode.” Rather than chasing aggressive growth, many prioritized defensive strategies in 2025.

More than one-third of CFOs focused on strengthening risk management and compliance, while roughly 30% emphasized supply-chain resilience and improvements to customer experience or service delivery.

The response differs notably between goods and services firms. Goods companies are leaning heavily into supply-chain diversification, vendor renegotiation and pricing discipline to offset tariff costs. Services firms, less exposed to direct tariff impacts, are concentrating on operational efficiency and selective margin protection rather than wholesale restructuring.

Technology investment took a back seat in 2025, with just 15% of firms prioritizing artificial intelligence and even fewer advancing digital transformation initiatives.

But the investment trends are shifting: Looking to 2026, one-quarter of CFOs say digital transformation will become a priority, nearly double the share from the prior year, signaling a more proactive phase focused on efficiency and scalability.

Margins, Not Tariffs Alone, Will Shape The Next Phase

As companies enter 2026, tariffs remain unresolved, but the response is evolving. Nearly two-thirds of firms expect growth, even as confidence varies sharply by uncertainty level. The lesson from 2025 is that margin resilience depends less on predicting policy outcomes and more on building flexible cost structures, resilient supply chains and targeted investments that can absorb volatility.

Tariffs may have set the pressure in motion, but margins are now firmly in focus. And increasingly, companies are playing a longer game to protect profitability while preparing for whatever trade policy delivers next.

At PYMNTS Intelligence, we work with businesses to uncover insights that fuel intelligent, data-driven discussions on changing customer expectations, a more connected economy and the strategic shifts necessary to achieve outcomes. With rigorous research methodologies and unwavering commitment to objective quality, we offer trusted data to grow your business. As our partner, you’ll have access to our diverse team of PhDs, researchers, data analysts, number crunchers, subject matter veterans and editorial experts.