Reflections on Tariff Commentary That Worked or Didn’t in Q1’25 Earnings Season
The first quarter’s earnings season was one of the toughest periods for companies and investor relations teams to navigate since COVID. Economic uncertainty, fueled by highly fluid political actions and punctuated by the tariff announcements made on April 2, 2025 (i.e., Liberation Day), lifted the VIX to its highest level since March 2020.
With market volatility and economic uncertainty at extreme levels, communicating forward expectations around each company’s potential impact from tariffs, as well as plans to mitigate and offset those impacts, was critical during this most recent earnings season. The sell-side was clearly scrambling to assess the model impacts, while the buy-side was busy selecting winners and losers and tweaking their portfolios accordingly.
Q1 Tariff Scorecard
Our team at Alpha analyzed how US-based companies communicated this quarter, focusing on the following factors:
- Were the potential impacts of tariffs acknowledged?
- Was a mitigation plan for tariff impacts communicated?
- Were cost impacts discussed or not?
We then juxtaposed each of these factors against whether forward-looking guidance was raised, lowered, maintained, or not provided. Lastly, we examined the same-day stock price performance of nearly 1,400 US-listed companies reporting earnings between Liberation Day (4/2/25) and the breakthrough in China tariff negotiations (5/11/25), which helped our research team identify the following:
A) Future Financial Impact Acknowledged?
- In every case, no matter what a company did with its forward guidance, taking a proactive approach to acknowledge the potential future financial impact of the tariff situation helped those companies outperform those that did not in Q1’25.
- In the case of lowered guidance, companies that addressed the impact of tariffs outperformed those that punted to future quarters by an average of 440 basis points.
- Allowing investors to speculate whether there was more downside to come was clearly a losing communications strategy.
B) Risk-Management Strategy Communicated
- We observed similar results for companies who articulated a proactive risk management strategy, as those that did so outperformed, on average, by 40bps versus those that did not.
- The companies most helped were those that also raised their EPS guidance in conjunction with risk management discussions, as they saw a 250bps bump versus those that didn’t talk to risk mitigation.
- Combining an explicit risk management strategy with a formal guidance discussion clearly gave investors greater confidence in the outlook.
C) Cost Increase Estimated?
- The last item we reviewed was the quantification of forward-looking, tariff-associated cost increases.
- Admittedly these were the most difficult data points for companies to provide given how fluid the situation was and remains. As a result, we were not surprised to see that only 20% of our sample set provided explicit cost impact ranges.
- Still, the data once again generally favored taking a proactive approach during this challenging quarter as those companies that made this effort outperformed those that did not by 70 basis points on average.
Looking Forward
As we look to the rest of the year, the tariff situation will continue to evolve. There is little chance that companies will obtain adequate clarity until much later in the year, which will put the spotlight on IR communications each quarter in 2025. The Alpha team has been counseling following these “golden rules” to manage the tariff uncertainty going forward:
1) Emphasis on Transparency & Proactive Communications
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- Be transparent about tariff exposure, cost pass-through plans, and supply chain vulnerabilities.
- Use earnings calls, investor presentations, and SEC filings to clearly outline tariff implications and changes in expectations as they occur.
2) Frame Tariffs as Part of a Broader Strategic Narrative
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- Integrate tariff impact into long-term strategy messaging — e.g., diversification of manufacturing, nearshoring, or automation.
- Present customer relationships and solutions in a broader, more strategic lens than one that is price-sensitive and transactional.
- Link operational responses to investor themes like resilience, agility, and cost discipline.
3) Highlight Margin Management & Cost Mitigation Actions/Ability
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- Clearly communicate cost-offset actions and opportunities.
- Quantify impacts where possible (e.g., “tariffs added $XXM in costs, but pricing recovered YY%”).
4) Display Clear Pulse on Customer/Stakeholder Sensitivity
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- Demonstrate understanding and customer focus — avoid appearing to use tariffs as an excuse for price hikes.
- Balance investor interests with consumer sentiment in messaging.
5) Frame Geopolitical Risks & Mitigation
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- Provide clarity on geographic revenue exposure, regulatory risks, and contingency planning.
- Include geopolitical risk maps or scenario planning slides in investor materials.
6) Be Prepared to Provide Timing & Earnings Guidance Adjustments
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- Clearly explain whether guidance changes are temporary or reflect structural shifts.
- Use “low/high case” guidance ranges or scenario-based outlooks where uncertainty is high.
7) Reinforce the Core Tenets of Your Strategy
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- Messaging needs to remain consistent with the long-term strategy.
- Shift your IR program to remain highly proactive and capitalize on uncertainty across the sector — this includes planning your next Investor Day event!
Conclusion
In summary, effective IR and communications strategies regarding tariffs tend to emphasize clarity, strategy, and control. The goal is to reduce perceived risk, demonstrate a clear pulse on various stakeholder sensitivities, show active management, and keep stakeholders aligned even in a volatile policy environment.
As we move through the rest of the year all companies are going to need to embrace these golden rules. Our integrated, corporate-focused communications team can help support your critical stakeholder communications, and we’d enjoy the opportunity to our share experiences and considerations surrounding these issues when you’re ready.
Source Data: S&P Capital IQ and Alpha IR Group
