Tariffs, Shortages, and Deductions: The Triple Threat Killing Supplier Margins

You know that moment in a storm when the rain’s pounding sideways, the wind’s howling, and lightning cracks above your head—and all you can do is brace yourself?

That’s what it feels like for many suppliers right now.

Tariffs are inflating landed costs, inventory shortages are delaying deliveries, and retailer deductions are quietly draining your bottom line.

Alone, each of these is a problem. Together, they’re a triple threat—and for too many brands, they’re pushing already razor-thin margins into the red.

This isn’t a future scenario. It’s happening now. And unless finance leaders take action, the compounding effect could force hard decisions—like cutting staff, pausing innovation, or pulling back on growth.

But it doesn’t have to be that way.

Let’s Break Down the Storm

1. Tariffs: The Front-End Punch

The latest round of U.S. tariffs on Chinese imports—some jumping to 30%—is hitting core categories like electronics, apparel, and industrial parts. And many suppliers? They don’t have the pricing power to simply “pass it on.”

A mid-sized home goods brand we’ll call “Brunswick” saw its COGS jump 18% overnight on key SKUs. With retailer contracts locked in, they had two choices: absorb the cost or eat into marketing and headcount.

Sound familiar?

2. Inventory Shortages: The Disruptive Middle

Now layer in shipping delays, port congestion, and raw material scarcities. It’s not just a supply chain headache—it’s a deduction trigger.

Late shipments? Wrong quantities due to fill rate issues? Backorders and substitutions?

Retailers don’t just shrug it off—they issue chargebacks. Even if the cause was a global shipping crisis, you’re on the hook.

One apparel brand shared that they racked up $93,000 in shortage deductions in just one quarter due to fulfillment lags from their Vietnamese factory. That wasn’t a demand issue—it was a logistics domino effect.

3. Deductions: The Back-End Bleed

Here’s the kicker: while you're fighting to reduce freight or optimize sourcing, deductions often go unchecked. They get coded as “cost of doing business.” But they’re not.

They’re recoverable. They’re preventable. And when left alone, they grow.

Most suppliers recover less than 50% of the deductions they dispute. Some never dispute them at all.

Why This Triple Threat Is So Dangerous

It’s not just that each problem costs money. It’s that they compound:

• Tariffs increase landed costs.

• Shortages cause delivery issues.

• Delivery issues trigger deductions.

• Deductions quietly erode margin.

• Eroded margins reduce your ability to invest in fixing the root problems

And round it goes.

The result? A CFO with a margin gap to close and very few levers left to pull.

What Finance Teams Can Do Now

Here’s the good news: while you may not control global policy or ocean freight delays, you can take action on deductions.

Here’s how:

Audit Your Deductions Aggressively Start with a 12-month lookback. What’s your recovery rate? What types of claims keep repeating?

Prioritize Retailer Policies Knowing what’s valid—and what’s not—is half the battle. An expert recovery firm will know these policies inside and out.

Don’t Rely on Software Alone AI can help categorize and flag claims, but it can’t negotiate with buyers, interpret exceptions, or analyze systemic errors. Human-led recovery is critical.

Treat Deductions as a Cost-Saving Line Item If you’re trying to offset tariff hikes or inventory issues, this is one of the few areas where you can reclaim lost margin.

Final Word: Fight the Storm—Strategically

The pressures facing suppliers right now aren’t going away soon. But they don’t have to sink your business, either.

You can build stability in an otherwise volatile environment by treating deduction recovery as a key pillar of your margin defense.

The wind may still blow. But at least you won’t be standing in the rain without an umbrella.

Take Action

Ready to recover what’s rightfully yours? HRG helps you fight back against deduction losses—so tariffs and shortages don’t get the last word.

Schedule a no-cost deduction assessment today

Contact us