If you’re a corporate, the simplest way to “mitigate” tariffs is to raise prices to consumers.

That’s obvious, right? I mean, Donald Trump says it’s not true, but he’s a compulsive liar. He’d raise prices to consumers if it was him in the board room, I can assure you of that.

There are, of course, all sorts of reasons why corporates may not raise prices to consumers, or anyway not pass along the entirety of any tariff costs. The most weighty considerations in that regard are the perceived health of household balance sheets and market share.

If I’m management and I think consumers are flush, I’ll raise prices. Because f-ck ’em. What do they need with money they might otherwise save? What are they gonna do? Retire one day? Not bloody likely! And let’s face it: They’re not gonna save it. They’ll just fritter it away on something (else) they don’t need, so I may as well take it from them before somebody else does. What’s the alternative? Tell my shareholders I feel bad for the customer? GTFOH, as the kids say.

If, on the other hand, I think consumers are tapped out, or getting there, I might decide against raising prices. Particularly if there are trade-down alternatives to what I sell. Everybody wants Bush’s beans in good times, but when budgets are tight, Great Value tastes just as good. Mostly because it’s the exact same damn beans, only with a lot more salt. You’re just paying for the fancy label and a can that won’t give you botulism.

In addition to concerns about consumers’ capacity to absorb price hikes and preserving market share, I might also hesitate to raise prices if the President of the United States tells me not to “or else.” Even if he doesn’t say what he means by “or else,” I don’t want to find out unless I have to, so maybe I’ll just pass along 40% or 30% of his lunatic tariffs instead of the 75% or 90% I’d pass on otherwise, and hope he doesn’t notice.

In that scenario, my margins are going to suffer, and that’s no good. But maybe I can make it up with higher volumes and hope shareholders don’t notice. Or don’t care as long as the bottom line doesn’t take a hit. Push come to shove, I can always put off those badly-needed plant upgrades and spend that money to reduce the float.

Who knows how this is all going to pan out going forward, and a lot obviously depends on whether, to quote from Tuesday’s ISM services anecdotes, “The tariff talk turn[s] out to be much more bluster than actual policy.” But it’s worth noting that although Q2 results boasted a very high beat rate for both EPS and sales, margins actually contracted QoQ.

There’s the chart. It’s from Goldman’s David Kostin. Q2 2025 was the first quarter in five during which S&P 500 margins dipped.

As the figure also shows, company analysts expect a quick rebound on the way to 125bps worth of margin expansion over the next six quarters. Kostin suspects that might be a little too optimistic. “Q2 results so far reflect modest pressure from tariffs that should increase in coming quarters but does not appear to be reflected in analyst forecasts,” he said.

For 2026, he sees aggregate (i.e., index-level) EPS of $280. That’d represent healthy YoY growth versus this year, but it’s well below bottom-up consensus (i.e., the sum of company analysts’ forecasts), which sits at $302.

“On the positive side of the ledger, results, guidance and revisions thus far suggest corporates will be able to offset much of the tariff pressure [and] fiscal policy should also be a modest tailwind,” he went on, before cautioning that “the price increases which protect margins create downside risk to real revenue growth.”