The 145% US Tariff Waiting Game: Should Your Business Absorb Costs or Adjust Prices Now?

With 145% US tariffs on Chinese goods potentially at a temporary peak as trade talks (May 9-10, 2025) unfold, businesses face a critical choice: absorb crippling short-term costs hoping for quick relief, or raise prices now and risk market share. Strategic deployment of a Hong Kong company can offer financial and operational flexibility to better navigate this high-stakes waiting game and implement a more resilient response.

The global trade arena is currently gripped by a high-stakes drama, as US-China trade talks commenced today, May 9, 2025, in Switzerland. These discussions are unfolding against the stark backdrop of punitive 145% tariffs imposed by the United States on a wide array of Chinese imports since April, a move that sent immediate shockwaves through international supply chains.

For countless businesses, particularly those in e-commerce, trading, and sourcing, this is not an abstract economic headline; it’s an urgent operational crisis. The biggest mistake businesses often make when confronted with such sudden and severe tariff hikes is to either react with panicked, ill-considered price adjustments or, conversely, to remain paralyzed by indecision. Compounding the complexity, recent statements from President Trump on May 8th, suggesting tariffs "could not get higher than 145%," coupled with reports that his administration is actively considering slashing these duties to a range between 50% and 54% as early as next week to facilitate negotiations, have intensified the current strategic dilemma.

This "waiting game" forces a critical question: should your business absorb the potentially ruinous short-term costs, betting on a swift de-escalation, or should you adjust prices now to protect margins, risking customer backlash if relief indeed materializes quickly?

April's Tariff Storm: A Sudden Escalation to 145%

The path to the current 145% tariff peak was alarmingly swift. Following President Trump's "Liberation Day" announcement on April 2, 2025, which outlined reciprocal tariffs on imports from numerous countries, the focus rapidly intensified on China. Baseline tariffs on Chinese goods were dramatically increased, reaching the 145% mark by mid-April on a broad spectrum of products, from consumer electronics and apparel to industrial components. The explicit aim was to address perceived trade imbalances and encourage a shift in manufacturing.

The immediate repercussions were palpable. Businesses, many already navigating delicate post-pandemic supply chains, faced an abrupt surge in their cost of goods. Importers reliant on Chinese manufacturing saw profit margins instantly threatened. The ripple effects extended through logistics networks, with reports, such as the OOCL Violet ship facing an estimated $417 million in new tariffs for a single voyage, illustrating the sheer scale of the financial impact. Beijing, not unexpectedly, responded with its own retaliatory tariffs, imposing duties of at least 125% on U.S. goods, further complicating the global trade map and adding another layer of financial pressure on businesses involved in bilateral trade. By late April, CEOs of major U.S. retailers were publicly warning of inevitable price increases for consumers and potential product shortages if the high tariff regime persisted. This set the stage for the urgent calls for negotiation and the intense scrutiny now fixed on the talks in Switzerland.

A Glimmer of Hope? Mixed Signals Ahead of Crucial Swiss Talks

The lead-up to the May 9-10 talks has been characterized by a degree of strategic ambiguity, keeping businesses on edge. On May 7, 2025, President Trump adopted a firm public stance, unequivocally stating there would be no lowering of the 145% tariffs ahead of the negotiations. He emphasized that the existing tariffs provided crucial leverage and asserted, contrary to Chinese accounts, that the talks were initiated by Beijing. This maintained an atmosphere of heightened tension.

However, a notable shift in tone occurred just a day later. On May 8, President Trump expressed a more optimistic outlook, describing the upcoming meeting with Chinese Vice Premier He Lifeng, U.S. Treasury Secretary Scott Bessent, and Trade Representative Jamieson Greer as potentially "very amicable." He suggested China was eager to reach an agreement and liberalize its economy, and significantly, stated that tariffs "could not get higher than 145%." This rhetoric of "peak tariffs" was substantially bolstered by contemporaneous reports from multiple outlets. These reports indicated that the Trump administration was actively weighing a concrete plan to slash the 145% tariff on Chinese imports by more than half, potentially reducing it to a range between 50% and 54%. This reduction could reportedly be implemented as early as the week following the initial talks, designed specifically to facilitate ongoing negotiations and alleviate the acute disruptions to supply chains. This potential for a significant, and relatively imminent, rollback is precisely what fuels the current "waiting game" and the difficult strategic choices facing businesses.

The Strategic Tightrope: Absorb the Blow or Pass on the Pain?

With the talks now underway, businesses find themselves walking a strategic tightrope. The core dilemma is whether to absorb the severe financial impact of the current 145% tariffs in the short term, or to pass these costs on to customers through price increases. Each path carries substantial risks and potential rewards.

Opting to absorb the costs is essentially a gamble on a swift and significant reduction in tariffs. If the talks yield a positive outcome next week, and tariffs are indeed slashed to the 50-54% range, companies that held their prices steady might preserve customer loyalty and maintain their market share, potentially even gaining an edge over competitors who reacted too quickly with price hikes. This strategy might be tenable for businesses with healthier profit margins, strong cash reserves, or those selling products where price elasticity is high, and customers are particularly sensitive to increases. However, the risk is considerable. If the talks stall, or if tariff reductions are less substantial or delayed, absorbing 145% duties for any extended period could erode profits to unsustainable levels, jeopardizing financial stability. Many businesses, particularly small and medium-sized enterprises in sectors like e-commerce or trading, may not have the financial buffer for such a prolonged hit.

Conversely, the decision to adjust prices immediately by passing on the tariff costs aims to protect profit margins from the outset. It reflects a more cautious approach, acknowledging the new, albeit potentially temporary, cost reality. This might be a necessary move for businesses operating on thinner margins or those with long production and shipping lead times, where absorbing such a massive cost increase, even for a few weeks, is not feasible. The primary risk here is customer alienation and loss of competitiveness. If competitors, particularly larger ones with deeper pockets, choose to absorb the costs, or if the tariffs are indeed quickly reduced, businesses that raised prices might find themselves at a significant disadvantage, struggling to regain price-sensitive customers. The common client question, "How can I maintain my business viability with these sudden cost surges?" underscores this acute pressure.

The "right" decision is rarely universal and depends heavily on a company's specific circumstances: its financial health, the nature of its products and customer base, the competitive landscape, its inventory levels, and its overall risk appetite. Understanding these internal factors is crucial before making a call.

The Hong Kong Advantage: Structuring for Resilience in the Tariff Waiting Game

In this volatile environment, the way a business is structured and where it is based can significantly influence its ability to navigate the "waiting game." A robust corporate structure, such as that offered by a Hong Kong company incorporation, can provide critical financial and operational flexibility. Hong Kong's unique position as a global trade and financial hub, with its simple Hong Kong tax system and strong legal framework, becomes particularly valuable.

Effective Hong Kong accounting and transparent financial management are foundational. Access to diverse banking solutions in Hong Kong, including agile Fintech partners like Airwallex and Wise, alongside traditional banks, can be pivotal for managing cash flow. This is especially true if a business opts to temporarily absorb tariff-related costs; having efficient mechanisms for international fund transfers and access to working capital can make a significant difference. Businesses often ask, "How can I manage my international payments more effectively during such disruptions?" – a Hong Kong setup offers answers.

Beyond immediate financial management, a Hong Kong company setup facilitates greater supply chain agility. As a premier logistics and sourcing hub, Hong Kong provides a strategic base from which to explore alternative suppliers or even manufacturing locations outside of mainland China, thus diversifying risk away from routes directly impacted by bilateral US-China tariffs. This is a key consideration for e-commerce businesses and international traders. For those wondering how to open a company in Hong Kong to tap into these benefits, the process is notably straightforward, especially with professional guidance.

Furthermore, a Hong Kong entity can be instrumental in market diversification. If the US market becomes temporarily or persistently challenging due to tariffs, a Hong Kong company provides a well-regarded platform to access other Asian and international markets, reducing over-reliance on a single, volatile trade corridor. The stability of Hong Kong law also offers a degree of predictability for structuring international sales and procurement contracts, allowing businesses to potentially build in clauses that address tariff volatility. While not a direct shield against specific tariffs imposed by other nations, the overall efficiency of a Hong Kong corporate structure, including the potential for Hong Kong offshore tax exemption on profits derived outside Hong Kong (subject to specific conditions), contributes to a company's overall financial resilience, making it better equipped to withstand economic shocks. Appointing a reliable Hong Kong company secretary ensures ongoing compliance with local regulations, allowing business owners to focus on these pressing strategic decisions. The mandatory Hong Kong auditing requirements also ensure financial transparency, which can be crucial when seeking finance or reassuring partners during uncertain times.

Beyond the Binary: Hybrid Strategies and Contingency Planning

The choice isn't always a stark one between fully absorbing costs or passing them all on. Businesses can explore hybrid strategies. This might involve a phased approach to price increases, allowing customers to adjust gradually. Negotiating with suppliers to share some of the tariff burden, even temporarily, could be another avenue. Some companies might explore offering different product versions or service tiers, with tariff impacts reflected only in certain segments.

Clear and transparent communication with customers is vital, regardless of the chosen path. Explaining the situation and the reasons behind any potential price adjustments can help mitigate negative sentiment. Most importantly, businesses need robust contingency plans. What if the talks in Switzerland result in tariffs being slashed to 50%? What if they only drop to 100%? What if, against current expectations, they remain at 145% for several more months? Modelling the financial impact of these different scenarios allows for more informed decision-making now and quicker reactions as the situation evolves.

As the Swiss Talks Unfold: What Businesses Should Monitor

With the US-China trade talks actively in progress today, May 9, and continuing through May 10, businesses should remain vigilant and monitor several key indicators. Official communiques from both the US and Chinese delegations will be critical, though initial statements may be carefully worded. Market reactions, particularly in equities and currencies, can offer early sentiment readings. Press conferences or statements from President Trump, Treasury Secretary Bessent, Trade Representative Greer, or Vice Premier He Lifeng in the coming days will be intensely scrutinized for definitive news on tariff levels. Businesses should rely on credible financial news outlets and official government channels for updates, avoiding speculative rumour.

The current "waiting game" surrounding the 145% US tariffs on Chinese goods is undeniably a period of intense pressure and uncertainty for businesses globally. The decision of whether to absorb the immediate, potentially severe costs or to adjust prices now is a complex one, with no easy answers. While the outcome of the May 9-10 trade talks in Switzerland remains to be seen, the strong indications from the US administration that the current 145% tariff level is a peak and likely to be significantly reduced offer a strategic focal point. In this fluid environment, agility, informed scenario planning, and a resilient operational and financial structure are paramount. A strategically established and well-managed Hong Kong company can serve as a vital component of that resilience, offering enhanced flexibility in financial management, supply chain operations, and market access, thereby empowering businesses to not just endure the turbulence, but to emerge better positioned for whatever the new trade landscape may hold.