Why Services Firms Are Worried About Tariffs Too

From law to consulting firms, services firms don’t face the same direct pressure from U.S. tariffs that the goods sector does. However, that doesn’t mean they’re in the clear.

U.S.-based goods firms are widely seen as facing the greatest threat from the Trump administration’s burgeoning trade war with China and looming blanket tariffs on most countries. After all, it is their imports of Chinese-made and other foreign-manufactured items, from clothing and furniture to toys and the semiconductors used in chips for electronics like smartphones, that are in the direct line of fire.

But services firms are also highly exposed. While they don’t face a direct threat, because they tend not to import physical goods from abroad, they’re squarely in the crosshairs because their bread and butter is working for goods companies. The mechanism is indirect, but the result is the same: Any downturn in business for goods companies quickly translates into a downshift for the services companies working for them.

A forthcoming report, “Tariffs and Business Uncertainty: The Current State of Play, May 2025,” from PYMNTS Intelligence, paints a picture of mounting concern, not just among firms directly importing goods but within the services sector as well. More than half of service firms are now anticipating significant supply chain disruptions for the companies they work for. Whether you’re an importer of mattresses or a consulting firm advising that importer on retail and wholesale strategies, you’re probably not sleeping well.

Services, including those sold by consulting, law, accounting and financial services companies, made up more than 72% of GDP in the last three months of 2024, the most recent data from the St. Louis branch of the Federal Reserve shows.

Amid the White House’s wildly fluctuating policies and signals on tariffs, American businesses, particularly middle-market ones with annual revenues between $100 million and $1 billion, are bracing for the potential fallout.

That requires dealing with the unknown, a fuzzy factor that businesses hate, simply because they need to plan, invest, order and ship typically many months in advance. The PYMNTS Intelligence report, based on a survey of 60 heads of payments conducted in March, underscores how “pervasive” uncertainty is clouding short-term outlooks for trade, consumer spending and the broader economy.

For companies operating in the goods space — including sectors such as manufacturing, retail, wholesale trade, construction, and food and beverage distribution — the negative impact of tariffs is becoming starkly clear. More than half of middle-market goods firms now believe the levies will be detrimental to their business, a notable increase from the prior month, when positive and negative outlooks were split equally.

The primary concern for these firms is tangible: supply chain strain. Nearly 9 in 10 goods firms expect shipment delays or supply disruptions. The vast majority also anticipate higher raw material costs, increases that would get passed on to consumers, who may not be willing to pay more. Meanwhile, two-thirds (68%) foresee difficulty exporting their goods due to retaliatory tariffs from China, and potentially from other countries.  

More than half of services firms surveyed reported expecting tariffs to result in product delays or shortages at goods companies. A substantial majority (64%) also anticipate higher material costs, just like their counterparts in the goods sector.

How confident are firms of all stripes in their ability to navigate these challenges? The answer, according to the report, is concerning. A quarter of the heads of payments surveyed across both goods and services companies expressed a lack of confidence regarding their firms’ ability to handle supply chain disruptions.

In a warning sign, overall strong confidence levels dipped slightly from the prior month. The report finds that respondents at goods firms are less likely than those at services firms to express high levels of confidence in their ability to adapt. Furthermore, firms facing high levels of overall business uncertainty are significantly less confident in managing supply chain challenges, with 40% reporting little or no confidence in this area.

Read more:

Microsoft Raises Xbox Prices, Citing ‘Market Conditions’

Concerns About Tariffs Drive Widespread Decline in Consumer Confidence

Fed Survey Says Pervasive Uncertainty Hampers Companies’ Hiring and Growth Prospects

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