Your wholesale price is fixed. Your landed cost is not. Here is what breaks first.
You signed a wholesale price a year ago based on a landed cost that no longer exists. That gap does not go away on its own. It has to be renegotiated, absorbed, or it eats the margin that made the deal worth doing.
A wholesale price agreement is built on a landed cost assumption at the moment it is signed. Tariff policy in 2025 and 2026 has moved fast enough that a landed cost locked in a year ago can be meaningfully wrong today, while the wholesale price in the contract has not moved at all. That gap is not a rounding error. On thin CPG margins it can be the difference between a profitable SKU and a loss leader you are contractually required to keep shipping.
Retailers are already responding structurally, not just tolerating it. Reporting shows brands are passing through somewhere between 51% and 100% of tariff-related cost increases where they can, and retailers are increasingly moving away from ad hoc, dynamic pricing changes toward structured, permanent price resets built to absorb this kind of volatility going forward.
What actually breaks when the tariff moves and the contract does not
| What is fixed | What just moved | Who absorbs the gap by default |
|---|---|---|
| Wholesale price per case | Your landed cost of goods | You, unless the contract is renegotiated |
| Trade spend commitments | Your gross margin per unit | You, which pressures the trade spend budget itself |
| Retailer shelf price | Consumer price sensitivity | The retailer, which is why they move slowly here |
Living agreements are replacing static ones for exactly this reason
The structural fix industry-wide is a move from static, multi-year wholesale contracts toward living agreements that build in cost-sharing mechanisms between supplier and retailer, so a tariff shock does not require an emergency renegotiation every time. If your current retail agreements were signed before this became standard practice, that is worth revisiting proactively rather than waiting for the next tariff move to force the conversation.
A contract that assumes your landed cost never moves is a contract written for a world that stopped existing. The brands protecting margin right now are the ones who went back and built in a mechanism for when it moves again.
The trade spend squeeze this creates
Brands trying to hold margin neutral under tariff pressure are frequently doing it by pulling back on trade spend and shelf promotions rather than raising the wholesale price, which is often the slower and more painful lever to move contractually. That means a tariff shock in your supply chain can show up months later as a quieter promotional calendar, not as a renegotiated price, and a buyer will notice the reduced promotional support before they connect it to your cost structure.
Questions founders ask
What happens if a tariff increases my cost after I have signed a wholesale price agreement?
By default, you absorb the difference, since a fixed wholesale price does not automatically adjust for a landed cost increase. The correct move is to proactively renegotiate a cost-sharing mechanism with the retailer rather than absorb the full gap silently.
How much of a tariff cost increase are brands passing through to retailers?
Reporting suggests brands are passing through roughly 51% to 100% of tariff-related cost increases where contract terms allow it, with retailers increasingly moving toward structured, permanent price resets rather than repeated ad hoc adjustments.
What is a living wholesale agreement?
A living agreement builds a cost-sharing mechanism into the contract itself, so that a shift in tariffs or landed cost does not require an emergency renegotiation each time, unlike a static, fixed-term wholesale contract.
Why would a brand cut trade spend instead of raising its wholesale price after a tariff hit?
Wholesale price changes are often the slower, more contractually rigid lever, while trade spend and promotional support are easier to adjust in the near term, so brands under margin pressure frequently pull back there first.