The custom integration industry — and, indeed, much of the business world — has wrestled with growing uncertainty about the economic climate in the months ahead, largely due to the trade tariffs now being imposed by the Trump administration.
To be candid, many of the indicators haven’t been great. Equity markets suffered sharp declines, with the benchmark S&P 500 index initially falling about 10% from all-time highs and then eventually rebounding to low-single-digit losses. Following “Liberation Day” announcements, stock futures cratered. By the end of the week, U.S. equities had plummeted 10.5% (S&P 500) and 11.4% (Nasdaq), calling to mind some of the worst trading days in U.S. history and bringing the Nasdaq into bear market territory.
For the sake of discussion, tariffs are defined as additional levies charged to importers (whether manufacturers, distributors or otherwise) who source components or finished goods from specific countries subject to the tariffs.
Experts Have High Concerns Current Tariffs Will Cause Recession
According to a press release that The Conference Board Inc. released March 25, “The Expectations index — which is based on consumers’ short-term outlook for income, business and labor market conditions — dropped 9.6 points to 65.2, the lowest level in 12 years and well below the threshold of 80 that usually signals a recession ahead.”
Moreover, Goldman Sachs on March 30 increased its recession odds within the next 12 months to 35%, a number that closely tracked online betting markets like Polymarket, which had put 2025 recession odds around 39%. Those recession odds then peaked near 67% on Polymarket following “Liberation Day.” Meanwhile, JPMorgan has now officially forecast a recession later this year.
Going back to the March 30 note to Goldman Sachs clients, Jan Hatzius, their chief economist, wrote at the time, “The upgrade from our previous 20% estimate [of a recession] reflects our lower growth baseline, the sharp recent deterioration in household and business confidence, and statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies.” The Goldman Sachs note indicated a higher Personal Consumption Expenditures (PCE) inflation estimate coupled with a reduced 2025 GDP forecast (1%).
All the Tariffs Currently Affecting Integrators
Contrary to a common misperception, it’s not the targeted countries that will pay the tariffs imposed by the Trump administration; it’s solely the American importers that will. For that reason tariffs imposed on other countries still have the potential to impact custom integration firms operating in U.S. markets if the products integrators are selling happen to be sourced from overseas in some way shape or form.
Here, we offer a primer of the tariffs initially proposed, temporarily paused, and then revised and expanded on April 2 during a much-anticipated White House announcement.
- 2018 Tariffs
- The first Trump Administration imposed sweeping tariffs on China targeting a variety of products including solar panels, washing machines and flatscreen TVs, among many others. About $300 billion of those were kept in place by the Biden Administration and subsequently added onto in places.
- 2025 Tariffs
- The second Trump Administration on Feb 4 added an additional 10% tariff to all Chinese goods imported to the U.S., later doubling to 20% on March 4. Moreover the administration announced plans to scrap the “de minimus” exemption for low-dollar-value packages.
- A 25% tariff on all Canadian and Mexican goods was also declared at the start of the administration. These tariffs were then placed on a 30-day pause on February 3, before being paused again for an extra month following trade negotiations.
- On March 12, a 25% tariff rate was placed on all imported steel and aluminum imports.
- On March 24, the Trump administration announced an additional 25% tariff on all goods coming from countries that purchase Venezuelan oil and gas. If imposed, this would further add to tariffs against China.
- On April 2 a new minimum tariff of 10% was announced against all countries, with higher rates for about 60 separate countries. According to a chart that the New York Times published, some of the new reciprocal tariff rates are as follows: China (34%), European Union (20%), Japan (24%), India (26%), South Korea (25%) and Taiwan (32%) based on calculated trade deficits with the countries.
- On April 9, the administration ultimately hiked tariffs on all Chinese goods to 125% while slashing all tariffs across the board (except for China) to 10% for 90 days.
- In response, China upped its tariffs on U.S. goods to 84%.
How These Tariffs Might Affect Integrators
Given the global nature of supply chains these days, tariffs have stoked plenty of anxiety among manufacturers, distributors and integrators across multiple electronics industries. During ISE 2025 earlier this year, vendor executives alluded to all-hands meetings taking place to figure out how to respond if the threatened tariffs actually went into effect. At HTSA’s spring conference, a special roundtable was held with multiple manufacturers ahead of the April 2 tariff announcement. Those conversations have likely only grown more pervasive.
Surcharges
John Clancy, chief sales officer, Crestron, says, “The current U.S. tariff on Chinese imports, including key components in our product lines, stands at 20%. While this does have a direct impact on our landed costs, we have strategically absorbed the majority of this burden to minimize disruption to our customers and maintain market competitiveness.”
He says that, comparatively, tariffs on goods produced in Mexico and Canada pose “…greater challenges due to supply-chain dependencies and cost structures.” Of course, the North American tariff impact remains the most uncertain as President Trump continues to speak behind closed doors with Canadian Prime Minister Carney and Mexican President Sheinbaum.
According to Clancy, “It is our intent to pass these costs along to our dealer/integration partners as a tariff surcharge — not a price increase — and should the full range of tariffs kick in, that surcharge will be 12%.” The virtue of adding a surcharge to an invoice, he says, is transparency about the source of cost increases; this likewise enables dealer partners to converse with their customers and adjust pricing accordingly. “We believe this approach also simplifies our ability to adjust surcharges as tariffs are reduced or removed,” Clancy says. “Things are fluid right now, and we intend to stay nimble, proactive and transparent.”
(Following discussions with Clancy, effective May 1, 2025, a 5% tariff surcharge was announced on all hardware invoices issued by United States-based Crestron Electronics, Inc.)
Price Increases
Richard Jonker, vice president marketing and business development, NETGEAR, emphasizes the component-by-component effect that tariffs will likely have on NETGEAR’s products.
“Only when products are entirely sourced and produced in a country with a tariff will the cost price increase by that same percentage,” he says. “At NETGEAR, we recalculate the price of a total bill of materials, often with more than 400 components, based on price variations for each part.” Jonker says that, since NETGEAR diversified its supply chain, it will be able to limit the impact regardless of which tariffs take effect.
Nevertheless, Jonker does expect our industry to see significantly higher prices due to the conflicting imperatives to pay tariffs and to maintain margin percentages. He offers the following example:
You buy parts and labor for a product for a total of $100 and sell that for $200; then, your margin percentage is calculated as [sales price – buying price] / [sales price]. In this example, the margin is $100, and the margin percentage is 50%. Now, if this were completely sourced with materials affected by a tariff, and the total buying price increased by a 25% tariff, the buying price shoots up to $125. If you want to preserve your $100 margin, your products should now sell for $225. But that is a 44% margin percentage, not the 50% it used to be. So, instead, companies would set the new selling price at $250 to achieve the margin percentage of 50%. So, a buying price increase of $25 would turn into a selling price increase of $50.
“That is why the impact of a tariff is more than a ripple effect,” Jonker says.
Pullback on Investments Due to Uncertainty
Peter Hansen, economist at AVIXA, reinforces the notion that unpredictability, perhaps more than anything else, is the biggest worry.
“Right now, the primary negative is uncertainty,” he explains. “There are some very uncertain aspects, or some cliffs, that are affecting different companies unequally.” That uncertainty involves not only which tariffs will be imposed (or postponed) and when, but also how tariffs might “stack” atop one another.
“These are all additive,” Hansen says. Think of Chinese goods, for example. Suppose a package that formerly enjoyed a “de minimus” exemption is now subject to the original Trump Administration tariffs on China, plus the newly announced tariffs, plus more tariffs on steel and aluminum (or on countries that buy Venezuelan oil or gas). “Now, you’re talking about a ridiculous price increase,” Hansen says.
To be clear, this is not the base case, Hansen hastens to add. However, it does speak to the level of uncertainty and potential for change. “Maybe it’s a 10% tariff,” he says. “But it could be [cumulatively] 25%, 50%…it could be a really, really huge change.” Even the possibility of “really huge change” can produce constrained investment and a defensive crouch.
“Whatever metric you look at, you see a meaningful increase in recession odds in 2025 as compared to the start of the year,” he opines. Equity markets are just one example. “That negativity in the stock market is one of the real-time indicators that the level of positivity has declined so far in 2025,” he says.
Another area where Hansen sees some negativity is in initial starts of construction projects and renovations. However, aspects of the professional AV and electronics industries tend to be further downstream, so the initial impact there may be muted.
Overcharging on Imports
Avi Rosenthal, managing partner at BlueConnect Partners, a consultancy specializing in consumer and IoT technologies, identifies a stressor for manufacturers that others haven’t commented on yet: uncertainty as regards whether a given shipment will be tariffed — and, if so, by how much. Indeed, he says, in some cases, importers don’t find out until the container actually reaches our border. “The good news/bad news here is, there’s no appeals process,” Rosenthal states. “So, if you receive a shipment that’s been under-tariffed, there’s no way to go back and say, ‘There’s a mistake.’ The same way, if there’s a shipment that’s been over-tariffed, it’s very difficult to go back and try to recoup that money.”
What that means for importers, Rosenthal says, is they may receive one shipment of goods for one price and then, for the very next shipment, be charged a different price, even though the rules haven’t necessarily changed. “So, it can be very difficult for them to set pricing to the dealer,” he adds.
Possible ‘Aftermath’ of Tariffs
Ultimately, even if a downturn materializes, Hansen does not expect it to be deep and long-lasting. Instead, he evokes the image of a sine wave or a sideways “S.” As he explains it, “You end up with projects being postponed in the most uncertain window, and then finally happening once the chips fall.” Hansen continues, “That said, to the extent tariffs increase the cost of doing business, the post-uncertainty rebound might not be as strong as the uncertainty-caused short-term drop.”
Meanwhile, Rosenthal predicts the possibility of a continuing manufacturing exodus from China in response to escalating (and stacked) tariffs.
“[Ever since] China became not the best place to build products, we’ve been advising our clients to migrate from China to other manufacturing facilities,” he says. “About five or six years ago, we had 23 contract manufacturers within mainland China; we’re now down to one.”
That manufacturing is now distributed among countries like Taiwan, Malaysia, Thailand, Japan, Vietnam, Mexico and South American nations like Colombia. This also reflects a hard-won lesson from the pandemic years: Don’t put all your eggs in one supply-chain basket.
Rosenthal also opines that, although tariffs are predicated on the idea of boosting domestic U.S. manufacturing, the fact that product “inputs” (e.g., aluminum, steel, raw materials) are not exempted from planned tariffs means it will be difficult even for U.S.-based manufacturers to seize on this policy change to bolster their own success.
After all, there might be no option to buy certain product “inputs” domestically. More broadly, he sees signs that some domestic producers are now raising their own prices to meet the enhanced costs of products imported from abroad. “They have no incentive whatsoever to lower their costs,” he declares, citing a more expensive competitive landscape.
How Manufacturers Are Responding
Clancy notes that Crestron is “… implementing a structured communication plan and has already provided notice of these tariff-related adjustments before they take effect.”
He continues, “Our approach includes direct email communications, regular updates through our partner portal and dedicated account management touchpoints to keep stakeholders apprised of our ongoing strategy.” As noted, the additional China tariffs were first to come into effect, and Crestron is currently absorbing the tariff costs to minimize disruption to partners and end customers. “However,” Clancy says, “should circumstances evolve, we have built flexibility into our plan, allowing us to reassess and adjust our strategy as needed.”
Jonker adds that suppliers like NETGEAR are seeking U.S. stateside options where they exist, as well as opportunities to leverage offshore operations in tariff-exempt countries. “We are constantly second- or triple-sourcing,” Jonker declares. “By diversifying this as much as possible, we maintain a stable supply pipeline.”
Meanwhile, some suppliers like Chang K. Park, Founder and CEO, URC, Inc., have stated that they fully intend to absorb the price increases themselves, rather than pass that on to custom integration clients. He is, however, confident that many of the governments involved will be able to hash out better rates for the tariffs over the next 90 days.
Still others like Island may not even be affected by the tariffs, being able to source all products and materials locally within the U.S., thereby removing the pressure of rising tariffs from their balance sheets.
Update April 17, 2025: Effective May 1, 2025, a 5% tariff surcharge will be added to all hardware invoices issued by United States-based Crestron Electronics, Inc.
How Integrators Are Responding
Against that inflationary backdrop, Rosenthal offers a word of advice to integrators and dealers: “Make sure that your contracts to your customers have the ability to be altered.”
The sales cycle for an integration project can last six months to a year, he notes, but equipment acquisition might not take place until a couple of weeks before the installation commences. “So, it’s important to put clauses into your contract that allow you to change the prices based on manufacturer changes,” Rosenthal underlines.
Although Lavine earlier questioned the viability of this strategy, saying Fortune 500 companies and other powerful clients would balk, the downside risk of leaving yourself exposed is simply too great. “It’s important to protect yourself as an integrator,” Rosenthal adds.
John Loud, president of LOUD Security Systems, Inc., meanwhile, chose to preemptively buy several hundred thousand dollars of product in cash, building up valuable inventory.
“The pricing structure for your products and materials are as low today as they’re pretty much ever going to be for years ahead,” he predicts. “When [prices] go up to 15%, 25% or 35%, that 35% increase is not going to go back to zero…. Just set proper expectations today that it’s not going back to zero.”
“If you don’t have that product available to be able to sell, your technicians aren’t going to be working [and] your salespeople aren’t going to be working,” he states. That sense of stewardship for associates also means Loud is clear-eyed about having to raise prices for his own clients in response to higher product-acquisition costs.
“We’re going to stay within a comfort level of what it costs for us — between all of our marketing, all of our salaries — to be able to invest and obtain new subscribers and retain them in the long run,” he declares.
Final Thoughts
Barring a dramatic and unforeseen change in administration policy, tariffs will continue to shape the economic conversation for months to come. The odds seem good that, in the coming months, we may see more tariff impositions, pauses, exemptions, revocations of exemptions, expansions and revisions.
Temporary measures like stocking up will only get integrators so far — while also perhaps straining their working capital, tying up their line of credit and filling warehouse space. “At best, you’re getting several months of supply, and that’s excellent,” AVIXA’s Hansen says. “But that goes away, and then you have three-and-a-half more years of [pro-tariff policy].” Hence, it’s essential to devise a sustainable long-term strategy.
The word of the day, it seems, will continue to be “uncertainty.” Integrators across the spectrum of residential and commercial spaces should buckle in and follow tariffs developments closely to protect their project profitability and cash flow.
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Another version of this article originally appeared on our sister site Commercial Integrator. Its contents have been tailored to better serve CE Pro audiences.
