Loyalty in a Tariff Economy

(Estimated read time: 6-8 min)

Loyalty is evolving, and fast. From AI-driven personalization to the impact of global tariffs, blockchain, and beyond, the future of customer engagement is being rewritten every day.

That’s why we’re launching Loyalty Disrupted as a reoccurring dive into the disruptive trends shaping loyalty programs worldwide. Expect bold ideas, practical insights, and thought-provoking perspectives designed to help you stay ahead of the curve.

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Earlier in 2025, substantial new tariffs were imposed on imported goods to the United States, and the effects have been unfolding in new ways almost every week since. The stated goal was to strengthen American industries and ensure that U.S. businesses could compete more fairly in global markets. Regardless of where one sits politically, the practical effect has been straightforward. Imported goods now cost more, which means higher producer costs, tighter margins, and ultimately higher prices at checkout.

For loyalty professionals, tariffs present a different kind of challenge. They are not a one-time shock like a storm disrupting supply chains. They are not as visible as inflationary spikes that dominate headlines. Tariffs work more quietly. They add pressure on both the brand and the customer in ways that are felt but not always named. That is exactly why loyalty programs are in a unique position to respond.

This article is not about whether tariffs are good or bad policy. It is about the fact that they exist, that they create new dynamics between brands and customers, and that loyalty programs need to be ready to deal with them.

A simple tariff example

Tariffs can feel abstract, so let’s ground it in a basic example.

Imagine a U.S. retailer imports kitchen appliances from overseas. Each blender costs $100 before tariffs. The government then imposes a 20 percent tariff on appliances from that country. Overnight, the landed cost of each blender rises to $120.

The retailer has three choices. It can:

1. Pass the full $20 increase to the customer, making the blender more expensive on the shelf.
2. Absorb some or all of the cost, which cuts into its margins.
3. Split the difference — pass part on to customers, absorb part internally, and possibly trim promotions.

No matter which path it chooses, both the retailer and the customer feel the effect. Multiply that by thousands of SKUs, and you see how tariffs ripple through an entire assortment.

For customers, tariffs operate like a hidden tax. Prices climb. Promotions shrink. The sense of value weakens. For the retailer, tariffs erode profitability and make every loyalty investment feel heavier.

Tariffs as a structural headwind

Because tariffs are imposed by governments, they can also change quickly. A policy adjustment in Washington can reshape entire categories overnight. That volatility is frustrating for supply chains, but it also makes tariffs a structural headwind that loyalty leaders cannot ignore.

The regressive nature of tariffs adds another layer. Lower and middle-income households spend a larger share of their income on goods, so they feel tariff-driven increases more directly. Higher-income households save and invest more, and their spending often skews to categories less exposed. The result is an uneven burden.

For loyalty programs this matters because the customers who use them most — the families looking to stretch their budgets — are the ones who feel tariffs most acutely. If programs remain silent, they risk losing trust at the very moment when customers are asking for relief.

Tariffs also land unevenly across industries, which means loyalty programs will feel the pressure in different ways.

• Travel and hospitality programs may see higher equipment and supply costs that make upgrades or perks more expensive to deliver.
• Retail and CPG programs experience the impact most directly at the shelf, where members encounter rising prices on everyday goods.
• Financial services programs absorb tariffs more indirectly, through cardholder spend shifting toward categories with thinner margins.
• Subscription-based programs can feel strain when content, hardware, or distribution costs rise, forcing choices about whether to pass those on or buffer them with loyalty incentives.
• Entertainment programs encounter similar questions when tariffs touch imported equipment, merchandise, or event production costs.

The key point is that tariffs are not a uniform headwind. They create different patterns of pressure depending on the vertical, and loyalty design needs to be sensitive to those variations rather than applying a one-size-fits-all response.

Industry variation is only half the story. The other half lies in member expectation across categories. A grocery or household loyalty member feels tariff driven pain immediately and personally, which makes relief both more visible and more necessary. A travel loyalty member, by contrast, is often operating in discretionary spend and may view tariff offsets as less relevant. The same mechanics play very differently depending on the context of purchase. Loyalty leaders need to calibrate their relief not only to the brand’s cost exposure, but also to the member’s perceived sensitivity in each category.

The double exposure problem

Brands feel tariff pressure long before it shows up at the checkout line. It starts in producer prices, shipping contracts, and vendor negotiations. That means the cost base of the company is already rising. If loyalty then adds richer earn rates or special discounts to help customers manage the pain, the brand is effectively absorbing the tariff twice. Once in its costs, and again in its loyalty offsets.

This is the double exposure problem. It explains why many companies hesitate to build tariff relief into their loyalty programs. But the alternative — doing nothing — creates another risk. Customers see prices rise, value erode, and loyalty programs remain silent. That silence can be just as damaging, especially for programs that are supposed to be the brand’s vehicle for care, fairness, and relationship-building.

The challenge, then, is to design relief mechanisms that are visible enough to build trust but disciplined enough to avoid undermining program economics.

Relief mechanisms also need to account for member psychology. Loyalty is not only about economics, it is also about the rituals of recognition. When members see a sudden earn-rate boost or a short-term multiplier without explanation, it can feel like a gimmick rather than an act of care. Transparency about why relief exists, framed around protecting value and fairness rather than masking tariffs, is essential. Done well, the offset is both financial and emotional. Members walk away believing the brand saw their struggle and responded with intent rather than with theater.

Loyalty as a shield

Loyalty programs cannot change policy, but they can influence how customers experience its consequences. They sit at the nexus of pricing, perception, and emotional connection. That makes them a powerful shield.

Another dynamic to consider is competitive positioning. Every brand exposed to tariffs faces higher costs, but not every brand responds in the same way. In this environment the question is not who can absorb tariffs best, but who can communicate their response with the most credibility. Loyalty programs become a stage for differentiation, not just a math problem. When members perceive that one brand is leaning in while others remain silent, trust and share shift quickly. The fight is less about cents per point and more about who earns the reputation for standing alongside customers in a difficult environment.

The task is not to offset every tariff dollar. That would be impossible. The task is to send a signal that the brand recognizes the pressure and is taking measured steps to protect its members.

Think of it as an act of advocacy, not subsidy. Members do not expect brands to erase tariffs. They do expect them to acknowledge reality and share some of the load. That acknowledgement, especially when it shows up in simple, tangible benefits, becomes a differentiator.

Practical approaches

The most promising responses are targeted and time-bound.

Some brands have begun experimenting with member value marketplaces — dedicated areas within the program where customers see enhanced redemption value on categories experiencing the most pressure. This approach makes relief visible while keeping it contained.

Others are piloting dynamic multipliers. When a tariff drives up the price of, say, electronics, members earn at a faster rate on those purchases. The logic is intuitive. Costs went up, so loyalty gives more back. Importantly, these multipliers are time-limited, preventing them from becoming permanent entitlements.

A third path is domestic substitution. By offering richer rewards on U.S.-made or tariff-neutral products, programs can nudge members toward alternatives that soften the impact. A Made-Here Multiplier means customers benefit from stronger value, brands benefit from better margin protection, and the broader economy benefits from increased demand for local supply.

Transparency also has a role, though it must be handled carefully. Receipts can show a line for “external cost impact” and another for the loyalty offset applied. The wording avoids politics while still communicating fairness. Members see that the brand is paying attention.

None of these approaches solve tariffs. They do something just as important. They turn an invisible frustration into a visible sign of advocacy.

Guardrails for design

The temptation when designing relief is to be overly generous. That is a mistake. Programs must protect their core economics.

The financial complexity goes deeper than double exposure. Tariff relief changes breakage patterns, accelerates redemption timing, and shifts redemption into categories that may already be under margin strain. Each of these effects alters liability curves and cash flow forecasts in ways that traditional models may not capture. Programs need new forms of stress testing, with scenario models that extend beyond tariff levels into redemption velocity and mix. Relief cannot be designed in isolation. It has to be modeled as part of the total financial ecosystem of the program.

• The first guardrail is neutral language. Brands should talk about “value protection” or “external costs” rather than naming tariffs directly. This avoids political risk while still sending the right signal.
• The second is a funding ladder. Vendor dollars and retail media swaps should be the first line of defense. Certificates with short expiries and built-in breakage come next. Margin steering — encouraging members to shift into more profitable baskets — follows. Only as a last resort should the brand add direct P&L dollars.
• The third is tier integrity. Loyalty programs are built on rewarding best customers most. Relief aimed at lower and middle-income segments cannot come at the expense of high-spend members. That means focusing protection on essential categories like pantry, OTC, or household basics, while premium tiers continue to enjoy differentiated experiences and access.
• Lastly, loyalty programs need governance guardrails that cover how tariff offsets are communicated, what terminology is approved, and how customer service is trained to answer questions. This is not about politics. It is about ensuring the brand avoids being pulled into unintended debates. Building that discipline in advance keeps the focus where it belongs, which is on the customer experience.

With these guardrails in place, tariff-responsive mechanics can enhance loyalty without distorting it.

Preparing for multiple futures

Tariffs are volatile. They can escalate, concentrate on certain categories, or unwind entirely depending on shifts in policy. Loyalty leaders must design not just for today but for several plausible futures.

One scenario is persistence. If tariffs remain a standing feature of fiscal strategy, loyalty programs need to institutionalize relief. That means building rule engines that automatically trigger capped offsets when external cost indices rise.

Another scenario is volatility. Tariffs rise and fall with political cycles. Programs in this world need flexibility. A tariff pressure index can serve as a trigger. When thresholds are crossed, multipliers activate. When pressures ease, they wind down. The program breathes with the policy environment.

A third scenario is concentration. If tariffs increasingly target specific categories like apparel or electronics, pre-built playbooks allow for rapid response. Each playbook would identify the SKUs, vendor partners, and communications in advance. When policy shifts, the program is ready in days, not months.

A fourth is structural change. If supply chains shift toward reshoring or friend-shoring, loyalty programs can accelerate adoption by offering multipliers on newly sourced products. Storytelling about local suppliers can reinforce the habit and give members pride in choosing differently.

Finally, there is the scenario of rollback. If tariffs are lifted, programs need to unwind relief quickly. That is why offsets should always be designed as campaigns, never as permanent entitlements.

The point is not to guess which future will arrive. It is to build systems that can adjust to any of them.

Measuring the success of tariff responses

Measurement turns good intentions into real strategy. Tariff-responsive loyalty mechanics need their own scorecards.

• Incremental contribution must be calculated net of vendor funding and breakage.
• Redemption mix should be tracked to see whether members are moving into lower-liability categories.
• Tier health should be monitored continuously, to ensure high-spend members retain perceived advantage.
• Fairness signals can be tracked through surveys and service transcripts, giving an early read on whether value-sensitive members feel seen.
• Trust metrics can be gauged through open rates, earned media mentions, and social sentiment.

The discipline of measurement ensures that relief is not just a feel-good gesture but a lever with real business impact.

A balanced approach is best

The tariffs of 2025 are the latest reminder that trade policy will always shape the operating context of American business. They underscore the need for fair competition, but they also create uneven burdens on households and new cost pressures for brands.

Loyalty programs cannot change that reality. What they can do is mediate it. They can give customers a sense that value and fairness are still being protected. They can stabilize demand in categories under strain. They can help brands navigate higher costs without sacrificing trust.

The right approach is pragmatic. Use neutral language. Cap benefits tightly. Secure funding upstream. Protect tier integrity. Build systems that flex as tariffs persist, shift, or unwind.

Customers do not expect perfection. They expect recognition. They remember which brands acknowledged their struggle and shared the load. In a tariff economy, that recognition can be worth more than any single discount. It becomes a source of long-term loyalty that no policy cycle can erase.

Learn more at kobie.com.

Written By: Chris Barnett, VP of Innovation & AI Strategy

Chris Barnett is VP, Innovation & AI Strategy at Kobie,  where he leads the evolution of loyalty through applied AI, adaptive value propositions, and modern data practices to help brands design and activate more contextual loyalty experiences at scale. He leads Kobie’s Loyalty Health Center of Excellence and previously led Strategic Consulting for Kobie’s Retail portfolio. Chris brings 20+ years of experience across loyalty, customer engagement, and CX design, known for pairing customer psychology with commercial discipline to drive measurable enterprise value.