As new rounds of tariffs disrupt global trade, Fastenal Co. is leaning on its supply chain agility, initiative-taking pricing strategy, and direct customer engagement to stay ahead of rising costs and uncertainty.
Executives at the industrial distributor addressed the company’s approach to tariffs in detail during its Q2 2025 earnings call, outlining a combination of long-term diversification and near-term adjustments designed to preserve margins and maintain trust with customers.
Fastenal has begun redirecting imports of fasteners and other impacted products directly into Canada and Mexico where justified, bypassing the United States in cases where tariffs would otherwise inflate costs.
“If all of a sudden there’s a 25%, 45%, or 50% tariff being applied on product and you bring it into the U.S. and then you subsequently move it into Canada or Mexico, you’ve created an inefficient supply chain for your customer,” said CEO Dan Florness on the call. “So, as we move through 2025, we’ve been redirecting more product to come directly into Canada where the economics justify it. And the same thing in Mexico.”
Though these alternate routes can be more expensive due to fragmented shipments and port complexity, Fastenal believes they are worth the tradeoff when compared to steep import duties.
To manage these complexities, Fastenal has revived a proprietary internal system initially developed during the tariff battles of 2018. Led by executive Kevin Fitzgerald, the company produces regular videos and data tools for field teams and supply chain staff to help simplify tariff impacts and communicate them clearly to customers.
“What we do here is try to simplify it for the field but also for the folks in supply chain,” Florness said. “Our goal isn’t to be the best organization at adjusting pricing. Our goal is to be the best organization at managing supply chain for our customer.”
A key part of this system is identifying which products qualify for duty drawbacks, allowing the company and its customers to avoid unnecessary tariff charges when goods are later re-exported.
CFO Sheryl Lisowski detailed a phased pricing strategy designed to offset tariff-related inflation. During Q2 2025, Fastenal implemented three pricing actions intended to contribute 3% to 4% price realization. These efforts added 140 to 170 basis points to the company’s second-quarter sales growth, she said.
“Supply chains have gotten more expensive and a part of our response over time will be incremental pricing,” Lisowski said. “We have been proactively engaging with our customers for several months.”
More price increases are planned for the second half of the year, depending on how deferred tariff decisions play out.
To cushion against potential disruptions, Fastenal has increased inventory levels, both to improve availability at selling locations and to stay ahead of supplier cost increases. Inventory grew 14.7% year-over-year in the second quarter, but the company maintained strong cash flow and margin performance.
Gross margin for the quarter rose 20 basis points to 45.3%, aided by improved margins on fasteners—an area specifically impacted by global steel tariffs. Fastenal’s operating margin also improved to 21%, up from 20.2% a year earlier.
Lisowski noted that while transportation and duty costs are rising, gains from fastener expansion projects and supplier negotiations helped offset the impact.
Executives acknowledged that the broader environment remains volatile, with uncertainty about how trade policy may evolve in the months ahead. However, they expressed confidence that Fastenal’s strategy, culture, and customer alignment will help the company continue to outperform.
“Fastenal has historically been able to win market share during periods of disruption,” Lisowski said. “That’s our expectation in the current environment.”
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