Surviving Tariffs: How to adapt to overcome trade limitations

Modern supply chains seamlessly connect economies and cultures, transporting goods around the world with unmatched precision. 

While today’s businesses now can connect suppliers and customers in ways that were previously impossible, they also find themselves vulnerable to international disruptions. Most recently, this has come in the form of tariffs.

Disrupting the global supply chain

When tariffs are imposed, the importing business often passes increased costs on to customers via higher prices, in turn reducing demand and forcing retailers to make changes and rethink their sourcing policies, supplier networks and inventory management. 

Some estimates have suggested that proposed tariffs could raise annual costs for U.S. consumers by as much as $2,600, but it remains to be seen what the true effect will be on shoppers. 

Facing rising administrative costs (14% from 2023 to 2024), the uncertainty of future tariffs and the possibility of additional economic actions, business leaders are weighing their options for mitigating overhead fees. 

For many companies, this means nearshoring their supply chain, altering pricing strategies or turning to new, unproven — and potentially risky — sourcing routes to deliver products on time. 

However, these reactive measures alone may not be enough to sustain long-term resilience. Instead, companies should embrace technology-driven supply chain management to enhance agility and mitigate risk.

Harnessing technology to minimize tariff impacts

By leaning on end-to-end data, AI and automation, companies can become more resilient — not only withstanding disruptions but becoming stronger and more resilient as a result. 

These cutting-edge technologies and capabilities enable complete visibility into supply networks, providing insights that lead to proactive decision making, whether it’s diversifying suppliers, optimizing inventory placement or adjusting logistics to avoid costly tariffs. 

In addition, cloud-based platforms foster greater collaboration across trading partners, ensuring that disruptions are managed with speed and precision.  

There is plenty of compelling evidence that a technology-first approach works. Studies show that the top performing supply chain organizations are investing in AI and machine learning to optimize their processes at more than twice the rate of low performing peers. 

Beyond that, the latest cloud-based supply chain technologies offer capabilities that directly address tariffs’ economic impacts. 

Because tariffs depend on country of origin, many companies will seek alternative suppliers in regions not impacted. In fact, nearly one-third of businesses are pursuing a dual supply chain approach, in which one is tied to China and the other is independent. AI can aid in supplier research and help businesses optimize their cross-border supply chain. 

For example, digital twin technology allows businesses to quickly model "what-if" scenarios, testing different supply chain strategies before implementation. Businesses can compare sourcing regions, logistics routes and pricing models to minimize tariff exposure.

Supply chain technology also enables agility, which is imperative in periods of rapid, constant change. Digital platforms consolidate data across suppliers, logistics providers and production sites, offering real-time tracking of goods. This single view of the supply network allows businesses to quickly assess tariff implications and instantly determine alternate strategies. 

AI can also be used to conduct rapid cost analyses and identify the most efficient way to offset expenses without eroding profit margins. In addition, compliance tools automatically ensure businesses stay up to date with changing regulations and tariff requirements, reducing the risk of penalties or delays.

Taking a smarter approach to global trade disruptions

In today’s uncertain trade environment, companies must be resilient, agile and adaptable. With the right technology, they can stay competitive in the rapidly evolving landscape and ensure tariffs don’t dictate their success. 

Modern digital supply chain management tools offer smart, integrated solutions and robust data transparency that empower businesses to make informed decisions based on real-time insights. Instead of reacting to trade shifts with costly, short-term fixes, they can use data-driven strategies to maintain profitability and compliance.

And not only can these solutions help businesses navigate uncertainty – they can also advance a stronger global economy. 

Darcy MacClaren is chief revenue officer, SAP Digital Supply Chain