Tariff Analysis to Action

Early in 2025, many companies scrambled to define what proposed tariffs and new regulations would mean for their supply chains and organization. In the months since, they’ve moved from analysis to action by making critical decisions to navigate the new environment.

U.S.-Based, Small Business Importers — Bloomberg reports that tariffs will hit this cohort hard, around $200 billion annually. The most straightforward solution might be simply passing cost increases to customers: A recent Gartner survey found that most companies plan to pass at least some of their tariff costs on to their customers.

Large Multinationals — From electronics to consumer goods, companies face highly-complex global networks. While large, multinational companies’ structures make them inherently more resilient to tariffs, these organizations are still finding ways to reduce their overall exposure to tariffs. Some tell us they will optimize their networks to mitigate high tariffs through tactics like leveraging regional networks to achieve corporate goals. While these strategies aren’t new, years of recent volatility and disruption helped companies build the muscles required to react quickly.

Automotive — The Wall Street Journal reported that this highly-exposed industry already took a $12 billion hit, with more to follow. They face a major revamp to their supply chain networks, and they’re raising customer prices to compensate for the tariff environment. These changes will take years to implement and leave the industry much more regionalized.

Customer demand patterns will also shift, but are you waiting to hear what this may look like from your marketing or sales team? While most of us are on the receiving end, there’s no reason supply chain executives cannot proactively get involved in these conversations. Taking things a step further, supply chain leaders must consider leveraging forward-looking resources that their commercial partners use to spot emerging demand trends.

AI will significantly and increasingly impact all areas of supply chain, and we’re already hearing some very intriguing uses for AI (more than GenAI). For example, sorting out the costs and tariff impacts may have taken two-plus months back in early 2024, but AI helps solve those problems in weeks. The models currently in development will only become more powerful and lead to faster decision-making. Supply chain leaders need to quickly choose where on the digital curve they want to be, especially since fast followers must prepare to move even more rapidly than they are used to.

At the same time, new and revised U.S. trade agreements are specifying increased local content value (LCV) levels that may seriously threaten import costs. Countries exporting products to the U.S. must comply with local content rules that raw material sourcing might make impossible. Gartner supply chain research estimates that tariffs not meeting LCV could reach the tens of billions of dollars, putting more pressure on corporate margins and consumer pricing. Don’t let this catch you by surprise.

With all this in mind, supply chain leaders still need to deliver on the basics. However, these basics are more complicated than simply delivering On-Time-In-Full. Profit margins are being squeezed, and material constraints are back in play due to new export licensing restrictions versus demand outstripping supply.

These supply requirements produced an environment of uncertainty (which isn’t really new), as well as a traditional corporate response. Many in the Gartner community said they intend to cut expenses, and this, of course, will trickle down to supply chain. It will be important to resist reflexive responses to CEO and CFO requests for cost savings.

After hearing stories of increased automation in supply chain, many CEOs are pressuring their organizations to show expense reduction through GenAI. However, GenAI in supply chain largely yields a personal productivity boost that hasn’t scaled to deliver significant ROI. Agentic AI is being positioned as the next productivity driver but, realistically, a combination of AI tools will deliver large, scalable gains. Leaders should start with the business problems that need solving, rather than searching for where different AI technologies might be deployed.

The “everybody gets a haircut” spending reduction methodology is another deeply-flawed response to centrally-mandated cost reductions. This approach can adversely affect already efficient groups and suspend innovation teams: Neither action is healthy for the business. This methodology can also cut into areas that differentiate an enterprise from the competition. 


Wade L. McDaniel
VP Distinguished Advisor
Gartner Supply Chain
wade.mcdaniel@gartner.com