Navigating Tariffs: A Playbook for Retailers

In an era of compound volatility, uncertainty is the only constant. For retailers, the latest disruption is a wave of tariff actions complicating costs and supply chains, highlighted by evolving discussions on goods from Mexico, Canada, and the European Union.

How Best to Respond?

Resilient retailers are taking a two-pronged approach: using data-driven decisions to ease short-term pressures while building flexibility for shifting trade policies and geopolitical complexity. By aligning cost management, tax strategy, and supply chain planning, retail leaders can weather today’s disruptions and strengthen their long-term competitive position.

At KPMG, we’ve been helping retailers navigate the tariff changes and their impact. Here are five key strategies to consider:

1. Dig into your data — and get it right.

For many retailers, tariffs aren't just exposing new problems, they’re magnifying old ones. Tariff-related data is often incomplete or outdated, leading to incorrect calculations and missed opportunities. A retailer importing TVs from India, for example, may assume a flat 25 percent tariff — even though the TVs chips, screws and screens are sourced from multiple countries with different rates.

To make informed cost and sourcing moves, companies must quantify a precise, detailed financial impact. That requires complete, accurate SKU-level data — from raw materials to finished goods — as the foundation for every decision.

Action Items:

Related story: How Retailers Can Navigate Rising Tariffs and Supply Chain Disruptions

• Conduct an assessment to determine tariff impact, and consider:
  • revalidating product classifications, duty rates, and transfer pricing models; and
  • leveraging automated commercial environment (ACE) trade data and analytics.

2. Manage costs strategically.

With a tighter view of data, retailers are better positioned to understand and mitigate cost challenges. Short-term “fixes” (e.g., stockpiling inventory or rushing supplier changes) often introduce new risks. Leading retailers take a holistic approach, coordinating finance, tax, procurement, and supply chain teams to manage margins and limit disruptions.

Action Items:

• Focus on cost-saving levers like duty mitigation, procurement adjustments, and operational efficiencies.
• Evaluate total cost-to-serve, not just unit savings, before shifting suppliers.
• Build flexibility into contracts with tariff clauses and renegotiation triggers.
• Identify tax credits and incentives to help offset duty increases.

3. Re-evaluate and strengthen your supply chain.

Better confidence in data and costs enables smarter supply chain decisions beyond chasing the lowest tariff rate. Options range from evaluating supplier locations to adjusting container mixes and SKU-level optimizations. For example, nearshoring can provide a proximity premium by reducing transit times and improving reliability. SKU consolidation — e.g., eliminating redundant T-shirt packs — can also cut costs and simplify sourcing.

Action Items:

• Create a country-by-country framework to assess tax implications and model sourcing scenarios.
• Use scenario modeling to regularly review suppliers and SKU mixes.
• Evaluate first-sale qualification opportunities for duty savings.
• Assess eligibility for retroactive downward transfer pricing adjustments.
• Ensure intercompany pricing aligns with tax and customs requirements.

4. Assess and enhance operational capabilities.

Data and strategy are only part of the solution. Retailers also need the talent and technology to act quickly. Many companies still lack strong decision-making capabilities due to talent shortages, outdated systems, and disconnected processes. Those that start now — identifying gaps, testing new solutions, and integrating better tech and analytics — will be positioned to pivot faster and operate more efficiently.

Action Items:

• Prioritize trade management in digital transformation efforts.
• Invest in automation, scenario modeling, and artificial intelligence forecasting.
• Evaluate whether internal talent can execute the strategy.
• Assure access to leading-edge tech and data, either in-house or via third parties.
• Emphasize change management to ensure adoption of new tools and processes.

5. Add tariffs to the enterprise risk matrix.

Historically, tariffs were treated as a procurement issue. Today, they must be managed like any other macro business risk. Just as companies model for economic shocks or cyber threats, they should monitor trade volatility and plan mitigation scenarios. Retailers that treat tariffs as a strategic risk avoid costly, last-minute reactions.

Action Items:

• Develop contingency plans for trade disputes, sanctions, and supply disruptions.
• Improve visibility into tier one and tier two suppliers to reduce risks.
• Use geopolitical scenario modeling to anticipate regulatory changes.

Tariff and supply chain challenges are an evolving reality. Companies that align cost management, tax strategy, and supply chain resilience will gain a lasting competitive advantage.

Mary Rollman is U.S. supply chain leader for Consumer & Retail, KPMG. Heather Rice is U.S. tax leader for Consumer & Retail, KPMG.