In an era of compound volatility, uncertainty is the only constant. For retailers, the latest disruption is the wave of tariffs and reciprocal actions that complicate costs and supply chains across the globe.

How best to respond?

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

At KPMG, we’ve been working with retailers to help them 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 Tariff-related data is often incomplete or outdated, leading to incorrect calculations and missed opportunities.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 TV’s chips, screws and screens are sourced from multiple countries with different tariffs.

To make informed cost and sourcing decisions, companies must be ready to quantify a precise detailed financial impact. That means having complete, accurate SKU-level data — from raw materials to finished goods — as a foundation for every decision. Tariff forecasting models can help retailers with product assortment planning as they consider whether to shift what they will carry and sell.

Action Items:

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

2. Manage costs strategically.

With a tighter view of data, retailers are better able to understand and mitigate cost challenges. Short-term “fixes” — like stockpiling inventory or rushing supplier changes — may be revealed as potential risks, from capital tie-ups to empty shelves. Instead, leading retailers take a holistic approach to costs with a coordinated effort across finance, tax, procurement, and supply chain teams to manage margins; limit disruptions; and plan for short-, mid- and long-term dynamics.

Action Items:

  • Focus on impactful 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.
  • Understand various tax credits and incentives to help offset increases in imposed duties.

3. Re-evaluate and strengthen your supply chain.

Improved confidence around data and costs also empowers retailers to make smarter supply chain moves beyond just chasing the lowest tariff rate. Options range from evaluating where suppliers are based to shipping container mixes to SKU-level optimizations. For example, nearshoring can provide a proximity premium by reducing transit times and improving reliability. And at the SKU level, do you really need both a three-pack and a five-pack of the same T-shirt? Consolidating SKUs can lower costs and simplify sourcing.

Action Items:

  • Create a country-by-country origin framework to assess tax implications and model sourcing scenarios, and create a road map for supply chain optimization.
  • Use scenario modeling to regularly review supplier options and SKU mixes.
  • Evaluate suppliers and review importer transaction flow for First Sale for Export (FSFE) qualification and duty savings. FSFE allows importers to use the manufacturer’s initial price, if eligible, as the value for customs instead of the price paid by the importers.
  • Evaluate eligibility for retroactive downward transfer pricing adjustments to reduce customs value resulting in refunds.
  • Review valuation methods to ensure intercompany pricing aligns with tax and customs requirements.

4. Assess and enhance your operational capabilities.

Data and strategy are only part of the equation. Retailers also need the talent and technology to act on them. Having the required talent enables agility and the resilience to navigate disruption, emerging opportunities and shifting customer preferences. Yet many companies still lack robust decision-making capabilities due to talent shortages, outdated systems, and disconnected processes. People are overwhelmed with tactical activities and have no bandwidth to think more strategically. This won’t be solved overnight. However, companies that start addressing it now — identifying gaps, testing new solutions, and integrating enhanced technology and data analytics — will be positioned to pivot faster and operate more efficiently, especially in uncertain economic times.

Action Items:

  • Ensure trade management is part of the company’s larger digital transformation priorities.
  • Invest in automation, scenario modeling, and artificial intelligence forecasting tools.
  • Evaluate whether the talent exists within the company to define and execute the strategy.
  • Assure access, in-house or via third party, to leading-edge data and tech capabilities.
  • Prioritize change management to ensure new tools and processes are adopted and aligned with business goals.

5. Add tariffs to the enterprise risk matrix.

Historically, many companies have treated tariffs as a procurement issue. But in today’s environment, they must be managed like any other macro business risk. Just as companies model for economic disruptions or cyber threats, they should actively monitor trade volatility and plan mitigation scenarios. Retailers that integrate tariffs into enterprise risk management will avoid costly, last-minute reactions.

Action Items:

  • Develop contingency plans for trade disputes, sanctions and supply risks.
  • Improve visibility into tier 1 and tier 2 suppliers to reduce disruption risks.
  • Use geopolitical scenario modeling to anticipate future regulatory changes.

Tariff and supply chain challenges represent an evolving reality for retailers. Companies that put in the work now — aligning cost management, tax strategy, and supply chain resilience — will gain a lasting competitive edge.

Mary Rollman is the KPMG U.S. supply chain leader for consumer and retail. Heather Rice is the KPMG U.S. tax leader for consumer and retail.