Revamped supply chain strategies can help mitigate tariff impacts
Organizations are rapidly rethinking their supply chain strategies: reconfiguration and diversification top the list of priorities
We recently surveyed senior executives to understand how evolving tariff regimes are affecting business operations.1 While our May survey revealed a cautious stance toward mitigating supply chain tariff challenges,2 these latest findings point to a shift. Some companies are maintaining the status quo because of uncertainty about future tariff changes, but others are taking practical near-term actions to mitigate tariff impacts even as they conduct long-term scenario analyses.
Among our respondents, 39 percent report that their gross margins are relatively unchanged, but 44 percent expect gross margins to decrease over the next year, suggesting that many businesses remain apprehensive about future adverse effects.
Among our respondents, 39 percent report gross margins have decreased due to tariffs, and 44 percent expect gross margins to decrease further over the next year.
Mary Rollman
Principal, KPMG
Reconfiguring the supply chain
Only a small minority (18 percent) maintain their current export regimes. Our respondents’ most common strategies include reconfiguring supply chains (62 percent), adjusting export pricing and product mix (61 percent), and diversifying export markets (48 percent).
Natural resources companies lead the way, with 86 percent restructuring supply chains and 83 percent adjusting export pricing. The life sciences and technology sectors are notably increasing investment in domestic markets (52 percent and 48 percent, respectively), while healthcare organizations are more likely to lobby for government support (39 percent).
Global supply chains are highly complex and therefore unlikely to turn on a dime. Our respondents say they need 7 to 12 months (43 percent) to adjust to tariff changes, with many retail and consumer goods companies needing 1 to 2 years to make significant changes.
Looking for new suppliers
To mitigate tariff exposure, 54 percent of respondents have diversified their supplier base, seeking new partners in lower-tariff regions. Other strategies include renegotiating supplier contracts (43 percent), utilizing cash flow management tools such as foreign trade zones (45 percent), and shifting to domestic sourcing (24 percent). Retailers are especially active, with 80 percent diversifying suppliers. Consumer goods companies focus on renegotiating contracts (60 percent), while natural resources firms turn to cash flow management strategies (83 percent). Only 10 percent of respondents have not made any supplier or sourcing changes.
Operational changes: strategic partnerships, risk management, and automation
Adding tariff clauses to supplier agreements is now standard practice for 45 percent of organizations. Among our respondents, dynamic pricing models (40 percent) and financial hedging strategies (39 percent) are also gaining traction, reflecting a shift toward embedding risk controls and flexibility directly into commercial relationships.
Strategic logistics partnerships (64 percent) and tariff cost-sharing agreements (61 percent) are the most sought-after alliances. Manufacturing joint ventures in low-tariff regions are also popular (38 percent), as companies look to optimize supply chains and share the financial burden of tariffs.
Nearly half of respondents have enhanced supplier screening and assessed high-risk third parties. Other adaptations include updating contingency plans, integrating tariff exposure metrics, and improving data collection on third parties. Only 10 percent of respondents report no significant changes to their risk management programs.
To counteract tariff pressures, 44 percent of respondents have deployed process automation technologies, and 53 percent have altered distribution channels. These investments are designed to increase efficiency and reduce costs. Only 19 percent have relocated or combined production facilities, indicating that most prefer to optimize existing operations rather than undertake major relocations.
Tax-efficient supply chains
Almost a third (27 percent) of organizations have implemented changes to both corporate structure and tax strategy, while another 27 percent have focused solely on trade compliance and tax strategy. The most prominent changes include tax-efficient supply chain restructuring (72 percent) and transfer pricing adjustments (70 percent), showing a clear focus on managing costs and profits across global entities. The healthcare and oil and gas sectors are especially focused on tax-efficient supply chain restructuring, while natural resources companies are making or considering transfer pricing adjustments.
Compliance and cost management
Our respondents say that product tariff classification (23 percent) and country of origin determination (22 percent) are the compliance processes most affected by new tariff policies. Most organizations report minor to moderate operational cost increases in compliance functions, with operational delays and investments in new technology cited as the primary sources of increased costs.
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The 2025 tariff environment is driving US businesses to rethink and retool their supply chains. Our survey respondents are taking a multilayered approach to mitigate risks and maintain resilience. While planning long-term responses to tariff volatility, they are rapidly adopting short and medium tactics ranging from supplier diversification and contract innovation to strategic partnerships and technology investments.
Footnotes
1. To gauge the impact of US tariffs, in September 2025 we surveyed 300 senior executives from diverse industries and functions.
2. https://kpmg.com/us/en/articles/2025/supply-chains-under-pressure.html
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