The impact of tariffs, trade policy and supply chain disruptions on retailers
U.S. retailers are navigating one of the most dynamic trade environments in recent memory. Sweeping changes to tariff rates and persistent supply chain disruptions are converging to create an environment that’s reshaping sourcing strategies, pricing models and customer expectations across the industry.
Retailers face mounting pressure to absorb rising costs, maintain customer satisfaction and adapt to shifting trade dynamics. The stakes are especially high for small and mid-sized businesses (SMBs), which often lack the negotiating power, operational flexibility or financial cushion of their larger counterparts. In this climate, understanding and responding to the evolving trade landscape is essential to ensure stable operations.
The changing tariff environment
Tariffs are typically used to protect domestic industries or influence trade negotiations, but for retailers, they function as a direct cost on imports that increases the price of goods before they even reach the shelf.
In April 2025, the U.S. implemented sweeping “Liberation Day” tariffs: a universal 10% levy on all imports, with targeted duties reaching 145% on goods from China.1 These moves added significant cost pressure across retail categories. Apparel tariffs alone have more than doubled — rising from an average of 14.5% in 2024 to 30.6% in 2025 — resulting in an estimated $26 billion in new duties for that segment.1
And yet, the policy remains uncertain. According to a recent survey, only 33% of retailers fully understand how tariffs will affect their bottom line.
Even though action has been paused for some tariffs, retailers lack clarity on whether this signals a path to de-escalation or merely a short reprieve in a longer-term protectionist agenda. This uncertainty makes it difficult to plan, price or negotiate with confidence.
Listen to the Nationwide Market Insights podcast: Shifting gears: Tariff’s impact on inflation still moderate
Trade policy: More than just tariffs
Tariffs are only part of the trade equation. Retailers must also contend with:
- Non-tariff barriers, such as import quotas, labeling requirements, sanctions and forced labor compliance laws.
- Evolving trade agreements, which may shift sourcing preferences or require renegotiation of existing supplier contracts.
- Geopolitical tensions, which can disrupt key markets or introduce new risks. For example, Chinese exports now face some of the highest tariff burdens, prompting many companies to consider relocating sourcing or assembly outside of China.
The result is an increasingly complex environment that requires constant monitoring and a proactive approach to policy developments.
Supply chain disruptions
Retailers are also facing continued strain from supply chain disruptions. While the pandemic-era chaos has receded, today’s challenges — ranging from labor shortages and shipping bottlenecks to extreme weather and war — are more diverse and less predictable.
According to a recent report2:
- 56% of retailers report frequent supply chain delays.
- 67% of retailers face sourcing challenges.
Retailers dependent on just-in-time inventory models are especially exposed, with delays creating out-of-stocks, missed sales and frustrated customers.
The unique challenges for retailers
Unlike manufacturers or wholesalers, retailers operate at the end of the supply chain and often bear the brunt of disruption. They have limited bargaining power, smaller cash reserves and tighter margins. Many SMBs are struggling with:
- Fewer supplier networks, especially if they source heavily from a single country or vendor.
- Inability to quickly switch suppliers due to contract lock-ins or regulatory requirements.
- Lack of pricing flexibility as customers push back against rising costs.
In this environment, reactive strategies won’t suffice. Retailers must take a proactive stance to help protect their operations and customers.
Strategies to manage uncertainty
To help navigate this complexity, retailers should pursue a multipronged strategy, including:
1. Diversifying supply chains
- Source from multiple countries and suppliers: Spreading risk across regions reduces exposure to any one country’s tariffs or disruptions. In fact, 92% of retail executives are actively reshoring or nearshoring operations to countries like Mexico, Vietnam and India.3
- Consider nearshoring: Shifting production closer to home can reduce shipping times and increase flexibility.
- Leverage Foreign Trade Zones (FTZs): These zones allow companies to store, modify or re-export goods without paying tariffs upfront, improving cash flow and cost control.4
- Explore “tariff engineering”: Minor product modifications or reclassification can result in lower tariff rates. Consult a trade attorney or customs broker to ensure compliance.5
2. Monitoring policy and regulatory changes
- Monitor key updates: Track developments from the U.S. Customs and Border Protection and the Court of International Trade.
- Stay informed: Follow changes in international regulations, including due diligence laws in the EU and forced labor legislation in the U.S.
- Strengthen your network: Join trade associations that offer policy updates and advocate for industry needs.
3. Strengthening financial resilience
- Review pricing strategies: Model pricing scenarios at 10%, 20% and 50% tariff levels to understand margin impact.6
- Improve cash flow: Negotiate longer payment terms or use revolving credit to manage inventory purchases.
- Hedge against currency risk: For companies importing in foreign currency, financial hedging can protect against volatility.
- Build inventory buffers: Holding additional stock for key SKUs can lower the risk of lost sales due to transit delays.
4. Leveraging technology
Technology can provide a critical edge in a volatile environment:
- AI-powered forecasting: Predict demand and identify at-risk SKUs before they cause problems.
- Supply chain visibility tools: Real-time tracking helps retailers adapt quickly to delays or disruptions.
- Integrated platforms: Connecting ERP, inventory, logistics and e-commerce systems allows faster decisions and improved customer experiences.
- Scenario modeling: Use digital tools to simulate tariff changes and test sourcing strategies in advance.
5. Reworking supplier relationships
- Negotiate smarter: Work with suppliers to share cost increases through extended terms, discounts or logistics collaboration.
- Explore alternative partners: Identify new or regional suppliers to reduce tariff exposure and improve flexibility.
- Build long-term value: Strengthen relationships based on transparency and mutual goals to encourage flexibility during disruptions.
- Engage in collective advocacy: Join trade associations to influence policy and gain early insights into regulatory changes.
- Exchange best practices: Use peer networks to share sourcing strategies, identify trusted vendors and learn from others’ experiences.
Preparing for future trade policy shifts
Tariffs may rise or fall, but unpredictability appears to be here to stay. Retailers may consider improving institutionalized agility with the following practices:
- Implement scenario planning and contingency strategies: Regularly model best-case, worst-case, and most-likely trade and cost scenarios, and develop contingency plans for each. This includes identifying backup suppliers, alternate transportation routes and emergency funding options to ensure your business can pivot quickly when conditions change.
- Train employees: Crosstrain staff to handle disruptions, pivot product offerings or manage new tasks.
- Communicate openly: Keep customers and suppliers informed of pricing changes, delays and trade-related decisions.
Conclusion
Today’s blend of trade policy, supply chain risk and consumer behaviors demand a new level of responsiveness. Adaptation will help support success for retailers, as will adopting and strengthening risk management strategies.
You can find risk management resources that can be shared with customers at our Risk Management Solutions Center. On our site, you’ll find articles, programs and more, such as:
- Our article about hiring young and inexperienced workers
By diversifying suppliers, investing in technology, risk management and strengthening financial and operational resilience, retailers can not only survive this period of uncertainty but emerge stronger and more competitive on the other side.
Check out these additional resources
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Citations/Disclaimers
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1
Forbes “Here’s a full list of Trump’s reciprocal tariffs announced Wednesday,” April 2, 2025.
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2
ZoomShift “SMBs Tariff Impact Report 2025,” May 7, 2025.
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3
Kearney “2025 Reshoring Index: The great reality check,” Accessed July 27, 2025.
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4
Leverage Foreign Trade Zones (FTZs): https://www.trade.gov/about-ftzs
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6
Review pricing strategies: https://umbrex.com/resources/how-to-navigate-a-high-tariff-environment/financial-modeling-of-tariff-impacts/