Global trade is increasingly complex and volatile. Average US tariffs increased sixfold in 2025, impacting virtually every trading partner and product category. These pressures come on top of depressed demand, rising commodity costs, and continued investment in AI. Many leaders are struggling with how to respond. One priority should be near the top of every leader’s list: reducing costs—both tariff-related and broadly across the enterprise.
Shifting trade policies are creating a structural cost crunch that squeezes or eliminates profit margins for many companies. In addition to tariffs themselves, one estimate found that compliance costs under the current tariff structure add an incremental 3% to total product costs. Regardless of a company’s trade situation, lowering the cost burden will make the company more agile and responsive, create headroom for future policy shifts, and free up the capital needed to invest in growth.
Some organizations already have a solid baseline of cost discipline, with clear productivity targets, commodity and supplier cost management, and routine reviews of low-value cost buckets. But they need to go deeper: understanding the interplay between trade, tariffs, pricing, compliance, sourcing, and network design. This is a C-suite-level discussion. They also need to understand their competitors’ cost structure and plans, to see where value pools may be shifting.
Our work with clients navigating today’s trade landscape points to four strategic moves leaders must prioritize. (See the exhibit.)
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Create a more cost-efficient, resilient supply chain. Media stories sometimes suggest the answer to tariffs is as simple as bringing production back to domestic sites. That’s a big, expensive step—and not always optimal. An alternate approach is to optimize the full supply chain. While manufacturing location decisions are important, procurement changes are much faster to implement. For example, building redundancy into the supplier base increases resilience and strengthens negotiating leverage. Identifying and qualifying new suppliers may entail initially higher costs, but it can reduce the risk of supply-chain disruptions that lead to lost revenue and, ultimately, high-cost workarounds.
The end-to-end analysis should include an assessment of the optimal location for each activity. There should be a rigorous analysis to understand when the extra cost of resilience is worth the “insurance policy” it provides to withstand shocks.
Invest in tech-enabled trade operations and compliance. Trade compliance can be challenging, given the changing tariff landscape and the typical lack of visibility into the upstream supply chain. Often, tier 2 and 3 suppliers either lack the data companies need—or they don’t want to share it. But tools and solutions are emerging—including many AI-driven options that can replace the flurry of ad hoc spreadsheets created during the initial tariff surges in 2025—that can model the inputs for specific goods with reasonable accuracy. These solutions streamline trade documentation and tariff classification, monitor tariff and regulatory updates, and help companies stay compliant while avoiding potential penalties. They can also assess a company’s exposure and model the impact of targeted mitigation measures, such as product redesign.
With the above capabilities, companies can better understand their exposure. Furthermore, digital visibility into the supply chain helps with a broad range of business decisions that can materially lower costs—such as changing suppliers, renegotiating prices, adjusting trade structures or trade-engineering exposed products.
Build a more adaptive, AI-powered operating model. Despite major investments, some 60% of companies haven’t seen a significant cost (or revenue) impact from AI. Part of the problem is that companies approach AI the same way they approached earlier technology waves, such as digital and e-commerce. In fact, AI is potentially more transformative—if companies put the foundation in place to capitalize on it.
Rather than just adding another layer of technology, the real value from AI comes from reshaping end-to-end processes and functions. The right approach does far more than just make current processes more efficient. It generates exponential benefits in terms of time required, accuracy, resilience, and cost. Leveraging AI and automation is key for manufacturing processes that must be reshored to high-labor-cost jurisdictions. It is also the case for cross-functional processes, like procure-to-pay, which span organizational boundaries and require looking beyond siloed cuts but deliver commensurate benefits.
Develop a high-efficiency commercial engine. Last, companies can use advanced analytics and cost-effective digital platforms to maximize the ROI on their commercial spending. For example, one highly impactful (but sometimes reluctantly taken) move is to adjust pricing in response to changes in tariffs and commodity costs. Companies in some sectors, such as consumer goods, can invest in revenue growth management strategies (RGM) to increase sales volume and market share. RGM integrates capabilities like automated pricing and trade actions with data-driven price-pack architecture. AI-enabled digital platforms also hold enormous potential in core commercial activities, from managing marketing spending to next-generation go-to-market approaches. Companies can only take these steps, however, if they have the analytics in place to understand and optimize their cost structure.
Key Success Factors
Execution will determine who turns these moves into advantage. Here’s how to deliver:
- Adopt a mindset of action. The temptation to “wait-and-see” is strong, driven by policy uncertainty. But uncertainty, as well as volatility, is here to stay. Instead, leaders should be more proactive about amassing all the information they can, understand that it won’t be perfect, and take steps to act. Companies that are already reducing costs need to do more and move faster. Others need to get started. In either case, simply waiting for conditions to stabilize is not an option.
- Invest where needed. Not all costs are bad. Investments that support growth, resilience, de-risked trade compliance or strategic advantage—especially in areas like AI, analytics, or regulatory capabilities—can be justified if they allow the business to absorb or offset other pressures. Lean, efficient organizations ensure that excised costs don’t creep back in.
- Strengthen your geopolitical muscle. Companies should factor geopolitics and trade into strategic decisions and capital allocation—not only to mitigate risk but also to boost growth. A recent BCG analysis found that companies use a range of cross-functional structures to embed geopolitical capabilities, spanning task forces, senior advisors, and dedicated fulltime teams. Regardless of what approach they use, companies need to connect geopolitical insights to the business, using human insights and AI-driven analytics to understand how specific developments will shape business value—and where new opportunities may lie.
- Double down on scenario planning. Some companies run scenario-planning exercises as part of their annual strategic review, but few go deep enough. Leading companies, especially those with strong geopolitical muscle, treat foresight as a continuous, data-driven capability—running a full range of scenarios to anticipate shifts in global trade. They model impacts through tools like digital twins and use those insights to guide real-time decisions. And they evaluate tradeoffs beyond cost, including customer proximity, service levels, and lead-time advantages. Critically, these companies also factor competitors into these scenarios, to understand how their relative positioning could shift under various scenarios.
Global trade is raising the cost of business around the world. Regardless of how else companies address those challenges, cost resilience is a smart move right now. It will continue to be a key source of competitive advantage.
