In the face of evolving tariff landscapes, businesses are turning to advanced technologies and strategic adjustments to mitigate financial impacts. Experts predict a significant rise in the adoption of artificial intelligence (AI) for inventory optimization. Brands are exploring AI-driven solutions to enhance assortment planning and maintain full-price sales without increasing prices. Meanwhile, concerns about intellectual property risks and counterfeiting have emerged as companies weigh the benefits of these technologies. Smaller brands are also adapting by exploring operational efficiencies and alternative suppliers. Additionally, some firms may consider using the tariff exclusion process, though this approach comes with its own set of challenges. The suspension of duty drawbacks and de minimis provisions further complicates supply chain strategies for both large and small retailers.

The global business environment is witnessing a transformative shift as companies seek innovative ways to address tariff-related challenges. Margaret Bishop, an assistant professor at Parsons School of Design and an expert in textile supply chain management, forecasts a notable increase in the use of AI for inventory optimization. This technology can refine assortment planning, allowing brands to boost full-price sales and offset higher costs. Some companies might even adopt a just-in-time inventory model, similar to Zara's approach, to eliminate unnecessary stock replenishments. However, Steve Lamar, CEO of the American Apparel and Footwear Association, points out that while generative AI holds promise for managing supply chain issues, it also introduces new risks related to intellectual property and counterfeiting.

Paul Magel, president of the supply chain technology division at CGS, emphasizes that there is no universal solution for handling tariff-related inventory challenges. Stockpiling before tariff hikes can be beneficial for some businesses but may lead to aging inventory for others. Smaller brands are making targeted changes where possible. For instance, Nicky Clarke, a premium hair tools brand, is investigating operational efficiencies, alternative packaging options, and improved shipping rates to manage tariff costs. Samreens Vanity, a beauty brand, anticipates a substantial increase in packaging costs due to tariffs on Chinese materials. To address this, the company is absorbing some costs through reduced profit margins, selectively raising prices on certain product lines, and diversifying its supply chain by partnering with Mexican suppliers for secondary packaging.

Jonathan Todd, vice chair of transportation and logistics law at Benesch Law, highlights the potential complexities of the tariff exclusion process. While this option could offer relief, it requires a careful evaluation of the time investment versus the likelihood of success. Companies must also be cautious about the public availability of sensitive information submitted during the process. Furthermore, the suspension of duty drawback and de minimis provisions under Trump’s executive orders has added another layer of complexity. The cessation of duty-free shipments valued at $800 or less will affect major e-commerce players like Shein and Temu, as well as smaller fashion and beauty retailers that have relied on these provisions to streamline their international supply chains and facilitate direct-to-consumer deliveries.

As companies navigate the intricate web of tariff-related challenges, the integration of AI and strategic supply chain adjustments offers promising solutions. While these approaches come with their own set of considerations, they provide opportunities for businesses to adapt and thrive in an increasingly complex global market. By leveraging technology and making targeted operational changes, companies can effectively manage costs and maintain competitiveness despite rising tariffs and changing trade policies.