For retailers weighing AI adoption, tariffs present a golden opportunity, big risks

Will tariffs increase the business case for AI adoption? It’s a good question. Let’s ask ChatGPT what it thinks.

“Yes, tariffs can strengthen the business case for AI adoption in the retail industry, though the exact effect depends on the nature, scope, and duration of the tariffs,” it said.

The chatbot then went on to explain over several bullet points that tariffs could push retailers to adopt AI in order to accelerate reshoring, optimize supply chains, and forecast changes in demand.

Then again it would say that, wouldn’t it?

To give the arguably biased bot some credit though, a whole cottage industry of companies are now pitching AI-powered business tools as a potential solution to tariffs.

• To name just a couple, Salesforce recently unveiled its new “always-on” Import Specialist Agent, an autonomous AI agent designed to rapidly process and analyze the 4,400-page US tariff schedule and provide “predictive insights” and “actionable recommendations.”
• And supply chain management platform Kinaxis just launched an AI-powered modeling tool that allows companies to simulate tariff exposure and generate strategic scenarios to assist with planning.

In such an uncertain economic environment, the business case for any tool promising lower costs and better predictions might seem unimpeachable. But investing in a new technology also comes with risks, and recent data suggests AI is even riskier than other tech investments.

In the words of IHL analyst Greg Buzek, the economics of AI adoption are “brutal.” Citing research from RAND, he noted that AI projects have a failure rate of 80%, compared to 60% for traditional IT projects, and just 30% move beyond the pilot phase, according to a Gartner analysis.

So is now really the time to be going all in on AI?

Disaster waiting to happen or golden opportunity: Buzek argues that it depends on the application. Retailers using generative AI for core business functions such as pricing without first going through a trial and error process and cleaning up their data is a “disaster waiting to happen,” he said.

“The single biggest correlation that we’ve seen in our research with generative AI success comes down to how much experience you have with traditional AI and machine learning in your company,” he said. “My biggest fear is those retailers that didn’t do that first part just try to jump to the second part.”

But now isn’t the time to sit on the sidelines, Buzek added. Instead, retailers should be getting started on iterating their way forward. “Failure isn’t necessarily a bad thing, because you’re going to have failure regardless of when you start,” he said.

On the other side of this experimentation are potentially significant returns on investment. A survey of supply chain professionals from the IBM Institute for Business Value found that companies that invested in agentic AI saw 61% greater revenue growth than their peers.

And in a world where economic disruptions such as tariffs are a reality, Pushpinder Singh, global supply chain transformation leader at IBM Consulting, said the firm is directing clients to do a lot of “what-if scenario simulations, so that when an event hits you, you can analyze the impact and then decide what’s the best course of action.”

The whole picture: Kinaxis is providing precisely this function with its Tariff Response tool. Chief Product Officer Andrew Bell explained that it helps companies understand the impact of tariffs concurrently across the functional silos that often form in an organization.

For example, there’s how tariffs could impact consumer demand. Then there’s how they could impact costs. With this tool, both impacts are processed at the same time and shared across the organization to provide actionable insights.

“Tariffs can hit and affect any part of the functional supply chain, and the more of a concurrent view that you have of how any one change affects the whole the better your ability is going to be to respond,” Bell said.