Ever since President Trump initiated new tariffs on U.S. trade partners in April, subsequently modifying them frequently, American businesses of all sizes have faced tumultuous uncertainty. For business owners reliant on international suppliers, abrupt increases in the cost of raw materials necessitate a hasty reassessment of long-term strategies and pricing frameworks. The constantly fluctuating tariffs have overturned months, if not years, of planning across operations, production, supply chains, and market strategies, rendering many entrepreneurs nearly immobile.

Currently, most imported goods encounter a starting tariff of at least 10%, though this figure can change abruptly. In April, Trump unveiled larger reciprocal tariffs on numerous countries before applying a 90-day suspension. The tariffs on China were initially raised to 145% and then reduced to 30% for the majority of Chinese products for a minimum of 90 days starting in May. To deal with the tariff chaos and endure the unstable political and economic landscape, it’s essential to navigate ongoing uncertainty and adapt to frequent interruptions. Failing to adjust promptly could mean transferring increased costs to consumers, placing your business in danger of losing them altogether.

To stay abreast of these perpetual changes, business owners need to routinely examine various “what-if” scenarios. For instance, if tariffs increase on a crucial supplier, how swiftly should pricing be adjusted? Or, what alternatives exist for switching to a supplier from a nation with lower tariffs? Given the numerous variables, AI can streamline this process. Tools like ChatGPT simplify the use of AI for financial modeling and supply chain analysis, enabling you to remain flexible while dealing with volatile tariffs.

How small businesses can use AI for smarter scenario planning and future-proof decisions

Earlier in my career, I helped large oil companies and financial institutions optimize their supply chains for better efficiency and lower costs. Traditionally, creating these models required complicated Excel spreadsheets and some proficiency in mathematics. Not only has AI made the modeling process more accessible, even for non-technical business owners, but it has also provided business owners with an essential tool for scenario planning that is adaptable in real time.

Tariffs are fundamentally unpredictable, especially today, so AI can’t predict what tariffs will be tomorrow, next week or next month. It can, however, help your business prepare for the unknown and make smarter decisions faster by running dozens of those “what-if” scenarios in seconds. That’s why it’s best to understand and use AI as an optimization model instead of a one-time solution.

Here’s how the optimization model works and how you can use it to build a pricing and procurement strategy that will help your business stay on top of 2025 tariffs:

Step 1: Provide your AI tool with data

Start by entering the key details into your AI tool—some of which your Large Language Model (LLM) may already know. An LLM is a type of AI that understands and creates human-like text by learning from vast amounts of writing.

Include information like:

• Current and projected tariff rates
• Domestic and international costs of goods
• Inventory holding periods
• Revenue per unit

This data is likely already available in your balance sheet, which you can quickly upload to your AI tool like ChatGPT or source through simple research. The AI’s goal is to optimize for a combination of these variables that yields the highest profitability at the lowest cost at any given point.

Step 2: Use AI to model supply chain alternatives

AI can scan trade databases and tariff announcements in real time, constantly updating teams in need. As tariffs fluctuate and updates are tracked, your optimization model will shift and evolve.

For example, if tariffs rise and the cost of overseas products increases, you may look to purchase goods domestically and ask your AI system to recommend sourcing alternatives. AI can even compare the benefits, drawbacks and long-term implications of sourcing from various countries.

While AI can’t provide specific pricing or shipping estimates, it drastically reduces the time it takes to evaluate new options. Once you find the rest of the information you need, by researching online or calling the suggested companies directly, feed it into your model to update your strategy in real-time.

Step 3: Use AI to explore multiple scenarios and identify the best path forward

Beyond just helping with sourcing decisions, AI can also recommend how much you can raise your prices to stay profitable without driving customers away. For example, your business might absorb a 5% to 10% tariff increase through modest price hikes, but a 15% increase could start to push customers away. AI can simulate different pricing strategies to help you find the perfect balance for your unique situation.

Ask your AI tool questions such as:

• How much would I lose if tariffs remain between 10% and 15% over the next 60 days?
• When does buying from international suppliers become economically unviable?
• How much would I need to raise prices if tariffs increase to 20%?
• What’s the best price increase to keep my revenue steady while covering costs?

AI can help pinpoint various thresholds and calculate your options. These actionable insights can be life-saving for businesses lacking the time, energy and resources for trial and error.

Think of AI as a personal financial analyst that works around the clock and costs a fraction of a human hire. Regardless of your business, integrating AI into your operational toolkit and interacting with it daily can help you prepare for an unpredictable market.

While the future of tariffs remains uncertain, their impact is very real today. Instead of freezing up from uncertainty or making hasty decisions, AI empowers business owners to stay proactive and ready for whatever comes next.