Tariffs are taxes collected on imported goods based on factors such as their type, value, quantity and country of origin. U.S. tariffs can change in response to geopolitical developments and global trade negotiations. Although they may make foreign goods less competitive and encourage domestic production, tariffs can also increase the cost of raw materials, finished goods and equipment.
These effects can spread throughout supply chains. Even organizations that do not import goods directly may face higher supplier costs, inventory shortages, shipping delays and longer lead times. Sudden price increases may also strain cash flow and reduce profit margins.
The financial impact can be substantial and is increasing. According to KPMG’s February 2026 Tariff Pulse Survey, 34% of U.S. businesses now pass on more than half their tariff costs to customers, up from 13% in May 2025. Fifty-five percent of executives plan to raise prices by up to 15% within the next six months.
Assessing Tariff-related Risks
Trade disruptions can be especially challenging when an organization relies heavily on one country, supplier or shipping route. Limited sourcing options can make it harder to respond when costs rise or a supplier cannot deliver. Businesses should consider:
- Which products and materials depend most heavily on imports?
- Do key suppliers rely on countries affected by tariffs or other trade restrictions?
- How quickly could alternative suppliers be identified and approved?
- How much additional cost could the organization absorb before profitability is affected?
- How might supplier diversification, contingency sourcing plans, vendor contract reviews and inventory planning help address these exposures?
Understanding Coverage Limitations
Standard business interruption coverage generally applies only when direct physical damage to covered property forces an organization to suspend operations. Contingent business interruption coverage typically requires physical damage to a key supplier, customer or other dependent property. As a result, tariff-related cost increases, margin compression and revenue losses usually do not trigger these policies.
Some specialty policies may respond to covered government actions, embargoes, customs delays, border closures or other trade disruptions, depending on the policy wording and cause of loss. Political risk or trade disruption insurance may protect organizations with international operations, overseas assets or foreign supplier dependencies. Trade credit insurance may provide protection when customers cannot pay due to insolvency or financial distress, including those related to tariffs or trade disruptions.
Coverage availability varies, and insurance alone cannot eliminate supply chain risk. Organizations should evaluate their import volume, supplier concentration, contractual protections and contingency plans with qualified advisers.
They should also monitor tariff developments and communicate regularly with suppliers. Early awareness can provide more time to adjust purchasing decisions, renegotiate contracts or secure alternate sources before a disruption becomes more costly.
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