Courtesy of KPMG

 

One year after the imposition of significant U.S. tariffs reshaped global trade, KPMG research finds U.S. businesses adjusting to a more complex, higher cost operating environment.

Results from the KPMG 2026 Tariff Survey – building on prior survey waves from May and September 2025 – show persistent margin pressure, continued reliance on price increases and a gradual shift from tariff defense toward longer term structural change.

While the Supreme Court’s recent ruling has improved near term sentiment, most organizations remain cautious, prioritizing resilience, selective investment and deliberate reshoring strategies in the face of ongoing policy and cost uncertainty.

Consumers face continued price increases as tariff costs shift downstream

Tariff-driven cost pressure has increasingly moved from corporate balance sheets to consumers. Over the past year, the share of organizations passing through more than half of tariff related costs to customers has risen sharply – from 13 percent in May 2025 to 34 percent in February 2026. At the same time, fewer organizations are absorbing tariffs internally, signaling a structural shift in pricing behavior.

Looking ahead, price escalation is far from over. A total of 55 percent of executives plan additional price increases of up to 15 percent within the next six months, reinforcing that tariffs are now embedded in standard pricing models rather than treated as a temporary disruption.

Margin pressure persists, but expectations begin to stabilize

Tariffs continue to weigh heavily on profitability. Seventy-eight percent of organizations report higher cost of goods sold in their most recent fiscal quarter, with more than half experiencing increases of one to five percentage points. As a result, 51 percent of respondents report current margin declines, most commonly in the 1 percent to 20 percent range.

However, forward-looking expectations suggest a modest easing. The share of leaders expecting margin declines over the next 12 months falls to 43 percent, reflecting cautious optimism that organizations are beginning to adapt their cost structures and operating models, even as uncertainty remains elevated.

Trade uncertainty continues to weigh on sales and investment

Despite targeted mitigation efforts, the global trade environment remains a headwind. Eighty-two percent of organizations report declining foreign sales, and 61percent report domestic sales declines. Europe, Canada and Mexico remain the top export destinations, yet retaliatory tariffs and sourcing cost inflation – often exceeding 26 percent increases – continue to suppress demand and margins.

Tariff uncertainty is also reshaping capital allocation. While outright cancellations remain limited, 68 percent of organizations report delaying or postponing investments, most commonly by up to 12 months. Instead of large-scale expansion, leaders are favoring smaller, more flexible investments while reassessing risk and return thresholds.

Job losses slow as companies rebalance through reskilling and automation

Labor impacts from tariffs have begun to moderate. Compared with late 2025, the share of organizations reporting job reductions has fallen by 11 percentage points, while 27 percent now report increases in hiring. However, this hiring is highly targeted rather than broad based.

To manage higher labor costs – a leading barrier to reshoring – organizations are leaning on two parallel strategies:

• 31 percent hired specialized roles focused on tariff, trade and compliance complexity (up from 22 percent in September 2025)
• 44 percent invested in automation, resulting in little or no net job growth

At the same time, persistent talent shortages remain, particularly in advanced manufacturing, supply chain and logistics and technical production skills.

Reshoring accelerates but remains a long-term commitment

Tariffs are increasingly driving structural supply chain change. The share of organizations in formal planning or active execution of reshoring has climbed to 26 percent, up from just 10 percent six months earlier. Meanwhile, early-stage discussions have declined sharply, signaling a shift from exploration to action.

Despite this momentum, reshoring is not a near term fix. Sixty percent of respondents say it would take one to three years to fully reshore operations, citing high U.S. labor costs, capital intensity and deeply integrated global supply chains as the top constraints.

State and local incentives are emerging as an important enabler. Nearly half of respondents say incentives would strongly influence reshoring decisions, and 68 percent would reconsider reshoring if incentives were significant.

Post SCOTUS ruling: optimism rises, caution remains

The Supreme Court’s decision to invalidate IEEPA as a basis for tariffs sparked an immediate shift in sentiment. In a follow-up survey conducted post-ruling, the share of executives expecting margin improvement over the next 12 months jumped to 44 percent, up from 7 percent in September 2025.

Even so, confidence in execution lags optimism. Half of leaders still report low confidence in executing investment plans or strategy, underscoring continued uncertainty around policy durability and operational follow through. As a result, organizations are prioritizing:

• Investments in existing U.S. operations (53 percent)
• Accelerated reshoring over the next 2–3 years (39 percent)

What this means for business leaders

Findings from the KPMG 2026 Tariff Survey point to a clear inflection:

• Pricing pressure is structural, not temporary
• Resilience has become a competitive differentiator, not a defensive measure
• Reshoring is progressing, but requires sustained investment, incentives and workforce transformation

Leaders that proactively redesign supply chains, pricing strategies and talent models will be better positioned to compete — regardless of how trade policy evolves next.

About the survey

Fielded in February and March 2026, the survey captured perspectives from 300 U.S. C-suite leaders at organizations with $1 billion-plus + annual revenue. The study builds on the KPMG Tariff Pulse Surveys conducted in May and September 2025, enabling year-over-year trend analysis. A targeted follow-up survey was conducted post-Supreme Court ruling to assess changes in sentiment and outlook.