Tech’s Role in Addressing Tariff Uncertainty—and why Private Equity Sponsors Shouldn’t Wait

Tariffs have introduced a level of uncertainty and complexity that private equity investors often try to avoid. Executives we’ve spoken with feel paralyzed by the rapid policy changes, evolving geopolitical tensions—and a lack of clarity on how to respond at scale. Decision-makers, too, are divided: Some are taking a wait-and-see approach, while others are applying band-aids to immediate symptoms.

But inaction is neither viable nor advisable. And stop-gap solutions rarely address the underlying inefficiencies or deliver lasting value. What’s needed is a coordinated, strategic response—one that uses digital tools, data, and automation to make smarter, faster decisions.

Many of the same levers used in stable conditions—particularly those tied to digital transformation and operational efficiency—are just as critical, if not more, in today’s environment. From advanced analytics and scenario modeling to automation and intelligent sourcing, technology is what turns reactive moves into strategic advantage.

While there’s no one-size-fits-all playbook, there is a clear path forward. Portfolio companies and their private equity sponsors each have a role to play in addressing tariff risk head-on—by leaning into proven value creation levers with a sharper lens on volatility, vulnerability, and velocity. The following strategies show how leaders across both groups can take meaningful, coordinated action.

How Portfolio Companies Can Weather the Tariff Storm

To navigate volatility, portfolio companies need more than quick fixes—they need coordinated, data-driven strategies that balance short-term response with long-term resilience.

Why it Matters

Tariffs are doing more than raising costs—they’re straining customer relationships, slowing operations, and putting private equity investment goals at risk. Tariffs were cited by 20% of respondents in our Q1 Supply Chain poll as their top issue, trailing only cybersecurity and ahead of geopolitical tensions and cost of materials. Most companies have taken some action in the first quarter like altering product materials or sourcing mix, and nearly one-third said they’ve updated pricing to pass increased costs on to customers.

Strategic Levers for Navigating Tariff Disruption

Thorough assessment and scenario modeling: Deeping your understanding of the full scope of commercial and operational risk—and its potential financial impact—is critical. Use advanced analytics to qualify exposure and model different paths forward, whether that means passing tariff costs to customers, absorbing them elsewhere, or reducing exposure through supplier diversification. Scenario modeling is essential to pressure-test assumptions and anticipate how pricing shifts may influence demand.

Cost takeout: With a clear view of the risks, you can begin identifying where to act. Many organizations can unlock short-term savings by cutting non-essential overhead and indirect costs. But the real opportunity lies in longer-term efficiencies—from smarter sourcing to optimized inventory and workforce strategies. Focus on solutions that balance supply-side cost management with pricing decisions on the demand side.

Operational efficiency: When speed is critical, it’s easy to deprioritize transformation initiatives designed to boost flexibility and resilience. But these investments—like automation and smarter planning—are foundational to long-term value and short-term adaptability. They not only help mitigate tariff-related disruption but also equip your teams with the tools to adapt faster. Reevaluate these initiatives within your broader scenario planning—not outside of it—to keep long-term value on focus.

How PE Firms Can Strengthen Investment Strategy Amid Tariff Pressure

Why it matters

Tariffs are weighing on valuations, delaying exits, and challenging fundraising efforts—all while amplifying pressure to deliver results. In our conversations with investors, many are rethinking how they evaluate targets, support portcos, and position assets for exit. Last year alone, buyout fundraising dropped by nearly 25%, while pensions and endowments shifted capital to smaller, more specialized players. At the same time, PE firms are sitting on a record 29,000 companies worth $3.6 trillion—many well beyond the typical hold period. Tariff-related supply chain stress is compounding these pressures. Navigating this complexity requires sharper focus and stronger diligence, from acquisition through exit.

Strategic Levers for Private Equity in a Tariff-Driven Market

Risk-oriented target selection: Choose investments with built-in resilience to tariff-related disruption. That means looking beyond near-term performance to fundamentals that hold up in any climate—like supply chain agility, operational efficiency, and product innovation. Prioritize targets with:

• Diversified supply and distribution networks
• Tech-enabled manufacturing that reduces cost and waste
• Collaborative supplier/customer relationships
• Proven R&D pipelines that meet emerging market demands

Service-based industries, such as HVAC and plumbing, remain attractive options due to steady demand and relative insulation from global pricing shocks.

Diligence that goes deeper: Many firms have already expanded their diligence efforts—but incorporating tariff-specific risks more systematically can reveal hidden vulnerabilities. This doesn’t mean creating an entirely new process—but going deeper on supply chain exposure, sourcing concentration, and the maturity of digital and operational capabilities. The goal: surface tariff-related vulnerabilities early and understand how they could impact value creation.

Portfolio company risk analysis: Where assessments are already in motion, scaling them across the portfolio is key. That means investing in the data and analytics needed to model risk at scale—and partnering with management teams to close capability gaps. If your portcos lack the internal horsepower to move quickly, now’s the time to bring in help.

Exit preparedness: Exits are slowing, and buyers are scrutinizing more than just growth—they’re looking for durability. Ensure your portfolio companies can demonstrate not only operational performance but the ability to weather disruption. Reinforcing these capabilities now will make assets stand out when the market rebounds.

Authors: Emilie Butler-Olimb and Srikanth Sripada