During his time on the campaign trail, then-candidate Donald Trump spoke about reforming tax policy, changing crypto regulations, and cross-border trade negotiations. And when it came to trade, there was one concept the Republican candidate repeatedly touted: tariffs.
And once he returned to the White House in January, Trump didn't take long to fulfill his campaign promise of imposing tariffs on countries including China, Mexico, and Canada.
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Below, I'm going to explore how tariffs can impact certain industries -- particularly consumer goods. From there, I'll dive into how artificial intelligence (AI) can help retailers form a game plan as they navigate the new tariff policies.
What are tariffs, and how do they work?
Tariffs are a way of placing taxes on goods that are imported or exported. A common reason for imposing tariffs is to strengthen domestic production while also using these taxes as leverage over trade policies with other countries.
While this might sound like a decent strategy when it comes to negotiations with foreign nations, tariffs can carry some unintended consequences. Namely, retailers are left with little optionality once the cost of imported goods rises. Businesses can either absorb these higher costs (which stifles profitability) or pass the rising prices onto the consumer -- thereby taking a toll on purchasing power.
Inflationary prices can directly lead to a slowdown in economic activity. Moreover, tariff policy can cause a major headache for businesses in supply chain logistics. Given these variables, it's clear that retailers are particularly vulnerable when it comes to navigating tariffs. Thankfully, AI is here to help.
Image Source: Getty Images.
Which AI company is using software to help retailers navigate challenges imposed by tariffs?
One company that can assist retailers in adapting to newly instituted tariffs is enterprise software platform Palantir Technologies (NASDAQ: PLTR).
Palantir specializes in developing ontologies, which are essentially large visualizations that help decision-makers simulate different impacts on their business operations by tweaking real-time data. The value of this application is trying to predict how a business could leverage different variables that could move in any direction at any time.
How is Palantir helping retailers?
Palantir's AI platform can assist retailers in a number of ways as it pertains to Trump's new tariffs. For example, if a company outsources some of its work to China, Palantir could run an analysis to help the business identify costs and savings opportunities should it choose to move some of its production efforts to another country. As a result, the retailer can better optimize its supply chain.
By analyzing price sensitivity on certain goods by using real-time data, Palantir can help determine just how much of a price increase consumers have been willing to take on, thereby allowing retailers to better modify their price strategies.
Real-time data can also shed light on how demand trends are shifting among different product types. As such, AI can help retailers make more informed decisions as it relates to their inventory -- thus operating at a higher efficiency level.
I think this use case for Palantir is important for a couple of reasons. For years, the company's reputation was that of a government contractor that consulted closely with the U.S. military and other defense agencies. And while Palantir's federal business is very much thriving, I think the company's place in the private sector is still misunderstood.
Many investors and Wall Street analysts view Palantir as a big data analytics platform akin to Snowflake, Databricks, or Tableau (owned by Salesforce). While there is some overlap with these competitors, Palantir's ontology can essentially serve as the operating system -- or backbone -- of a corporation's AI infrastructure.
Palantir's AI capabilities are not limited in scope to defense operations. Rather, the company's software is quite ubiquitous. Given the sensitivity of tariff policy on the retail sector, I would not be surprised to see the president's policies actually serve as a bellwether for Palantir's AI platform so long as trade disputes with other nations remain pertinent.
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Adam Spatacco has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies, Salesforce, and Snowflake. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
