Telecoms and tech are bracing for a fractured global economy

Tariffs are not just a minor cost increase on an Excel sheet — they affect nearly every line of the P&L, from COGS to operating expenses, and even intercompany transfer pricing and taxes. Finance teams need advanced simulation tools to model first-, second- and third-order effects of tariff scenarios. A tariff on imported hardware, for instance, can raise equipment costs and contribute to an aggregate effect that drives up inflation, weaken currency exchange rates and increase interest rates — all of which feed back into the cost of supply and capital.

Crucially, these models should not be static. Leading organizations are evolving simulation models to dynamically link with real-time data sources and high-frequency indicators (HFIs) — such as economic policy shifts, business news, social media sentiment and financial market movements — to make sure their scenario analysis is continuously updated and responsive. This allows companies to move beyond long-range projections and adapt in real time to new signals in the macro environment. Scenario modeling should incorporate these variables to quantify impacts on cash flow and margins. Stress-testing the business under various tariff and recession scenarios can help leaders make data-driven decisions. Plan for the worst (and best) cases. What happens to EBITDA if a 25% tariff hits critical network gear? What if tariffs expand to software or services? Companies that embed dynamic forecasting and “war-gaming” tariff scenarios into their regular planning are better prepared to pivot. Customs specialists enrich these models by supplying real-time intelligence on tariff classifications, duty rates, exemptions and potential mitigation levers like free trade agreements or bonded warehouses.

Contingency planning should expand to cover a wider range of futures — from a return to freer trade to protracted trade wars or even full decoupling between major economies. Each scenario brings different challenges, from deep downturns to slow growth with rising costs. Playbooks for plausible geopolitical and trade developments — including the imposition of digital services taxes, new export controls on tech or sanctions affecting key markets — should guide decisions on investment pacing, market entry/exit and capital allocation. If faced with a scenario of “technological bifurcation” (splintered tech standards and supply chains by region), for example, how would a global operator of digital infrastructure localize data centers or redesign networks?

Leading enterprises are moving from annual static plans to rolling scenarios embedded in enterprise risk management cycles. The goal is agility. Know ahead of time which levers are available (cost cutting, price increases, alternate sourcing, etc.) depending on how the macro environment shifts.

Tariff considerations should shape spend management discipline and cost reduction initiatives. Implement disciplined cost controls, undertake fit-for-growth transformation initiatives and rigorously apply zero-based budgeting principles. Zero-basing spend management with the objective of minimizing tariff exposure provides an effective lens for financial planning. It compels leaders to critically scrutinize every spending category for tariff vulnerability and identify opportunities to eliminate or significantly reduce exposure. Proactively developing and prioritizing cost reduction initiatives can address immediate tariff impacts and help position your organization for long-term resilience and competitive advantage amid ongoing geopolitical uncertainty.

Which assets and operations are most vulnerable to geopolitical disruption, and how can greater economic sovereignty be achieved? This question cuts to the core of strategy in a de-globalizing world. Telecom and data center operators should identify critical infrastructure and capabilities that would pose the greatest risk if cut off by trade restrictions or political conflict. These might include data center hub locations, subsea cables, core network platforms or even skilled workforce concentrations. This might mean establishing new facilities in politically aligned jurisdictions, diversifying software development or managed service center locations, or securing alternative suppliers in allied countries.

Many companies are weighing moves to localize production of key components and regionalize data storage to comply with sovereignty requirements. Regionalization of critical operations is becoming a strategic necessity, not just a regulatory compliance task. This approach is grounded by customs teams who continuously flag regulatory changes that might alter cost structures, keeping financial models aligned with the current trade landscape. The objective is to enable continuity of service and supply even if globalization continues to fragment. In practice, this could mean duplicating some supply chain nodes in different regions (with inevitable cost trade-offs) to hedge against a single point of failure. Balance the efficiency of global scale against the resilience of local control.

When trade winds shift suddenly, having critical stock on hand can spell the difference between continuity and crisis. Supply chain managers should conduct risk-adjusted inventory planning for key components and materials. Rather than blindly reverting to just-in-time models, define optimum stock levels and update order quantities for high-risk categories (such as semiconductors, fiber and specialty chips) based on cost-benefit analysis. This might involve carrying extra weeks of supply for components with long lead times or limited alternative sources. The lesson from recent semiconductor shortages is clear. A strategic safety stock is an insurance policy against sudden tariff implementation or export bans.

Each company’s strategy will differ — some may bulk-buy ahead of expected tariff deadlines, others might leverage bonded warehouses or duty-free zones to hedge costs. Use data to balance resilience versus cost. Identify where inventory buffers most effectively mitigate risk for the least cash drag. Customs teams support this by advising on duty-saving mechanisms like bonded zones or free trade programs and identifying compliant routing options to reduce friction in cross-border flows.

Logistics can be a surprising choke point when tariffs strike. If a tariff is imposed on goods entering through Country A, but not Country B, can you reroute shipments? Supply chain teams should build flexible logistics networks with multi-modal options. This may mean negotiating alternate shipping lanes or ports of entry. Diversifying from one primary port to several smaller ports can prevent a single point tariff or customs issue from stalling deliveries. Some companies are also considering near-shoring assembly or staging, bringing products to a neighboring country for final assembly to exploit trade agreements, like assembling in Mexico to qualify under USMCA for the US market. Leveraging technology (IoT tracking, AI-based routing) can provide real-time visibility into shipments and dynamic rerouting if a border closes or delays mount. In a volatile trade environment, agile logistics — rerouting on the fly, using air freight sparingly to bypass slowdowns, even adjusting International Commercial Terms with suppliers — is a vital capability.

A hard look at supplier diversification is mandatory. Many tech manufacturers have long-tail supply dependencies (a single-source supplier for a specific chip or a sole-country source for a raw mineral). Tariffs and trade barriers throw these weak links into relief. Procurement and supply chain leaders should accelerate dual-sourcing initiatives, especially in high-concentration areas like semiconductors, rare earth materials and telecom hardware. Risk mapping exercises can pinpoint where over-reliance on one region or vendor creates vulnerability. From there, companies should invest in qualifying new suppliers or working with existing partners to shift production to alternate locations.

For example, several telecom equipment OEMs have started sourcing more components from Vietnam, India and Eastern Europe to reduce reliance on any single Asian country. This also extends to design. Can your product be tweaked to use more readily available components if one source becomes costly or unavailable? The competitive edge will lie in agility, and leading firms will use digital supply chain dashboards and analytics to get real-time insight into supply disruptions and quickly find alternatives. In practice, this might mean having a library of interchangeable parts or a prequalified pool of secondary suppliers that can be tapped on short notice.

Friend-shoring and onshoring to help relocate production or sourcing to countries with favorable trade relations (or domestic locations) can blunt the impact of tariffs and geopolitical risk. Companies like major cloud providers and telecom equipment makers have announced plans to build more locally (e.g., opening new manufacturing in the US or EU) in response to policy incentives and uncertainties abroad. While shifting shores can increase short-term costs, it reduces long-term risk exposure.

Analyze which product lines would justify local manufacturing despite higher labor or facility costs. Ask which inputs can be obtained from tariff-exempt trade partners. Some firms are negotiating contract manufacturing in regions like Latin America or Southeast Asia that enjoy preferential access to key markets. Tax incentives and government subsidies such as the US CHIPS Act funds or EU semiconductor incentives can offset some costs of localization. Weigh the cost of disruption (or of being cut off from a market entirely) against the incremental operating cost. Build an operating model that can pivot across borders as politics evolve. With customs input, companies can better assess origin documentation, manage tariff exposure and navigate shifting regulatory environments that affect sourcing and logistics decisions.

Capital planning for network and data center builds — such as fiber rollouts, 5G upgrades or new hub or edge data center facilities — should become more agile and phased. Traditionally, operators might commit huge capex up front for multiyear infrastructure projects. In a world of trade uncertainty, it’s wise to sequence spending in smaller increments tied to milestones or demand triggers. For example, rather than committing to buy 24 months’ worth of networking gear at once (and risking a tariff hike on the second batch), an operator could phase purchases quarterly and retain the option to defer or accelerate based on the latest trade climate. Phased rollouts and modular designs can reduce “lock-in” risk. If a key component’s cost spikes 50% due to tariffs, the company can pause and re-plan rather than being over-committed. This approach also dovetails with financial scenario planning — modeling the net present value (NPV) of projects under different cost assumptions and only green-lighting the next phase when it still meets return thresholds.

Essentially, operators of digital infrastructure — including networks, telecom systems and data centers — should build flexibility into capex programs. Some are even considering leasing or as-a-service models for hardware (see “Service-shifting” below) to convert large upfront costs into more adjustable operational expenses. During infrastructure planning, customs teams help identify duty deferral or exemption opportunities — such as inward processing relief or temporary importation options — that can reduce upfront capex on imported equipment.

Embracing open and interoperable standards can be a powerful way to reduce dependency on any single vendor or country. For telecom, the rise of Open RAN (radio access network) is a prime example. Instead of relying on proprietary equipment from one or two vendors, operators gain flexibility to mix-and-match hardware and software components from different suppliers. Open standards and interfaces break vendor lock-in, making it easier to swap out a piece of equipment if it becomes tariffed or embargoed. However, moving to open ecosystems comes with trade-offs, including integration complexity, potential performance differences and the need for new skills to manage multi-vendor networks.

Consider conducting a trade-off analysis to determine if the freedom to switch vendors (and thus dodge a tariff issue) is worth the upfront effort of certifying and integrating diverse components. In many cases, the cost of staying flexible is outweighed by the risk of being stuck with an inelastic, proprietary supply chain. The same concept applies to data center hardware (e.g., open compute project designs) and software (open-source platforms). By committing to open standards, telecom and tech firms can gain strategic optionality like sourcing gear from alternate suppliers in Europe, Korea or locally if one source becomes problematic. Strategic sourcing decisions informed by customs analysis can further improve for tariff exposure when selecting hardware standards or vendor regions.

The more a network’s capabilities are defined in software, the less it’s tied to specific hardware subject to tariffs. Telecom operators are accelerating moves toward software-defined networking (SDN), network function virtualization (NFV) and cloud-native architectures. These technologies decouple services from the underlying physical devices. Instead of buying proprietary appliances, for example, an operator can run virtualized network functions on generic servers — servers that might be more readily sourced or manufactured in tariff-friendly locations. Similarly, moving core network intelligence into cloud software might mean that if hardware from Vendor X is suddenly expensive, the operator can port the software to hardware from Vendor Y with minimal disruption.

Additionally, software supply chains have their own geopolitical concerns (like foreign code or intellectual property restrictions), but they’re generally more malleable. This shift to software-defined everything also allows for quicker reconfiguration of networks in response to cost changes. If international bandwidth providers hike prices, for instance, a software-defined WAN can reroute traffic via alternative paths automatically. The cloudification of networks also aligns with the need for rapid scaling up or down, with capacity being added via software updates rather than truckloads of new hardware. In short, investing in digital transformation of network ops is a hedge against both tariffs and other uncertainties.

Another operational strategy is to transform vendor relationships and procurement models. Rather than heavy upfront capital purchases of equipment (with all the tariff and depreciation risk they carry), telecom operators can shift to as-a-service models. This turns what used to be capex into opex. Service contracts can often be more flexible or negotiable if conditions change. For example, a managed service provider might absorb some tariff costs or spread them among clients, whereas buying hardware outright leaves the operator fully exposed.

Additionally, shorter contract cycles or rental models allow a company to continually reassess the landscape. If a certain technology or supplier becomes cost-prohibitive, the company isn’t stuck with sunk costs –– it can pivot at the next contract renewal. This thinking is being applied in areas like data center equipment leasing, cloud migrations (using cloud providers instead of buying servers) and even radio access network sharing. It’s outsourcing some of the risk. But make sure contracts have tariff pass-through clauses or rate adjustment mechanisms so you’re not blindsided by vendors passing on costs midstream. The overall aim is operational agility by converting fixed costs into variable costs that can flex with the geo-economic winds.

We’ve seen some consumer electronics companies add “temporary tariff surcharges” to products while others quietly raised prices. In addition to passing through some, or all, of tariff-induced cost increases to consumers, telecom operators might consider surcharges on equipment-heavy services like higher installation fees for fiber or special tariffs on handset purchases. Similarly, data center and cloud service providers may elect to pass through increasing cost for the chips, compute and networking equipment that underpin their infrastructure, using infrastructure-as-a-service or colocation surcharges to preserve margins. For large-scale facility operators, this could include tariff-related uplifts on power- and hardware-intensive services or variable fees tied to infrastructure refresh cycles. Any pass-through needs careful modeling of price elasticity and customer sentiment as well as competitor response, both domestically and internationally.

Pricing strategy should become more fluid and segmented. Perhaps enterprise customers are willing to pay a premium for a steady supply of equipment, but your retail customers are more price sensitive. Analytics and willingness-to-pay models can identify what portion of increased costs the market will bear. In parallel, transparency is important for brand trust — in fact, a recent poll reveals 61% of Americans prefer that businesses reveal how much tariffs are affecting price changes. Consider hedging through long-term contracts with key clients before costs rise, or even pre-buying foreign currency or components to lock in margins.

Product and service portfolios may need to adjust based on tariff exposure. If certain devices or equipment become significantly more expensive, can the company promote alternatives? A telecom operator might shift marketing from a Chinese-made handset to a Korean, Indian or locally made handset that carries a lower tariff. For enterprises running their own data centers, one workaround to rising tariffs on imported hardware might be shifting workloads to the cloud, where infrastructure costs are more abstracted. But for hyperscale cloud providers, cloud is the infrastructure — so substitution means rethinking how they source and build hardware. Many of the largest players are already assembling custom gear, initially driven by performance optimization and making sure their hardware meets operational requirements. Now this capability is proving valuable to reduce tariff exposure and gain more supply chain control. This kind of vertical integration also gives them flexibility to shift manufacturing across regions as trade policies evolve.

Navigating customers toward less exposed options requires close collaboration between product development, procurement and marketing/sales teams. Companies should identify which offerings have high embedded tariff costs and proactively develop substitutes or bundling strategies. There’s also a customer experience angle — abrupt removal of a popular product can hurt loyalty, so the substitution should be managed with incentives or education. For example, “We no longer carry Device X, but Device Y offers 90% of the features at a similar price and avoids the surcharge.” But be mindful of brand implications. If the substitutes are lower in perceived quality, it could erode brand premium. One alternative is to explore domestic or regional manufacturing of select products under your own brand to circumvent tariffs (some companies have resurrected dormant local manufacturing for this reason). Be ready to rotate promotions and product mix in tandem with the shifting trade winds. Working closely with customs enables product teams to anticipate which offerings are most exposed and adjust inventory or messaging accordingly, to help minimize customer service disruptions.

The growth of subscription and as-a-service models in tech provides a cushion against cost volatility. For example, offering devices on a monthly subscription (device-as-a-service) can spread out the cost and make customers less sensitive to price jumps. This move can also extend life cycles altogether, further reducing exposure. If tariffs raise the cost of a device by 20%, a customer might balk at a $1,200 purchase but be more amenable to a $5 increase in monthly subscription fee. Similarly, telecom services that bundle hardware, software and connectivity into one subscription can internalize and smooth out cost shocks. This not only helps with customer retention (by avoiding large upfront price tags) but also aligns with how vendors are selling — many equipment vendors are open to outcome-based pricing or leasing models in a bid to maintain volume. Both sides essentially share the risk.

During volatile times, businesses with recurring revenue models tend to be more resilient. Pivoting offers to subscription models can be a win-win. Customers get predictability and providers get loyalty (and can adjust pricing gradually as needed). This also turns a potential sudden margin hit into a slower burn that can be managed with cost actions elsewhere. Customs teams assist in pricing and product planning by flagging which SKUs or service bundles face higher landed costs, guiding decisions around surcharges or substitutions in specific regions.

Circular economy practices (refurbish, reuse, recycle) are not only good for sustainability goals but they’re increasingly tariff-smart. They reduce the need for new imported units, thereby sidestepping tariffs and import quotas. A data center operator extending the life of servers or repurposing hardware from one site to another, for instance, might delay purchases of new equipment that carry tariffs. Likewise, a telecom retailer with a robust trade-in and refurbish program for smartphones can resell devices and serve certain demand via this circular supply instead of having to import devices. This strategy builds resilience by creating an internal supply loop. It’s also becoming a competitive differentiator as customers grow more eco-conscious — and it resonates well with regulators (who may grant concessions) as well as investors who appreciate forward-thinking risk management. As a bonus, it can also expand access to customers with lower purchasing power or limited credit, unlocking new market segments.

Keeping resources in use for longer also protects against material shortages and captures value in the supply chain. Telecom and tech companies can invest in facilities to refurbish network gear or partner with specialized recyclers, effectively creating secondary sources of supply that are tariff-free. And by using more recycled materials in manufacturing, some products may qualify for tariff exemptions or lower duties.

• Vinish Bawa, Partner and Telecoms Sector Leader, PwC India
• Glenn Burm, Partner and Global Semicon Leader, PwC Korea
• Tanjeff Schadt, Partner and EMEA Semicon Leader, PwC Germany
• Russell Taylor, Partner and Telecoms Sector Leader, PwC UK