TLDR: Texas firms are increasingly adopting artificial intelligence, particularly generative AI, as a strategic measure to mitigate the financial impact of escalating tariffs. A recent survey indicates a significant surge in AI usage, with businesses leveraging the technology to enhance productivity and reduce labor costs amidst narrowing profit margins.
Businesses across Texas are increasingly exploring and implementing artificial intelligence (AI) as a key strategy to navigate the challenges posed by some of the highest effective tariff rates seen since the 1930s. This strategic shift is highlighted by recent findings from the Texas Business Outlook Survey (TBOS) conducted by the Dallas Federal Reserve, which indicates a notable increase in AI adoption among firms in the region.
The primary motivation behind this accelerated AI integration is the need for cost-saving measures, enhanced productivity, and reduced labor requirements. Firms grappling with higher input costs due to tariffs and subsequently shrinking profit margins are actively seeking innovative solutions, with AI and automation emerging as viable work-arounds.
The TBOS results reveal a significant upward trend in AI usage. In May 2025, 59.1 percent of surveyed businesses reported utilizing either generative or traditional AI. This represents a substantial 21-percentage-point increase from April 2024, when the figure stood at 38.3 percent. Generative AI, defined as AI that autonomously creates new content, has been a primary driver of this growth. The proportion of firms employing some form of generative AI (either exclusively or in combination with traditional AI) jumped from 20 percent in April 2024 to 36 percent in May 2025.
Overall, the pace of AI adoption in Texas is accelerating rapidly. Data shows that only 5.4 percent of firms reported using AI in 2018, a figure that surged by nearly 33 percentage points by 2024, underscoring the technology’s growing prominence in business operations.
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Specifically addressing the tariff impact, approximately a quarter of the TBOS respondents indicated that their firms would increase their use of automation and/or AI to offset the effects of higher tariffs. Interestingly, the vast majority of these firms, around 85 percent, are already AI users. This suggests that current tariff policies are more likely to prompt existing AI adopters to intensify their use of the technology rather than spurring new investments from firms not yet utilizing AI. However, this dynamic could evolve depending on future tariff policies and the continued advancements and accessibility of generative AI.
