Tariff Rewind
Tariff wars are back. How do leaders keep people focused when the same "crisis" keeps emerging?
The news sent the Detroit automaker into a tailspin. An unexpected surge in steel prices prompted by a trade war was going to hit its earning guidance hard. The CEO gathered his executive team and business-unit heads together for an emergency meeting to figure out how to contain the financial damage. The meeting could easily have taken place this past week, but in fact it occurred a little over a year ago, after new tariffs went into effect against China.
When it comes to tariffs, business leaders are starting to feel like Bill Murray in Groundhog Day, experiencing the same scenario over and over again, in different countries. This time around, it’s the US and Canada facing off over tariffs after talks between the two countries broke down. The US slapped new 50% tariffs on dairy, steel, electronics, and other goods coming out of Canada, which countered with its own tariffs on US exports and an ongoing boycott of American-made goods. The escalation in tensions has major ramifications for leaders across industries given the size of the trading partnership between the two countries, estimated at just under $875 billion last year. “This dispute is different because each country has such deeply interconnected, mutually beneficial supply chains built on decades of trust,” says Tracy Bosch, a Korn Ferry senior client partner based in the firm’s Vancouver office.
Different or not, this is hardly the first tariff “crisis” leaders have faced. Some experts worry about the difficulty of keeping staffs energized over a recurring issue. At various points over the last few years, leaders have had to navigate tariff disputes between the US and China, Mexico, Brazil, Japan, and other countries. “The past will be an important predictor of how the latest dispute plays out,” says Torrey Foster, managing partner in the North America Consumer Markets practice at Korn Ferry, who notes that most previous standoffs have ended in new deals before a full-blown trade war could break out.
But leaders can’t operate on the assumption that a settlement will be reached. And—more importantly—until that happens, they have to adjust supply chains and financial budgets, keep employees focused, and manage costs. “What the tariff situation has taught leaders is that it’s no longer enough to have a plan A and plan B,” says Iktimal Daneshvar, a vice president in the Recruitment Process Outsourcing practice for Korn Ferry in EMEA. “You have to have multiple plans in place that can be executed based on what is happening geopolitically.” Renee Whalen, a senior client partner who oversees professional search for the Consumer and Healthcare markets in the US and Canada for Korn Ferry, agrees, noting that in the consumer space, where tariff volatility can rapidly swing companies from profits to losses, firms over the last year have been prioritizing leaders “who can manage through change and are comfortable in that type of environment.”
Nowhere is that more evident than in the supply chain, whose leaders adapting to higher costs from tariffs have had to move production, renegotiate vendor contracts, find new partners to source materials, and more. Over the last few years, says Meredith Moot, a senior client partner in the Logistics, Distribution, and Transportation practice at Korn Ferry, supply chains have learned to build optionality and contingency plans into their sourcing, procurement, and delivery practices, whether with existing partners in the US and Canada or those in Asia or Europe. “Supply-chain leaders aren’t waiting around for policy clarity,” says Moot.
Foster also expects firms to continue looking for ways to leverage AI to lower their overall cost structure to help offset tariff increases. “The key for leaders is to not overreact prematurely and to stay true to their business strategy,” he says.
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