The Great Tariff Decision

Market watchers thought they’d get a ruling last week. Now they think a ruling will come this week, but maybe it’ll be next week. Regardless of the exact day, a Supreme Court decision on whether the current US administration can continue to impose the tariffs it started last year is imminent, and whatever the ruling is, it will send the leaders of thousands of organizations into a frenzy of maneuvering.

The problem, experts say, is that the ruling likely doesn’t clear up much uncertainty. Indeed, experts say an answer from the Supreme Court about the legality of the tariffs imposed last year still leaves a multitude of other questions on trade. And whatever its ruling is, the Supreme Court isn’t addressing other very recent policies the US administration has enacted or publicly stated it intends to enact that could radically shift how businesses operate. “We don’t know what’s actually going to take place,” says Scott Sette, Korn Ferry senior client partner in its Global Healthcare Services practice.

Indeed, trade is just one piece of uncertainty being thrown at various sectors these days. Since the New Year, the US administration has publicly mulled enacting price controls on credit card interest rates, banning stock buybacks in certain industries, capping executive pay, prohibiting private equity firms from buying single-family homes, and canceling government contracts. And there is more to come, as leaders try to keep up with rapidly moving curveballs.  “It’s unprecedented,” says Kate Shattuck, a Korn Ferry managing partner.

The Supreme Court’s trade ruling remains the timeliest issue. But experts say the ruling might not bring much resolution for firms that rely on global supply chains. For instance, if the tariffs are ruled illegal, will they be replaced by other, more legally-sound duties? Can companies that paid illegal tariffs get refunds? Should companies change their prices right away or wait to see what the government does next? Will the ruling modify the administration’s demands that firms do more of their manufacturing in the United States?

The trade uncertainty has caused considerable consternation in boardrooms, especially around pricing. Some companies started ordering goods from low-cost countries that the current US administration has trade disputes with, anticipating that by the time they have to pay for them the tariffs will be gone. That would be giving the companies the ability to charge their own customers less without sacrificing profit margins. Other organizations, however, are unwilling to take that risk, fearing the tariffs will remain (or new tariffs will be imposed) and the government won’t look kindly on the strategy. “Is it riskier to get audited by the government and get in trouble for doing something wrong or going to the marketplace at a price disadvantage?” says JP Sniffen, leader of Korn Ferry’s Military Center of Expertise.  

There are plenty of other trade questions, too. The US government announced frameworks for trade deals with a multitude of countries, but nearly none of them have been finalized. “Many of the key details, especially around implementation, are still to be determined, which makes it difficult for organizations to take concrete action at this stage,” says Luka Cras, a Netherlands-based principal for Korn Ferry.

Experts say that since many trade questions—and other uncertainties—are beyond leaders’ control, scenario planning is in order. It can’t predict every conceivable outcome but can give leaders ideas about what actions they should take. “Scenario planning, having that muscle around, gives you the ability to map out possibilities,” says Tamara Rodman, a Korn Ferry senior client partner in its Culture, Change and Communications practice.  If leaders are still stuck, another step may be to fall back on an organization’s mission, vision, and values, Shattuck says. Leaders may or may not like the outcomes of the government and court’s actions, but it’s the leader’s responsibility that their organization can succeed in any environment. “Make your teams understand that they’re going to execute their roles. It doesn’t matter where they are on the political spectrum,” Shattuck says.

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