Navigating the Unpredictability of Tariff Variations
In the face of increasing uncertainty, a group of experts, including Aman Khan, Alyson Potenza, Aleem Damji, Tulika Vardhan, and Luca Wernick, have proposed a new operating model for U.S. multinationals to respond nimbly and effectively to the challenges posed by tariff volatility.
The proposed model emphasises the institutionalisation of scenario planning capabilities, allowing for multivariate scenario planning and dynamic "what-if" modelling. This approach aims to help businesses anticipate and adapt to various tariff scenarios, reducing the risk of costly overreactions and enabling more informed decision-making.
One of the key areas of focus is the supply chain and operations teams, which are encouraged to lead with foresight, delivering strategic insights that inform capital expenditure prioritisation, footprint decisions, and long-term supply network design. By pushing decision authority to the lowest responsible level, organisations can facilitate faster and more agile responses.
The experts also highlight the need to revisit make-versus-buy decisions, reassess organisational structures, and consider shifts in supplier and logistics-provider relationships due to tariffs. This may involve absorbing and adapting to uncertainty by moving from fragmented, reactive structures to integrated, proactive leadership.
The impact of tariff-related meetings and tasks on Fortune 500 companies and U.S.-based multinationals is multifaceted. Productivity losses due to tariffs and associated uncertainties are significant, with top 2,000 U.S.-based multinationals losing 2 million working hours per week, equating to nearly $10 billion in productivity losses annually.
Rising costs due to tariffs increase prices for intermediate and consumer goods, with 45% of SMEs reporting reduced profits attributed to tariffs in 2025. Despite the intention to promote reshoring of manufacturing to the U.S., tariffs alone do not make reshoring economically viable because production costs abroad often remain lower even after tariffs.
Innovation and technology adoption are also affected, with experts arguing that automation and AI implementation are the key drivers for boosting productivity and innovation in U.S. manufacturing. The U.S. lags behind in AI adoption in factories compared to global peers like China.
The complexity of managing ongoing tariff negotiations, compliance, and supply chain reconfigurations demands organisational changes. Companies need more agile and specialized trade teams, enhanced risk management capabilities, and stronger coordination between procurement, legal, and finance departments.
Firms are also exploring alternative manufacturing hubs outside traditional North American bases due to capital flight trends toward Southeast Asia and Eastern Europe, driven partly by tariff-related pressures.
In summary, while tariffs aim to protect domestic manufacturing, their direct impact on boosting productivity and innovation is limited without accompanying advances in automation and AI adoption. Furthermore, tariff-induced administrative burdens and cost increases prompt organisational shifts and cautious investment strategies among large U.S. firms. The emphasis for sustainable growth lies more in technological upgrades than tariffs themselves.
The experts also suggest that trade compliance should be moved closer to sourcing and logistics decisions, and companies should establish dedicated geopolitical risk units or embed trade strategists in operational teams. Agile "tiger teams" with deep functional expertise in trade, logistics, legal, and commercial relationships can be empowered and held accountable to deliver rapid, high-quality responses.
Businesses must recalibrate pricing strategies for both suppliers and customers in response to cost fluctuations. Including small and medium-size enterprises, the total economic impact on the United States could be as high as $100 billion a year due to tariffs.
Organisational design should be rethought to elevate the role of trade compliance from reactive risk flagging to proactive scenario shaping. Overall, the experts stress the need for a proactive, integrated, and adaptive approach to tariff volatility to ensure long-term success and resilience for U.S. multinationals.
- The proposed operating model for U.S. multinationals suggests a shift from fragmented, reactive structures to integrated, proactive leadership, focusing on areas like global trade, finance, and business to adapt effectively to tariff volatility.
- In the face of rising costs due to tariffs, a recalibration of pricing strategies for both suppliers and customers is necessary, as the total economic impact on the United States could reach up to $100 billion annually, affecting not only large corporations but also small and medium-size enterprises.
- As tariffs increase administrative burdens and cost increases, organizations need to reconsider their supply chain management, with a focus on supply chain and operations teams that can deliver strategic insights and lead with foresight, contributing to a more agile and responsive business in the face of global trade politics.
