The Toll of Tariffs: How Businesses Can Navigate Uncertainty

In recent months, many professionals have found themselves drawn into numerous ad hoc meetings aimed at understanding the implications of tariffs. If you’ve experienced this, you’re certainly not alone.

According to Kearney, a typical multinational corporation spends approximately 1,000 working hours a week grappling with tariff uncertainty. This staggering figure indicates that the top 2,000 U.S.-owned multinational corporations collectively lose over 2 million working hours every week due to tariff updates.

If we conservatively value this lost time at $100 per hour, the annual cost is a whopping $10 billion. Expanding this analysis to over 100,000 small and mid-sized enterprises with more than 100 employees pushes the total economic impact on the United States well beyond $100 billion each year.

This issue extends far beyond lost hours. The volatility brought on by changing tariffs leads to frustration and fatigue in the workplace, diminishing job satisfaction, heightening stress levels, and ultimately delaying critical investments and strategic decisions.

New Challenges, Priorities, and Skill Sets

The unpredictable trade environment today brings forth multiple new challenges and requirements for businesses. Here are some key areas of focus:

• Customer and Supplier Renegotiations: Recent tariff changes have led to increased negotiations regarding commercial terms, lead times, and service levels, burdening organizations heavily.
• Scenario Modeling Exercises: Rapid assessments of the implications of new tariffs necessitate continuous scenario modeling, demanding considerable analytical resources.
• Legal and Regulatory Reviews: Frequent consultations with legal and compliance teams are required to understand the implications of new tariffs and trade regulations, leading to extensive alignment cycles across jurisdictions.
• Pricing Adjustments: As cost structures shift, finance and product teams must recalibrate pricing strategies, which involves extensive reviews and approvals.
• Forecasting Revisions: Changes in trade conditions continually impact demand and supply forecasts, necessitating regular updates and stakeholder alignment.
• Rewiring Supply Chains: Policy changes demand significant supply chain adjustments, coordinating teams across functions to redefine supplier relationships and distribution networks.
• Capital Expenditure (Capex) Reprioritization: Investments in automation and infrastructure must be re-evaluated in light of new economic risks, often leading to delays in transformative initiatives.

A 5-Pronged Approach to the New Normal

To effectively address these requirements and minimize the impact of tariff volatility, businesses can implement the following five strategies:

1. Define Clear Roles and Governance: Establish a mini operating model that clarifies roles, decision-making processes, and inter-departmental collaboration to help mitigate uncertainty.
2. Streamline Communication: Rather than treating every news update as urgent, empower teams to analyze information and present its implications at scheduled meetings, reducing unnecessary churn.
3. Reconsider Hierarchical Decision-Making: To improve responsiveness, promote cross-functional teams empowered to make swift decisions, minimizing drawn-out approval processes.
4. Future-Proof Talent and Capabilities: The evolving landscape requires new skills—companies should hire talent specifically focused on tariff risk management and scenario modeling.
5. Rethink Organizational Design: Integrate trade compliance with supply chain functions to create proactive accountability and minimize global trade exposure.

While these measures may appear drastic in response to short-term tariff challenges, it is essential to recognize that uncertainty is the new normal. Organizations must transition from crisis management to implementing strategies that ensure productivity, morale, and organizational effectiveness endure in the long run.

The authors would like to acknowledge the contributions of Tulika Vardhan and Luca Wernick to this article.

Aman Khan and Alyson Potenza are partners, while Aleem Damji is a Consultant in the Leadership, Change & Organization practice at Kearney, a global strategy and management consulting firm.