Last week – on so-called ‘Liberation Day’ – US President Donald Trump announced a slew of new tariffs on dozens of counties. Although there has been much discussion of tariffs since the president took office, the scale of the levies announced caught many off guard.
The EU has been hit with a blanket 20% tariff and many Asian nations, including Vietnam, Taiwan and Japan, have also been targeted. The highest tariffs have been levied against China.
Although it was originally handed a 34% tariff (which came on top of a pre-existing 20% on Chinese goods), this was increased to 104% after China refused to lift its tariffs on US imports. The trade war escalated again on 9 April when China retaliated with 84% tariffs on US goods.
The UK has emerged comparatively unscathed, with a general 10% tariff and a 35% levy on cars and auto parts. The impacts of ‘Liberation Day’ will nevertheless be significant for many British businesses. The FTSE 100 sank to its lowest level since January, following the announcement, and stock markets globally are still in turmoil. In the UK, experts are forecasting job losses, business restructurings and price rises as organisations adjust to the changes.
“I don’t think any business can absorb the costs,” says Cristian van Tienhoven, European CEO of Global-e, an ecommerce platform. “Very few companies have margins of 25%. If tariffs go up by 20% they will struggle to shoulder the increase.”
Continuing macroeconomic upheaval seems inevitable, but there are ways for British businesses to weather the storm.
Prioritise strategic planning and analysis
Given the current levels of volatility and uncertainty, it would be easy for business leaders either to have knee-jerk reactions or to be paralysed by indecision. Both would be a mistake, says Cas Paton, CEO of OnBuy, an online marketplace.
“You need to get off the hamster wheel and take some time to step back and plan,” he says. Paton recommends taking a break from focusing on business as usual and instead scrutinise end-to-end operations. Business leaders should examine their supply chains and consider changing suppliers, review their financial models, find areas to offset costs and consider bringing in external expertise to help with any necessary transitions.
Most importantly, leaders must be prepared for ongoing uncertainty and make scenario plans along a range of timelines. So says Lauren Maynard, global chief growth officer at Futurebrand, a management consultancy. “Unlike in 2020, when you had an overnight shock on cost, in this case you’re going to have a longer-tail impact for consumers and more immediate impact for businesses,” she says. “I’d hope this is more near-term instability so it’s important for businesses to also be able to play that out and have a game plan for both the long and short term.”
Both Maynard and Paton emphasise the importance of having the right people in the organisation’s “war room”. “You always need the voice of the consumer in the room,” says Maynard. “Marketing is going to be one of the functions that takes the first hits, so your CMO needs to be present. It would be amiss not to have your head of innovation or your CTO in the room thinking about the role AI can play in cost reduction.”
Paton adds that the best plans require the boardroom to be representative of the audience the business is trying to reach. “You need to get a well-rounded view because, in cases like this, working in silos means you’re going to come up with the wrong decisions,” he says. “You need everyone’s view.”
Maintain a strong customer focus and deliver value
Keeping the right balance of people around the table should help firms keep the customer front-of-mind at all times, a move which will be critical for retaining consumers during a difficult period.
Once execs have completed a full assessment of the situation and identified how the tariffs will affect their consumer base, they should actively seek out ways to offset these pressures and provide extra value.
Van Tienhoven recommends implementing a Delivered Duty Paid (DDP) model, to ensure consumers don’t have to deal with customs themselves and therefore have a more frictionless experience. “Work with someone who knows all the ins and outs of customs and the new formal clearance rules that are coming through,” he says.
He also advises business leaders to explore options for subsidising duties and taxes, so that less of the price increase is passed on to consumers.
For Paton, delivering greater value meant reassessing operations and making changes that allowed the company to offer customers at least 5% cashback on purchases. “It was a big decision for us to make when the tariffs came in,” he says. “As a marketplace, our margin is very small, so giving 5% back doesn’t leave us a huge amount. But with other revenue streams to offset the impact, we’re focused on coming out strong.”
Business leaders who want to protect their consumer base through the tariff-based upheaval need a robust communications plan. “Make sure you’re making a promise you can deliver on,” says van Tienhoven.
Maynard adds: “Have clarity about who you are and the role you play in your customers’ lives. It’ll be really important to have a lot of empathy for the consumer as they’re going through this.”
However, she counsels caution when it comes to dropping prices by slashing marketing budgets. “Do not make this a race to the bottom of the sales funnel. You will need a point of differentiation if you are to come out the other side stronger.”
Embrace agility and innovation and be aware of a changing landscape
Companies with an adaptable and resilient supply chain stand at an advantage as the world faces a potential trade war. However, moving manufacturing locations or predicting which countries will have the lowest tariffs represents a challenge, van Tienhoven says. “Let’s say you change location to Vietnam, because it’s cheaper today – who knows what the tariff implications will be tomorrow?”
Brands should look to diversify as much as possible and explore alternative sourcing options to mitigate risk and wholesale entry into key markets to reduce tax burdens.
The ability to be flexible will become more important as the business outlook remains unpredictable. However, volatility often gives rise to a new generation of innovators, says Maynard.
“At historical moments of financial crisis, a lot of people tend to be laid off. But these people often have the time and moment of opportunity to create change,” she says. “After such crises – even going back as far as the 1800s – you often see a rise in patent applications and challenger brands that come in and disrupt the market.”
Van Tienhoven provides another reason to remain positive. “I’m an optimist at heart,” he says. “Whenever there are points of dislocation or uncertainty, there are always opportunities. Everything’s going to get shaken up. It will be painful in the short run, but human history has shown that we’ve always innovated to get back to growth.”
Although the headlines paint a gloomy picture, business leaders who calmly assess the situation, build up resilience and take the opportunity to innovate may be able to find opportunities among the tariff turbulence.
Last week – on so-called 'Liberation Day' – US President Donald Trump announced a slew of new tariffs on dozens of counties. Although there has been much discussion of tariffs since the president took office, the scale of the levies announced caught many off guard.
The EU has been hit with a blanket 20% tariff and many Asian nations, including Vietnam, Taiwan and Japan, have also been targeted. The highest tariffs have been levied against China.
Although it was originally handed a 34% tariff (which came on top of a pre-existing 20% on Chinese goods), this was increased to 104% after China refused to lift its tariffs on US imports. The trade war escalated again on 9 April when China retaliated with 84% tariffs on US goods.
