Tariffs and trade controls are expanding rapidly around the world. Macroeconomic uncertainty is growing. Second-order effects of government actions are multiplying.
The first global economic shock since the COVID-19 pandemic has arrived.
While geopolitical tensions have been rising for several years, the recent wave of trade controls and reciprocal tariffs has come on quickly and intensely. Not since the 1930s has the world seen this level of tariff activity.
The impact on businesses is high, unevenly distributed, and likely to remain that way. In the automotive industry, for example, the amount of content that comes from different countries ranges widely by car model, making the impact of tariffs highly variable and creating cascading effects through automakers’ supply chains (exhibit). Take the example of one 2025 hybrid electric vehicle: Its gearbox is made in Japan, roughly 30 percent of its parts originate in the United States or Canada, and another quarter are sourced from Mexico; the engine is assembled in the United States and the final vehicle in Mexico. Other car models comprise almost entirely imported parts; a few are largely sourced and assembled in a single country. This complexity is not limited to the automotive industry—many sectors and regions face similar challenges.
While business leaders confess to feeling overwhelmed at times, they are addressing day-to-day issues as best they can. Many companies have calculated initial estimates of their exposure to new tariffs and are taking steps to reduce it. Some North American organizations are applying for certifications under the United States–Mexico–Canada Agreement (which has a high burden of proof) rather than relying on most-favored-nation (MFN) status, as they had in the past. Teams are focused on filing for duty drawbacks, obtaining Temporary Importation under Bond (TIB) certifications, and expanding access to free trade zones and bonded warehouses to preserve cash and avoid tariffs where possible.
Even as they grapple with immediate challenges, company leaders are unsure about what comes next. With the pandemic crisis still fresh in their minds, they find themselves again facing a highly uncertain environment with few parallels to guide them and no clear sense of when normalcy might return. They hesitate to make strategic moves because they are unsure how long the tariffs may last. They realize that a range of tariff consequences—from a sharp macroeconomic impact to trading-partner responses to national-security reassessments—could cause sudden changes in trade regimes.
Given the web of interdependencies that govern global trade, business leaders realize that they can’t define and prepare for the path forward using traditional forecasting and planning methods. What they need is a geopolitical nerve center—a central hub that tracks new developments in global trade, plans across several horizons, and guides decision-makers on ways to mitigate the impact of the expanding tariffs and trade controls.
Read the article by Cindy Levy, Mihir Mysore, Shubham Singhal, and Varun Marya
