In our Navigating Geopolitical Risk and Uncertainty Webinar our geopolitical and finance experts explored the potential impacts of the changing trade landscape and how businesses can protect operations against volatility, strengthen organizational resilience for long-term success and help prepare their workforces for the future.
For insights from the session, we invite you to watch the replay and see a summary of the discussion below.
What is happening?
The US administration is using tariffs as a negotiation tactic to pressure trade partners, as punitive measures against countries for non-trade issues, and as a macroeconomic tool to protect domestic industries and increase revenue. The administration's recent actions include imposing a 10% tariff on most countries, sector-specific tariffs on steel and aluminum, and a complex set of exemptions. Many major trading partners have responded with counter-tariffs, while tensions with China have escalated, particularly regarding critical minerals.
Legal challenges to the tariffs are emerging, in part questioning the use of the International Emergency Economic Powers Act to justify their implementation. The situation is dynamic, with companies uncertain about future developments.
What is the impact?
Tariffs and geopolitical uncertainty are impacting global supply chains, investment outlooks, and workforce planning. The risks from tariffs include higher costs for manufacturers, potential changes in commercial strategies, increased competition, and supply chain disruptions. The effect on the investment landscape includes potential inflationary pressures and economic growth concerns, with a focus on the consumer impact. Additionally, location and workforce strategies may be affected as organizations adapt to changing production network needs. Insurers and reinsurers, while showing resilience, face potential margin deterioration and volatility due to inflation and economic conditions.
Organizations should consider scenario planning exercises to help navigate these uncertainties. One key area for scenario planning is to understand and map your entire supply chain, which Marsh McLennan’s Sentrisk™ tool is designed to do.
How might this play out?
A reshaping of the global order is under way, with a notable decline in the perception of American reliability on the global stage. China is positioning itself as a stabilizer, while the US is seen as a disruptor. At the same time, the administration's goal to increase domestic manufacturing will require thoughtful consideration of workforce strategy. There are also concerns about the potential impact of tariffs on services, which have not yet been subject to tariffs. The situation remains fluid, and organizations should monitor it closely for potential impacts.
What are the watchpoints and strategies for managing uncertainties?
Key strategies include understanding your entire supply chain and how it could be affected by tariffs, assessing exposures, and running scenarios to explore risk and mitigation strategies. Organizations are encouraged to communicate with their employees, engage in strategic workforce planning, and develop a skills-based view of work. Regarding investments, it’s important to maintain diversified portfolios and avoid knee-jerk reactions in financial decision-making. Specific insurance lines of business, such as workers' compensation and personal auto insurance, may be more exposed to economic changes. Diversified non-life insurers and reinsurers are generally well positioned. Smaller companies, with high equity exposure and liabilities exposed to inflation, may have less flexibility.
Speakers on the webinar:
- Olaolu Aganga, US Chief Investment Officer, Mercer
- James Crask, Global Head of Multinational Clients, Marsh Advisory
- Jayan Dhru, Managing Director, Global Analytics and Advisory, Guy Carpenter
- Carolina Klint, Chief Commercial Officer, Marsh McLennan Europe
- Niall O'Sullivan, Global Solutions, Chief Investment Officer, Mercer
- Tauseef Rahman, Partner, Career, Mercer
- Dan Tannebaum, Partner, Global Anti-Financial Crime Practice Leader, Oliver Wyman