Geopolitical Risks in Business

I’m pleased that President Trump has announced a pause on implementing some of the “reciprocal tariffs” that he announced last week.   In the short-term, tariffs can hurt economic activity. They cause costs to rise, and companies will either absorb those costs, decreasing margins, or pass them on, which will affect pricing and demand. So delaying the tariffs will avoid these short-term impacts.   But we remain in a period of high uncertainty, including the near-term rising risk of an escalating trade war with China. This uncertainty will likely dampen global investment and growth. Every investment decision is based on both risk and return. The large uncertainties in the global trading system have substantially increased risks for most companies.   BCG’s trade and geopolitics experts, put it this way: “Every company, regardless of sector or location, needs to build tariffs and the related uncertainty into its planning and operating model.” In other words, core decision making just got a lot more complicated for business leaders. You can read more from our Global Advantage team on navigating the impact of tariffs: https://lnkd.in/ert8gazK Some companies have already built geopolitical muscle, developing capabilities to anticipate and respond to policy shifts. They’ve set up teams to map out tariff impacts, consider pricing strategies, and work with suppliers to share cost burdens. They should be better positioned to confront the current turbulence and headwinds. But even the leaders of those companies are now asking harder, longer-term questions. All businesses need to understand how sustained high tariffs could affect their supply chains and manufacturing networks—and prepare in advance as much as possible.   Trade battles and higher uncertainty are not what most of us would have wished for, but that’s the world we’re in. Leaders must embed a mindset of resilience grounded in adaptiveness and agility and seek advantage and opportunity amid uncertainty.

Want to know what's dominating CEO conversations? Here is the most recent data for Q1 2025 by Philipp Wegner with IoT Analytics - Hot off the Press as of March 25th! 𝐊𝐞𝐲 𝐅𝐢𝐧𝐝𝐢𝐧𝐠𝐬: • 𝐓𝐚𝐫𝐢𝐟𝐟𝐬 𝐓𝐚𝐤𝐞 𝐂𝐞𝐧𝐭𝐞𝐫 𝐒𝐭𝐚𝐠𝐞: CEO mentions of tariffs surged by 190%, surpassing previous peaks as companies grapple with new global trade tensions and policies. CEOs are actively exploring strategies to mitigate or even leverage these tariff impacts. • 𝐔𝐧𝐜𝐞𝐫𝐭𝐚𝐢𝐧𝐭𝐲 𝐒𝐩𝐢𝐤𝐞𝐬: Mentions of uncertainty climbed 49% as geopolitical shifts and trade wars cloud strategic decisions, notably affecting the EMEA region and industrial sector most significantly. • 𝐀𝐈 𝐂𝐨𝐧𝐭𝐢𝐧𝐮𝐞𝐬 𝐑𝐢𝐬𝐢𝐧𝐠 – 𝐄𝐬𝐩𝐞𝐜𝐢𝐚𝐥𝐥𝐲 𝐀𝐠𝐞𝐧𝐭𝐢𝐜 𝐀𝐈: AI remains a priority, with an impressive 275% spike in discussions about Agentic AI—highlighting a strategic shift towards autonomous decision-making technologies designed to boost efficiency and innovation. • 𝐑𝐞𝐜𝐫𝐮𝐢𝐭𝐢𝐧𝐠 𝐇𝐢𝐭𝐬 𝐚 𝐅𝐫𝐞𝐞𝐳𝐞: Amid economic turbulence, CEOs scaled back conversations on hiring by 8% while hiring freeze mentions soared by 286%, signaling cautious approaches towards workforce expansion. 𝐌𝐲 𝐓𝐚𝐤𝐞: CEOs today face complex, interconnected challenges. They’re shifting from optimistic hiring and growth toward defensive positions amidst economic uncertainty and tariff complexities. At the same time, investments in innovative AI, particularly agentic AI, are viewed as strategic ways to navigate these turbulent waters. 𝟑 𝐏𝐢𝐞𝐜𝐞𝐬 𝐨𝐟 𝐀𝐝𝐯𝐢𝐜𝐞: 𝟏. 𝐑𝐞𝐚𝐬𝐬𝐞𝐬𝐬 𝐒𝐮𝐩𝐩𝐥𝐲 𝐂𝐡𝐚𝐢𝐧 𝐑𝐢𝐬𝐤𝐬: Evaluate your exposure to tariffs immediately. Move swiftly to adjust sourcing and production to maintain competitiveness. 𝟐. 𝐒𝐜𝐞𝐧𝐚𝐫𝐢𝐨 𝐏𝐥𝐚𝐧𝐧𝐢𝐧𝐠 𝐢𝐬 𝐂𝐫𝐮𝐜𝐢𝐚𝐥: Strengthen your organization's ability to rapidly respond to geopolitical shifts. Having robust contingency plans can provide stability in uncertain times. 𝟑. 𝐀𝐜𝐜𝐞𝐥𝐞𝐫𝐚𝐭𝐞 𝐀𝐈 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭: Quickly identify and prioritize strategic AI investments—especially autonomous, agentic AI solutions—to drive productivity, agility, and market advantage despite hiring freezes. 𝐅𝐨𝐫 𝐦𝐨𝐫𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐨𝐧 𝐭𝐡𝐢𝐬 𝐫𝐞𝐩𝐨𝐫𝐭: https://lnkd.in/eWWMt47K ******************************************* • Visit www.jeffwinterinsights.com for access to all my content and to stay current on Industry 4.0 and other cool tech trends • Ring the 🔔 for notifications!

As I recently discussed the concept of trade in value added (TiVA) to explain why shifting of the assembly of finished consumer goods like cell phones from China to Vietnam overstates the degree that the U.S. and China are truly decoupled due to Vietnam’s reliance on intermediate inputs from China, I wanted to share two plots, reproduced from this Bloomberg article (https://lnkd.in/gmyG7AdJ ) that illustrate the surge of exports from China to Vietnam for intermediate inputs. Thoughts: •Top chart shows Chinese exports to Japan, South Korea, and Vietnam. Since 2017, exports to Vietnam have risen from ~$70 billion to ~$161 billion (a ~$91 billion jump). While some of the increase is likely due to inflation, this far outpaces the increases to Japan and South Korea. Just to be clear though, this unlikely fully offsets lost exports to the USA (see https://lnkd.in/gheEZbzh ). •Bottom chart shows some of the product categories with the greatest growth in Chinese exports to Vietnam. Electronics parts (e.g., memory, processors, LCD modules, phone parts, computer parts, lithium-ion batteries, and printed circuits) were many of the top categories. Such inputs are needed for the manufacturer of both computer & electronic products (NAICS 334) as well as electrical equipment, appliances, & components (NAICS 335). •One reality the incoming Trump Administration must face is that China is “the OPEC of intermediate inputs” manufacturing per Richard Baldwin and colleagues (https://lnkd.in/gUA4hEZ6). Consequently, beyond these examples of final assembly in Vietnam using Chinese-made intermediate inputs, U.S. manufacturers in NAICS 334 and 335 make extensive use of imported Chinese electronic parts. We know from prior research that tariffs on intermediate inputs makes U.S. exporters less competitive (https://lnkd.in/gzXUjgGJ). Implications: TiVA makes it clear that extensive U.S. tariffs targeting Chinese goods won’t be as effective as many pro-tariff folks argue. Shifting final assembly from China won’t change the reality about China’s dominance as a source for intermediate inputs. Efforts to try and attach larger tariffs to goods sourced from Vietnam, Mexico, Malaysia, etc. with a high share of Chinese content will both add complexity and contribute to higher inflation. #shipsandshipping #economics #markets #freight #trucking

From my expertise working inside the FDA and alongside CBP, I can tell you this — what just happened isn’t a trade adjustment, it’s a regulatory upheaval. New import taxes are being introduced under the guise of fairness, but they’re about to trigger a domino effect that affects everyone moving products across borders — especially those regulated by federal agencies. Costs won’t just rise. Risk will. Businesses operating in highly controlled industries will now face a triple-threat: 🔸 Unpredictable border interventions 🔸 Shifting agency priorities 🔸 Higher stakes for even minor missteps I’ve seen this kind of pressure play out from the inside. It’s not just about what you bring into the country — it’s about whether your business is built to survive these shifts. If you're responsible for compliance, legal strategy, or product movement — especially in food, supplements, drugs, devices, cosmetics, or even pet goods — now’s the time to act, not react. #TradePolicy #RegulatoryStrategy #FDACompliance #TariffImpact #USImports #GlobalTrade #CBPEnforcement #SupplyChainRisks #ExecutiveLeadership #LegalStrategy #FoodLaw #PharmaCompliance #MedicalDeviceRegulations #PetIndustryRegulations #CrossBorderTrade #ProductSafety #RiskMitigation #ThoughtLeadership #USDA #LinkedInCreators

𝗧𝗮𝗿𝗶𝗳𝗳𝘀 𝗮𝗿𝗲 𝗯𝗮𝗰𝗸. 𝗕𝗶𝗼𝘁𝗲𝗰𝗵 𝗶𝘀𝗻’𝘁 𝗿𝗲𝗮𝗱𝘆. The first real trade shock since COVID is hitting, and CDMOs and biotechs are still using playbooks built for stability, not volatility. Tariffs and trade controls are exploding across major economies. Supply chains once optimized for cost are now liabilities. You’re flying blind f your team doesn’t have a geopolitical nerve center. Here’s what I’m seeing from the frontlines: 🧭 𝗚𝗹𝗼𝗯𝗮𝗹 𝘀𝗼𝘂𝗿𝗰𝗶𝗻𝗴 𝗶𝘀 𝗳𝗿𝗮𝗴𝗺𝗲𝗻𝘁𝗶𝗻𝗴: What used to be a question of price is now a question of access and exposure. APIs, consumables, and critical reagents are crossing multiple borders and one policy shift can disrupt an entire production run. 📦 𝗖𝗗𝗠𝗢𝘀 𝗮𝗿𝗲 𝗯𝗲𝗶𝗻𝗴 𝗮𝘀𝗸𝗲𝗱 𝘁𝗼 𝗱𝗼 𝘁𝗵𝗲 𝗶𝗺𝗽𝗼𝘀𝘀𝗶𝗯𝗹𝗲: Absorb upstream tariff costs, accelerate timelines, and maintain pricing. Spoiler: You can’t do all three without strategic trade modeling. 📉 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀 𝗮𝗿𝗲 𝘄𝗮𝘁𝗰𝗵𝗶𝗻𝗴: If your biotech isn’t proactively assessing tariff exposure across your suppliers, your CDMO partners, and your revenue markets, you’re not protecting your burn rate, let alone your valuation. So what do the smart operators do? They build trade resilience across three timeframes: 𝗡𝗼𝘄: Fix customs delays, optimize bonded warehousing, and rethink safety stock. 𝗧𝗵𝗶𝘀 𝘆𝗲𝗮𝗿: Engage regulators, clean up HTS code classification, and model cross-border cost impacts. 𝗡𝗲𝘅𝘁 𝗻𝗼𝗿𝗺𝗮𝗹: Rethink your global manufacturing footprint. That low-cost producer may cost you more in volatility than they save you in dollars. This isn’t just a logistics problem...it’s a C-suite, investor, and board-level problem. If your strategy doesn’t account for trade disruption, you don’t have a strategy, you have a spreadsheet that’s about to get blown up.

Tariffs & Profits: We are only beginning to see the impact of trade uncertainty on corporate fundamentals. Recently, Marathon led the rescue financing (DIP) of a business affected by such uncertainty, in order to give the company the flexibility and additional capital that it needed to restructure and rebuild their business, and enable them to emerge from bankruptcy with a strong position. There will undoubtably be more situations where capital solutions will be required - many without a formal restructuring process. Marathon Asset Management's exceptional credit team performed an exhaustive study of the BSL & HY market at the issuer level to assess the impact of tariffs on each issuer's operating margins, cash flow and resultant leverage. Whereas Marathon’s analysis is company specific, below are six big conclusions that one should consider. 1. Nearly two-thirds of issuers will see de minimis impact from tariffs. 2. The approximately one-third of issuers affected will see a median impact to net cash flow of ~6%. 3. Middle Market private credit will see less overall impact compared to upper-market issuers as larger companies have the most exposure to international trade and tariffs (the same is applicable for HY issuers compared to larger and more global IG-rated corporates in the public market). 4. Whereas U.S. service companies will see minimal impact, a sub-set of industries in manufacturing, IT hardware, industrial and pharma supply and retailers such as those in apparel and footwear will face margin pressure. 5. U.S. exporters will benefit from a weaker dollar; the reverse is true for importers, adding to currency pressure visible in the FX market in recent quarters. 6. We believe that companies subject to tariff pressure are likely to absorb a portion of the cost burden and also pass on a portion of such costs; the resultant impact can be thought of as a tax on the one-third of issuers sucicptible to tariff risks going forward. It is worth noting that corporate fundamentals entered this period of some margin pressure on solid footing; per JPMorgan, recent EBITDA margins of BSL and HY borrowers as of the recent quarter-end were 15.9% and 14.4%, respectively; off the higher levels of recent quarters, but capable of absorbing some tariff impact. At the country level, as Morgan Stanley reported, heads of state in Asia receiving letters sent from the White House are among those most impacted, as shown below:

We’re only human Measures of economic policy uncertainty have eclipsed the pandemic. The largest increases are due to trade policy uncertainty and where the US will end up with regard to tariffs. Why do we care? A top 10 list 1. A “wait and see” mentality emerges. Large, hard to reverse spending decisions by firms and households are put on hold. That acts as a drag or tax on economic activity. 2. Business investment feels the bulk of the effects and contracts. 3. Credit conditions tighten, especially for those most exposed to tariffs, which further constrains investment. Even firms with plans to invest can be hobbled. 4. The banking system becomes less stable. Loan defaults pick up as the economy slows. Consumer delinquencies are already on the rise. 5. Unemployment rises as growth slips to levels that no longer enable the economy to absorb those entering the labor force. What is unknown is whether that weakness will cause a further slowdown in wage growth given the stagflationary effects tariffs. Workers tend to demand compensation for the escalation in the cost of living due to tariffs. 6. Consumer spending skips a beat. Job losses confirm fears and and trigger a larger blow to aggregate incomes and spending. 7. Financial market volatility soars and asset prices fall. People lose retirement savings and feel poorer, companies can't raise money by selling stock and loan losses accelerate. Confidence among consumers and busineses further falters. 8. Monetary policy becomes less effective as fear prevents firms and consumers from reacting to stimulus once it starts. 9. Contagion. Foreign firms and governments perceive the US as an unreliable and less predictable partner. Supply chains are reconfigured to reduce their dependence on US markets. 10. If left unchecked, sustained periods of uncertainty can trigger a breakdown of economic and political systems. Five things can help mitigate and derail bouts of uncertainty from becoming a vicious global cycle: 1. Strong institutions. They create confidence that rules won’t arbitrarily change, and work to counter the “wait and see” behaviors that curb growth. The judiciary plays a key role. 2. Clear communications by the Fed. That and a lack of political interference tempers uncertainty regarding the trajectory of inflation. 3. Automatic fiscal stabilizers, which provide immediate, predictable government response without political gridlock that can worsen a crisis. 4. Well capitalized banks, which prevent larger credit crunches from taking root. 5. International cooperation, which limits contagion. Bottom line Bouts of uncertainty trigger fight or flight reactions. That has resulted in a toxic mix of panic and paralysis. Expect whiplash, as the surge in activity ahead of tariffs borrows from growth later in the year. As for national security, that could be shored up with a targeted & strategic approach to industrial policy. Break bread not ties when possible. Be kind; pay it forward.

📢 Thinking Through Policy Uncertainty: A Strategic Imperative for Business Leaders In times of great geopolitical and policy uncertainty—like the one we are witnessing today—business leaders must sharpen their ability to distinguish the signal from the noise. With shifting alliances, evolving trade policies, economic fragmentation, and security risks shaping the global landscape, how should leaders consider what matters most? Here’s where to start: 🔹 Focus on Structural vs. Cyclical Change – Not all policy shifts have the same weight. Some are fundamental shifts in global power structures, while others are short-term political maneuvering. Leaders must ask: Is this a momentary disruption or a realignment that demands a strategic pivot? 🔹 Identify the Intent vs. the Impact – Governments make bold statements, but the real question is whether they have the political will, economic leverage, and regulatory mechanisms to implement those policies effectively. Bluster does not equal execution. Distinguish rhetoric from reality. 🔹 Look Beyond Borders – Policy changes in one country often trigger ripple effects across industries, supply chains, and markets. A new trade restriction, for example, doesn’t just affect exporters; it reverberates through global pricing, logistics, and investment strategies. 🔹 Scenario Planning, Not Guesswork – No leader has a crystal ball, but those who think through multiple contingencies will be best positioned for success. What happens if tariffs rise? If economic blocs realign? If new sanctions emerge? Having a strategy for different scenarios creates agility in uncertainty. 🔹 Follow the Money & Markets – Watch how capital moves. Global investors, multinational corporations, and financial markets often react before policies take full effect. If businesses are shifting supply chains or hedging investments, that’s a sign of where the real risks and opportunities lie. 🔹 Security, Stability & Strategic Foresight – Policy uncertainty isn’t just about commerce; it has deep implications for operational risk, cybersecurity, and corporate security strategies. Leaders must assess vulnerabilities beyond the balance sheet. The Bottom Line? In this era of uncertainty, success belongs to those who don’t just react but anticipate. Those who ask the right questions. Those who embrace complexity rather than fear it. The future isn’t predetermined—but strategic leaders shape how they navigate it. What’s your approach to policy uncertainty? Let’s discuss. 👇 #Geopolitics #BusinessStrategy #PolicyUncertainty #GlobalTrade #Leadership

Many are accessing Google Maps today to locate the Strait of Hormuz. This narrow, waterway connects the Persian Gulf to the Gulf of Oman and then the Arabian Sea. Business leaders must focus on risk mitigation strategies for logistics and supply chain disruptions for the potential closure or restricted access through the Strait of Hormuz. The waterway is used for about 20% of daily global oil and gas shipments. A closure could disrupt international trade, inflate oil prices, and increase the cost of goods and services globally. China, India, Japan, and South Korea heavily rely on oil imports through the Strait of Hormuz. Disruptions could lead to increased fuel and production costs, impacting global inflation. Gulf countries have alternative export routes to mitigate the risk of a blockade. Saudi Arabia's East-West pipeline and the UAE's Fujairah pipeline are examples of such initiatives. Pipelines cannot handle the volume like an Oil Tanker. What can the oil industry and manufacturers (who use oil by-products for production) do in the short? ➡️Gamify with scenario planning. Conduct a daily discussion to review assumptions and understand the impacts on shipping in flight and what is to be shipped/manufactured in the next 30, 60, and 90 days ➡️Appoint someone in your company to monitor news and government policy changes so your company can be proactive rather than reactive ➡️Go back and revisit your response to when the cargo ship that was stuck in the Red Sea Suez Canal in March 2021 or inspiration What should be added to the list? Check out the BBC article from June 23, 2025, “Strait of Hormuz: What happens if Iran shuts global oil corridor?” #RiskManagement #Geopolitics #SupplyChain Longview Leader Corporation

When policy changes overnight, so do deals. I got the opportunity to talk with the The Wall Street Journal about how today’s economic landscape is forcing dealmakers to rethink their entire approach. The speed of policy shifts is creating a new level of uncertainty in M&A. Deals that made sense last month might not work today, here's what’s happening: 📰 Government Moves Are Reshaping Business Models – Companies that rely on federal funding or incentives (like renewables & healthcare) are in limbo. A solar startup in West Virginia had to pause $25M worth of projects because their expected government reimbursements were frozen. That kind of risk is now a real factor in deal valuation. 📰 Tariffs Are Disrupting Supply Chains – A Canadian furniture company just laid off 115 workers because U.S. buyers started sourcing from Asia instead, anticipating a 25% #tariff hike. That’s a prime example of how protectionist policies are shifting M&A dynamics in real time. 📰 Speed is More Critical Than Ever – With so many unknowns, companies are pushing to close deals faster to avoid getting caught in sudden #policy shifts. We’re seeing acquirers put more weight on scenario planning: “What happens if a new tariff pops up?” or “How does this deal hold up if federal funding dries up?" Adaptability and speed are now the name of the game. The best dealmakers will be the ones who adapt the fastest. How's your deal strategy adjusting? #MarketTrends #Acquisitions