When the rules of global trade could change any day, how do you make decisions? McKinsey experts report from the business frontlines of geopolitical turmoil.
The recent wave of tariffs, trade negotiations, and geopolitical tensions ground the world’s businesses to a halt—but only for a while. Business leaders cannot give in to paralysis; they need to analyze, plan, and, in some cases, act urgently. We invited seven McKinsey leaders whose profiles span diverse geographies and industries to share the tactical or strategic moves their clients are making, what they’re most worried about—and what they may not be worried about enough.
Questions keeping CEOs up at night
Shubham Singhal: Uncertainty about trade policy is obviously high on the list. More fundamentally, CEOs are feeling uncomfortable. These individuals are generally driven to push ahead and make decisions, so they’re asking, “How do I lead during this time?” One CEO used a sports analogy: If you’re a track athlete, you have fixed points and firm ground. If you’re a surfer, there are no fixed points or firm ground. He wondered if there were any fixed points in the current uncertainty toward which he could navigate. However, this is more of a surfing scenario: Business leaders have to learn how to ride the waves.
Sven Smit: CEOs need to absorb and make sense of large amounts of change—what is noise, what is signal, what you should act on now, what you should wait to act on. Will new governments reverse course in a few years, or are we facing something structural and fundamental? Then, of course, they need to analyze each geography, each supply chain, each product category. We haven’t seen these types of developments for 35 years, so CEOs don’t have the experience through which to filter this reality. And the signals are not clear: Experts disagree about fundamental things, such as whether large trade deficits are good or bad.
Cindy Levy: The first question I get when I speak to CEOs is, “How do I get my own intellectual handle on what’s going on?” Whereas once they engaged on these topics at a steady but low level, they now realize they need a strong grasp on all the developments and a “house view” on which eventualities they need to plan around, at least on a contingency basis.
Shivanshu Gupta: Asian companies worry about the concentration and vulnerability of their supply chains. For example, rare earth materials supply chains are becoming constrained due to geopolitical tension between the United States and China, affecting industries such as automotive and electrical equipment. Some automakers in Japan, Korea, and India are already so severely affected that they are considering scaling down production. Business leaders are additionally concerned that the many disputes in the region could flare up.
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