In early April, President Donald Trump unveiled a sweeping new set of import tariffs aimed at boosting manufacturing and protecting jobs in the United States (US). Rates ranged from a global baseline of 10% to higher rates for selected countries, including 104% for China. The announcement unsettled financial markets – causing stock market falls not seen since the financial crisis – and raised fears of prolonged economic uncertainty.
However, barely 24 hours after the tariffs officially came into effect, President Trump made a U-turn, freezing tariffs for 90 days at a rate of 10% across most countries, with the exception of a 25% rate for specific sectors, and an even higher rate of 125% for China, which subsequently increased to 145%.
While markets rebounded on the news, the pause in tariffs has created considerable uncertainty as to what comes next. In light of this, Nik Zhukov, Managing Director of Global Solutions at Hawksford, shares his thoughts on the implications of the tariffs, and how Hawksford is helping clients manage risk and maintain resilience in this shifting global landscape.
What is your take on the US approach to tariffs, based on what we have seen?
You can take the tariffs at face value and see them as a way for the US government to increase income at the same time as trying to boost US jobs. However, there is another view that the tariffs are a mechanism for the US to get countries around the table to negotiate individual trade deals.
An alternative perspective is that this is also being done so that countries will choose to do business with the US rather than with China. Whatever the motivation, it has created a really challenging environment for businesses, especially those that operate across borders.
Do you think that certain businesses will be hit more than others?
I think it’s inevitable. Take car manufacturing, for instance. In some cases, the tariffs mean that a company’s business model becomes completely irrelevant because they will be non-competitive in the US market, so they will have to rethink their operations.
And it's definitely going to be a bigger hit for some smaller companies, because they won’t have sufficient cash flow and facilities to sustain the business. It's likely not going to be as big a hit for larger companies, because they will be able to survive until the picture becomes clearer. Of course, that doesn’t mean they won’t be affected as they wait for things to settle down.
The tariff picture changed radically in a matter of days and it’s near-impossible to say where it will go next – how difficult is it for governments and business to adapt and plan ahead?
In recent discussion with business leaders, it was noted that in the past, businesses usually have Plan A and Plan B for any given scenario. But now, they’ve got to have more than five different plans to adapt to a host of possibilities. Again, this can typically only be done by bigger firms as SMEs simply can’t afford to work up to that level of planning.
Take a business that has been predominantly focused on buying something in China and selling into the United States and there's no plan B in their model. They don't have other big markets they can go to. Now the model is gone, because they can’t offer this cheaper price anymore as it’s going up because of tariffs.
The fact that the picture is unpredictable is what is making things really difficult for businesses. The sooner there is clarity, the sooner they will be able to act. Right now, there could be a big risk in making decisions that might unravel further down the line because the tariffs change again.
What do you think the 90-day pause means for businesses?
On one hand, it will give companies the chance to take stock of where they stand. Yet on the other, they may find themselves not able to take action as they wait to see the trade deals the countries they operate in negotiate with the US. And that may vary from country to country.
In some extreme cases, businesses are literally freezing operations. We have a mid-sized client, for instance, who does a lot of global e-commerce and has chosen to pause their operations because it doesn't make sense to continue in the current climate.
Do you see trade lines being redrawn as a result?
I think it’s going to create new roads, new ways of how products get delivered, where they get manufactured and so on.
Imagine if you have a company that has a presence in, say, Germany and South Africa, and Germany manages to negotiate a 10% rate whereas South Africa manages to only negotiate a 30% rate. That has the potential to reshape their operations and where they actually operate. It could result in a reshuffling of everything we know in terms of logistics and trading.
From a Hawksford perspective, that means we might need to help some clients close down legal entities in some countries and open somewhere else. They’re going to have to spend time and effort and money on restructuring what they’ve been doing in the past, depending, of course, on what trade agreements are reached.
So, what sort of discussions have you been having with your clients in the wake of the tariffs?
It varies, depending on where they're operating, what they're doing, what sector they're in and so on. There are those that are reaching out to us and inquiring about what action they can take, what are their options, how they can minimise costs, whether they should investigate alternative locations and what that would look like in terms of closing down one entity, establishing another, hiring staff and so on. There are also those who are thinking about putting a company into a dormant state.
We always work with clients on a bespoke basis, tailoring solutions to their needs, and that has never been more the case than right now.
In line with Hawksford’s ethos of ‘thinking beyond tomorrow’, is it even possible to take a long-term view right now?
That’s a good question, because it really is challenging at the moment and the final outcome is so uncertain. It's absolutely reasonable for businesses to prepare in case nothing actually happens, and the tariffs stay in place as they are.
I think that we’re just trying to ensure that we support our clients with the decisions they make whenever that may be and to have solutions in place, which will very much be on a case-by-case basis.
I think there is genuine concern that this will take longer than 90 days to resolve. That the situation keeps changing and drags on and on, which means that businesses really can't chart a way forward. So, we will be there to advise on whatever happens, when it happens.
Hawksford Expert Q&A series features commentary on market developments and industry trends that matter to our clients. Our subject matter experts across Hawksford share their views to help businesses navigate change and make informed decisions. Subscribe to our newsletter to get the latest insights. All information presented in this article is accurate at the time of publication.
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