Good morning. Tariff uncertainty may raise the risk profile of certain companies. And many CFOs are planning to pass on tariff costs to consumers.
Since returning to office, President Donald Trump has imposed tariffs on Canada, Mexico, China, aluminum, and steel, while warning of potential duties on the European Union, chips, autos, and pharmaceuticals, Fortune reported, and reciprocal tariffs are due in a few weeks. But the on-again, off-again process has increased uncertainty.
The White House has defended Trump’s economic plans by pointing to the stock market and GDP gains during his first term. “We’re going to raise hundreds of billions in tariffs,” Trump said on March 12 while boarding Air Force One.
According to economists at Boston Consulting Group, there isn’t yet evidence that the fundamentals of the U.S. economy have “abruptly deteriorated” since Trump began his second term. “What has changed is the introduction of deliberate uncertainty about policy changes as a political strategy,” the economists state in a new Harvard Business Review report titled “Navigating the Economy Amid Deliberate Policy Uncertainty.”
BCG global chief economist Philipp Carlsson-Szlezak, along with BCG Henderson Institute’s chair Martin Reeves, and Paul Swartz, executive director and senior economist said that they’re seeing a turn to “strategic optionality” as a response to deliberate uncertainty. The idea is that while managing through an era of deliberate uncertainty, companies should expeditiously create more options that can improve their ability to operate within a variety of policy outcomes.
“At a minimum, this approach requires investing in preparedness—for example, devising alternative sourcing plans, stockpiling greater inventory, and creating financial buffers,” according to the report. Strategic optionality can also include rethinking product mix, design, and marketing.
A more radical approach would be for firms to reimagine the product and production process to make it more modular, localized, and flexible. “For some, this will not be possible, but those that can creatively invest in optionality will find themselves with this advantage,” the authors write. Navigating uncertainty at reasonable cost and finding opportunity could become “a new source of competitive advantage,” the authors write.
However, they noted that economists have a saying “Optionality has value,” which often, if not always comes with a cost. “As the value of strategic optionality rises, firms should be willing to pay that cost,” according to the authors. “The firm that can build a strategic optimality most effectively is more likely to find a way to thrive.”
I’d say finding a way to pay for that cost will seemingly fall under the CFO’s purview. And, regarding uncertainty, the article also points out that “rarely have there been so many moving pieces with such little visibility.”
As stock market volatility continues, consumer confidence lags, the odds of a recession are being weighed, and tariffs remain a concern for executives, CFOs will be the stewards of aligning short-term actions with long-term vision. And at the same time, gauging opportunities for strategic growth.
Sheryl Estrada
sheryl.estrada@fortune.com
Leaderboard
Ann Dennison was promoted to EVP and CFO of The Cigna Group (NYSE: CI), a global health company. Before joining Cigna in early 2024 as deputy CFO, Dennison was EVP and CFO at Nasdaq, where she led a global team responsible for corporate finance, treasury, planning and analysis, investor relations, ESG reporting, procurement and real estate. She joined Nasdaq in 2015 as SVP, controller and chief accounting officer. Prior to that, she was a managing director and head of financial reporting at Goldman Sachs.
Valarie Sheppard was appointed interim CFO of Ibotta, Inc. (NYSE: IBTA), a mobile technology company, effective immediately. Sheppard is a seasoned industry leader and current Ibotta board member. Current CFO Sunit Patel is leaving Ibotta to pursue an external opportunity in the telecom space. Patel will stay engaged with the company in an advisory role for at least one year. At Procter & Gamble, Sheppard held the role of treasurer and controller. Ibotta has engaged a search firm to identify a permanent CFO.
Big Deal
American Express has released the Amex Trendex: B2B Payments Edition, which polled 1,000 U.S. business decision-makers. The research found that 91% of respondents say that easy, streamlined, and secure payments drive business growth. Although the respondents recognize the advantage of payment automation, just 17% have fully automated their payment processes. And 15% have not automated any payment processes at all citing their leading concerns are: cost (45%), not believing it would benefit their business (28%), and security (26%).
“The reality is that the time and cost associated with automation can be easier to implement than expected, and can benefit businesses in both the short and long run,” R.J. Ancona, a VP and general manager of Merchant Services at American Express, said in a statement.
Going deeper
As the fate of TikTok in the U.S. is yet to be determined, the social media platform is sharing a report that outlines the economic benefits it has delivered to the nation. According to an Oxford Economics report, over the last seven years, 7.5 million businesses have used the TikTok platform.
The research found that 4.7 million U.S. jobs benefit from utilizing TikTok. This includes more than 3.1 million jobs directly using TikTok in their work either by creating content for the platform or managing their accounts, according to the report.
Overheard
“I believe that my job as a businessperson is to try to pay forward, share the wealth, however you want to say it, because at the end of the day if you’re the only person who benefits from your success, you’re not going to have much of it.”
—Samuel Adams founder Jim Koch told Fortune in an interview about how he built a $3 billion American beer company.