AlixPartners CEO Simon Freakley on Tariff Uncertainty and CEO Anxiety

CEO Anxiety Amidst Policy Uncertainty

• 💡 CEOs are experiencing significant anxiety due to the rapid and unpredictable changes in tariff policy, making long-term planning extremely difficult.
• 📌 The constant shifts in policy mean CEOs wake up to a different stance on tariffs daily, hindering their ability to plan for production and investment.

The Impact of Tariff Uncertainty on Business

• 📈 Businesses, especially industrial CEOs, face challenges in planning production when tariff policies are volatile, impacting decisions worth hundreds of millions or billions of dollars.
• 🎯 The current situation is described as a "game of chicken" involving multiple entities, making it hard for US CEOs to determine when tariffs are permanent enough to justify bringing manufacturing back onshore.

Strategies for Navigating Tariffs

• 🛠️ Companies are establishing "tariff war rooms" to strategize and implement tactics like tariff engineering.
• 🧩 Tariff engineering involves analyzing different countries' tariff structures and re-evaluating product components and construction to minimize tariff impacts and indirect costs.

Rising Costs and Consumer Impact

• ⚠️ A key certainty is that costs are going up due to tariffs, and these will be passed on to the customer rather than absorbed by company margins.
• 💸 For example, Whirlpool saw component costs increase by 10-50%, adding an average of $90 to each washing machine after bringing production onshore in 2018.
• 📊 This trend is expected to lead to higher prices for consumers across a range of products, effectively acting as a tax on the American people.

Economic Outlook and Recession Fears

• ❓ The possibility of a recession is a key question, with uncertainty surrounding inflation and employment trends.
• 📉 If inflation remains high and employment begins to rise, a recession becomes a distinct possibility.