Below is a conversation from this morning’s Bloomberg Surveillance. Ryan Petersen with Flexport discusses tariffs. He offers most of the same predispositions, assessments, arguments, and preferences as most of my supply chain-focused clients and contacts. Most support “bringing back” manufacturing to the United States. Many are open to carefully crafted reciprocal tariffs (here and here and here). But they don’t like tariffs. They especially don’t like the so-far messy and sometimes contradictory roll-out of US tariff policy.
Given the current level of uncertainty, Petersen — and other guests on this morning’s Bloomberg Surveillance — suggest that corporate decisionmakers are waiting-to-see, delaying decisions, and holding their bets — which incrementally decelerates economic activity.
The “right” response for the emerging tariff regime will be particular to each enterprise. But the decision-making options are roughly the same. As each tariff is announced, then sometimes implemented, potentially continued (or rescinded), and prompts retaliation (or not) the tactical options are to Transfer the risk or Avoid the risk or Reduce the risk or Accept the risk (TARA). How to conceive and execute the right tactical response will depend on the specific product category, interdependent components, and each firm’s exposure to tariff consequences.
Strategic options can be identified on a continuum between embracing or rejecting American autarky. How self-sufficient can the United States become? Is more self-sufficiency good or bad for your particular enterprise? The United States is almost entirely self-sufficient in almond production. (But retaliatory tariffs could constrain almost $5 billion in US almond exports.) Hawaii and Puerto Rico produce less than one percent of the coffee consumed in the United States. Decision-makers at almond and coffee enterprises face very different challenges. Such extremes are unusual. Most enterprises operating in the United States depend on a mix of domestic and foreign inputs and compete with a variety of domestic and foreign sources.
What is your mix? What is the best case for greater self-sufficiency? What is the worst-case? What is the most likely case? Why? What plausible factors might change your answers? Given your answers, where do you place your bet? How much do you bet? (For more on betting, listen to Mohamed El-Erian after 2:06:39 on the video below.) Not betting is not really an option. You are being forced to play.