Board Focus: Huddling in the Boardroom About the Trade War

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Ask any director what’s top of mind these days and you’ll likely get the same response you’ll get from every quarter of corporate America: tariffs, tariffs, tariffs and more tariffs. It’s not just that boards need to help company executives with the yo-yoing of on-again, off-again tariffs. It’s that they also need to take some serious steps back in order to consider the future, experts say. According to a survey of about 400 directors, the current trade war is now the number-one priority of boards—outranking compliance issues, AI, and shifting M&A-activity policies.

While CEOs may be diving quickly into operations issues and employees’ concerns, boardroom conversations likely are focusing on strategy and overall risk, experts say, particularly in three areas: financials, supply chain, and talent. For example, should a company that manufactures shirts in China look to build a factory on US soil? Or should it wait and see whether the government continues to pause its tariffs after 90 days? At many companies, millions of dollars of investment are at stake. 

To be sure, directors don’t run company operations. But experts say the heart-stopping recent trade-war developments—along with the market volatility they’ve caused—have forced company executives to focus chiefly on operational fires. "Given the stress that management and the board may be under, it is important for board members to keep a cool head and not add to the drama," says Anthony Goodman, head of Korn Ferry's Board Effectiveness practice. For her part, Tierney Remick, co-leader of Korn Ferry’s Global Board and CEO Services practice, says that boards “need to manage for the short term, while planning for the long term.” 

Financials

In their efforts to understand how tariffs might reduce profits and earnings per share, boards are looking at up to a dozen different scenarios, experts say—from short-term quarterly outlooks to longer-term domestic production and sourcing scenarios. “What are the implications of quickly restructuring a strategy?” asks Jane Edison Stevenson, global vice chair of Korn Ferry’s Board and CEO Services practice. “What costs do you pass on to the consumer, and what do you retain?”

These questions are driving many conversations. Delaying a major product launch, for example, could have a ripple effect on everything from a company’s quarterly earnings predictions to its capital allocations to its shareholder dividends, experts say. Concern over a pullback in investments could in turn hamper corporate growth. 

Supply chains

While the movement and manufacturing of goods are always on a board’s radar, they’ve taken on a higher priority, Stevenson says: “Boards are going to be scrutinizing supply chains in a different way.”

Of course, companies can’t implement new supply-chain processes immediately. “None of them is going to pick up business and move tomorrow,” Remick says. “It’s too costly, and there’s no labor force or infrastructure built.”

For boards, the difficulty is to help the CEO and other executives analyze the risks, based on the tariffs, of onshoring costs or redesigning products—without knowing how long the trade wars will go on. No company wants its new factory to sit empty because tariffs have been reversed and offshoring has resumed. 

Talent

The board also has to have an understanding of employee productivity. For instance, fear of layoffs or stagnating wages could affect employee engagement. Boards can offer a competitive advantage in an uncertain environment by helping the CEO and other top leaders tap into employee productivity in a positive way, Remick says.

On the other hand, uncertainty can lead employees to wonder if their company is the best place for them. Even before the tariff announcements, studies showed that about one-third of high performers planned to leave their jobs in the next 12 months. “The tariff experience is ripe for companies and employees to start to think about what they need from work in new and different ways,” says Jonathan Wildman, a Korn Ferry Advisory senior client partner.

The tariff back-and-forth could also cause boards to prioritize leading through ambiguity—if they haven’t already done so—on their succession wish lists.

If there’s comfort to be had, experts say, it lies in the fact that boards have been through a wave of uncertainty before. “It’s like COVID again,” Remick says. “One of the things boards learned during that period was to be as calm as possible.” If history is a guide, then composure will be the board’s North Star. 

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