Trump Tariffs Spark Scenario Planning, Preparation and War Rooms

# Foreign Exchange

# Risk Management

Watch a video distilling takeaways from recent NeuGroup sessions on how treasury teams are responding to tariffs.

The Trump administration’s stance on tariffs and spending by federal agencies is prompting some multinationals and the treasury and finance teams within them to engage in scenario planning to prepare for potentially higher costs for imported materials and, at other companies, a reduction in revenue from government contracts. But most companies are not making significant changes yet.

Those are among the takeaways from recent NeuGroup sessions held to help members cope with the flood of news, noise and uncertainty that has marked the first month of President Trump’s second term in office.

“Most of our member companies are not acting—they’re watching and waiting; they’re trying to separate the real signals from the noise,” said NeuGroup executive advisor Paul Dalle Molle following a special session he led where members shared what they’re thinking, doing or thinking of doing.

Please hit the play button below to watch a brief video of Mr. Dalle Molle recapping highlights from the discussions. You’ll also learn how and where members are sharing information internally amid the steady drumbeat of developments.

Paul Dalle Molle, NeuGroup Senior Executive Advisor

War rooms. During the first Trump administration, some companies set up war rooms where leaders from finance, tax, legal, sales, supply chain and other functions met to share information and perspectives as well as discuss strategy and tactics. “There’s a category of companies who were hurt by tariffs in 2017 and 2018, and they have a playbook and they’re going to the playbook,” Mr. Dalle Molle says in the video. War rooms are again part of that playbook.

At a NeuGroup for Working Capital Optimization Series meeting in San Francisco, one member with such a room, said, “A large part of that war room is dedicated to understanding what’s happening, daily changes.”

The question on many minds is whether and when the business will pass on the cost of tariffs to customers. “Everybody is asking questions,” the member said. “Sales people want to know, ‘if the price is going up, what happens when we have fixed price arrangements with customers?’ All of that.”

Currency concerns. Less direct impacts from tariffs are a concern for some companies. One member attending the working capital meeting is paying close attention to moves in the FX market in response to Trump trade policy developments. “We do have revenue and cash flow from Canadian dollars, from Mexican pesos and Chinese RMB,” the member said.

“When we look at these tariffs, we are trying to understand how this is going to impact the currency and our revenue,” they added, noting the company uses forwards to hedge about 50% of its exposures. “That’s something we are closely tracking, and if there’s a major impact we will probably have to pass it on to the customer.”

One member whose company recently set up a hedging program “with the dollar at a very recent high” is grappling with decisions about timing the repatriation of cash from countries whose currencies have depreciated. The potential effect of tariffs and counter tariffs complicate the issue, he said last week.

“I think we sort of learned in the 2016-2017 Trump era, that the worst did not come to pass—but something still did,” he said. “And so we’ll just sort of see what happens; but also it’s just anyone’s guess what will actually happen.” His advice: “Don’t believe in yourself too much here. Just do what you think is smart.”