Whether you agree to it or not, President Donald Trump's massive new tariff regime could promise to restructure the entire world trade, and in the process, plunging the economy into a recession. Stock markets around the world fell over the details of his plans on Wednesday, and CEOs of all industries tried to assess how changes will affect them.
For many, the news was shocking, even if the president had telegraphed his intentions for years. Since Trump took office earlier this year, when I spoke to CEOs and board members, I found a common thread of expectations. “He's a deal maker. This is part of it.”
One person not in that camp: Ram Charan. Bestseller Authors, CEOs and board advisors around the world, and long-standing contributors chief executive officer He has spent a lot of time on Trump's thoughts and the thoughts of those closest to him, and has told people who have listened for over a year that he is seriously dead about his tariff plans. Charan argued that the round was very different from last time he was in the White House.
In a very public session at the CEO Leadership Conference in November, he laid out with painstaking details that Trump is likely to use as an organizational plan to attack them. He said the president saw the global trade deficit on US goods and foreign tariff regimes as “ripping” for US companies that have been unwilling to undermine US manufacturing and national security for decades and chasing them. In short, he heard what Trump was really saying and he took him with his words.
I arrived in Charan early Thursday due to his reaction to the tariff announcement, what he thought would happen next, and his reaction to what the CEO should do now. The following has been edited for length and clarity.
Most of the CEOs I know said there would be no tariffs, whether they voted for Trump or not. This was merely “Trump is Trump” and this was a negotiation tactic. It's not you. You called back like this. How did the rest of us do that so wrong?
Most people are still in the dark, not realising, not understanding. 95% of the people I meet, they think Trump is wrong. It's not going well. And they never realised what Trump was trying to achieve.
The short-term outcome of a year can have a negative impact on the US economy, but it is a new way to lead countries to fair play in trade, reduce the US deficit, fuel other countries, build troops, build large industrial capabilities in the US, and stop fueling them to attack the US by selling at marginal prices in the US. There is no connection.
Given how clearly you called this, what is your sense of what happens from here?
From now on, the number of calls to Trump per day will increase exponentially. Everyone wants exceptions, and Trump negotiates. Do you want an exception? I'll give it to you. What are you giving in return?
That's what happens. If someone makes the change he wants and believes this change will happen, he gives them time to do it.
This is mainly in about 10 countries. He is not going to spend his time on small countries or small situations where there are small deficits, unless he has the precious minerals and valuable materials that we need. It makes sense.
What is the play now for the average US CEO? What do you think they should do?
Look at the industries and products that India, Japan and Europe need. They are not competitive in prices. That may change. Look at a country that needs the know-how of America and does not trust China's know-how. So there is an investment that should be made there. Because when I travel, people trust America, no matter what the press says. The government of that country may not trust America, but people do. And they know that China, an alternative, is not attractive to them.
How about the next few months, so will we come out strong on the other side? Because it will be a tough year. What do you need to do that year?
Most important: Stop looking at the stock market. That has to go down. It was completely artificial. You are getting cheap prices from other places where you are wasting a huge amount of profit from China and elsewhere. It fades over time. Evaluating your mind with the stock market is not a great idea. It has to go down, it's down.
The tariff corrections begin to take hold and it goes down to the point where people come here and build factories and invest their money. This will be more clearly seen by November and October. There is more trust that the pledge is authentic and they are not Balanie.
Meanwhile, look at the product's value chain. Does it direct interactions, tariff arrangements, and currency adjustments? Many products are not included in that category. Cars are one of them. The textile is something else. Important electronic machines are different. So take a look at these categories that are most important. Download all imports, exports by category and see what's more important and more important. That's where negotiations take place.
There are plenty of places to really bring it to the chin if retailers, restaurants, or customers pull back. What should they do if there's a high chance of a recession over this?
This is psychology and confidence. Countries with a lot of debt and volatility, and the stock market where people invested money in, add to the psychology of anxiety, fear and pessimism. That will happen. That's happening now. You're going to stand up on it. If tax cuts come in, if it's good and effective, it tries to smooth out that part.
Consumption has not yet decreased. It's the press, everyone else who talks about this is slowing down and there's a recession. There's not at all yet. And the definition of a recession is completely wrong. Two quarters or negative for zero GDP growth? No, you have to go to the sector by sector.
In conclusion, what is really essential for the CEO reading this today? What are the important ideas that people should enter the weekend?
Number one: Understand your way of thinking and psychology correctly. Don't worry if you have extraordinary debt or have liquidity issues. Second, we will do cash flow analysis immediately. Understand which products will be affected. Do I need to proceed with these items? You've probably already done it.
Look at your accounts receivable, what's normal. Then, I immediately start thinking about pricing. Move to products by product, country to see if the specific products you import are subject to customs negotiations.
Certain things are encouraged to be exported from the United States. How do you fit into the supply chain? Many of our CEO clients are B2B suppliers, so start thinking. Which countries should we provide better costs, better quality? What tariffs will help you grow? Don't invest in factories yet, but accept products in other countries.
I have to say, I hope you are right. I am a “free people, free market” man and I have doubts.
Most people are free market people, which is difficult to swallow. It's not just you. I have not heard of any economists who support it. All I can say is look at the facts and watch the journey.
