Last Friday, the US Supreme Court decided that the International Emergency Economic Powers Act does not allow a US president the authority to unilaterally impose tariffs. Over the last year, the US government has been leveraging tariff policy to negotiate new trade agreements (for example, recently signing agreements with Indonesia and India.)
Despite the fact that the US president has now declared a temporary, 150-day import surcharge of 10%, raised to 15% over the weekend, tariff policy as a lever for economic negotiations has been upended. For example, European Union lawmakers have postponed a vote to ratify the recent trade deal, citing the need for “full clarity” on next steps before proceeding (and other governments are also publicly saying they will reassess trade assumptions).
Amid quickly changing policy, what should executive leaders take away from this news? TL;DR: If you aren’t leveraging a robust scenario planning discipline, now is the time to get started in earnest.
Tariff Relief Won’t Be Immediate — And Isn’t Even Guaranteed
US Customs and Border Protection has said that it will stop collecting tariffs under the previous policies as of midnight February 24, but little else is certain. More than 1,000 companies, as importers of record, and several US states, on behalf of consumers, have already filed for what the Penn Wharton Budget Model estimates could amount to as much as $175 billion in tariff refunds, and the number of cases is set to explode. It’s clear that the cost or complexity of doing business won’t fall overnight:
The ruling is narrow. The Supreme Court struck down only tariffs imposed under the 1977 International Emergency Economic Powers Act while leaving the door open to the use of other trade authorities (e.g., provisions of the 1930, 1962, and 1974 Trade Acts).
New tariffs are already in the works. In addition to invoking Section 122 of the Trade Act of 1974, the US president is further invoking Section 232 of the 1962 Trade Expansion Act to investigate and adjust tariffs for “national security” reasons and Section 301 of the 1974 Act to probe “unfair” trade practices. This effort will likely be used to justify new duties, thus contributing further uncertainty.
The path for refunds is unclear and will be expensive. Friday’s ruling pushed questions about how, when, and which importers (or consumers) will receive refunds on tariffs already paid. If they pursue this path, CFOs and procurement leaders should expect a prolonged legal fight that could ultimately cost companies more than the refunds they seek.
Unwinding structural changes that companies have made will be (very) costly. Multiple studies show that 94% of the economic burden of Trump’s tariff policies has fallen on US companies and consumers. Many companies already have reengineered their supply chains, absorbed higher costs, or passed them on to customers. While companies may feel the need to reconsider such decisions in light of the court’s ruling, continued uncertainty is likely to reinforce the status quo.
Trade relations will not snap back to “normal.” There is no reset button that will restore trust between governments and companies after a year of tariff skirmishes and policy whiplash. Many trade partners have already adjusted their strategies and imposed their own tariffs on US goods, and it is unlikely that these will be adjusted until US tariff policy is more certain.
“Always-On” Scenario Planning: Your Key To Navigating Tariff Fallout
Tariffs remain central to US economic policy, and companies should expect the US to continue to pursue a tariff-heavy economic policy strategy even as the mechanisms may change and further court challenges occur. Add to that ongoing uncertainty in other areas (e.g., global conflict, the race for AI, and more), and scenario planning now is simply a given.
Boards and C-suite leaders must be ready to respond to specific scenarios such as targeted export controls, foreign investment restrictions, trade agreement renegotiations, and customer pressure for commercial terms that try to bring some certainty to ongoing uncertainty (e.g., automatic price adjustments in the event a tariff is added or discontinued, threshold-based triggers, timing impact clauses, and even tariff refund sharing). Make scenario planning your bulwark against the risk of higher costs, supply chain reconfigurations, greater uncertainty, and business volatility. For example, be proactive in addressing the likelihood that customers’ finance, legal, and procurement teams will be even more involved in purchasing agreements by revisiting contract terms and enabling sellers with focused messaging. The best mix of onshore, nearshore, and offshore production is never fixed but subject to changes in technology, terms of trade, and sustainability regulations. This is why thoughtful supply chain leaders build resilient supply networks, embedding optionality rather than rigid supply chains.
To Manage Through Volatility, Focus On Your Customers, Operations, And Partners
For every scenario, the fundamentals of running your business continue and should stay front and center: Ground actions in what your customers want and expect from you. To do that:
Reaffirm your target customers. Be clear on who your customers are. Done right, consumer segmentation and business buyer segmentation are critical to bring focus and offer a quantitative way for business leaders to stay on top of the needs and challenges customers have. Well-developed personas complement this with a qualitative tool for developing messaging that builds empathy. Be crystal-clear about the blend of the four value dimensions (functional, experiential, symbolic, and economic) that delivers on your target customers’ value needs, matches what your organization excels at, and provides a competitive advantage, and give customers consistent, on-brand experiences.
Reaffirm your business priorities. Amid resource constraints, prioritize what will most positively impact customer experience and help them realize their objectives. Learn to become adaptive to the core — keep the five-year plan as guidance but not an edict and instead commit to being selective, effective, and thoughtfully adaptive. For example, create dynamic offering roadmaps that use agile development and design thinking, or build out marketing plans for key scenarios so you are ready to put them into action.
Get creative with low-cost innovation and fast experimentation. You may already be using AI to improve tasks and operational effectiveness. Add to that “shoestring” CX for quick, ongoing wins. And don’t forget the importance of keeping employees motivated to explore, iterate, and effectively measure — now is the time to be the change leader your organization needs. Your ability to be customer-obsessed and continuously adapt to customer needs and economic uncertainty can be a key differentiator that sets you apart from the competition.
Communicate clearly — internally and externally. During times of constant change, communicating with clarity, empathy, speed (with a plan!), and the right storytellers is key. And it’s just as important to keep listening — with a willingness to learn and take action.
Forrester clients can reach out to schedule a guidance session or inquiry for more in-depth guidance specific to your organization’s individual needs.
