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The Trump administration’s tariffs program landed with a bang, crashing markets worldwide, and now CFOs are called to the front lines to help their businesses navigate the fallout.
Over the last several years, CFOs have been learning how to both plan and react to change—whether through shifts in strategy brought on by the pandemic to learning about advanced technologies (like GenAI). Now with tariffs and overall economic and geopolitical uncertainty, CFOs are forced to, once again, manage through rough terrain.
“This is what we’ve been training for,” Tom Hood, EVP of business growth and engagement at the AICPA, told CFO Brew.
President Donald Trump unveiled his most extensive set of tariffs yet on Wednesday afternoon. New tariffs include a 10% baseline rate on nearly all countries (including a remote Australian territory populated by penguins) and much harsher rates on China, Cambodia and Vietnam.
“We’re going to start being very wealthy again,” Trump told a crowd gathered in the White House Rose Garden. “We’re going to be wealthy as a country because they’ve taken so much of our wealth away from us. We’re not going to let that happen.”(Thursday’s stock market decline wiped out nearly $2 trillion.)
The tariff uncertainty is similar to what finance pros faced during the Covid-19 pandemic, according to Hood. Only instead of not knowing the immediate future of trade, companies were faced with sudden shutdown orders. CFOs had to “get much better at forecasting and future looks to support their CEOs,” he explained.
In the years since, organizations have dedicated resources to improving the finance function.
“We’re still seeing those companies investing in upskilling, investing in technology for their CFO teams, so they can continue down that journey,” Hood told CFO Brew. “This is going to make them even more valuable inside those companies, which I think is a good thing for our profession.”
(Not so) great expectations. Hood said that, in the immediate aftermath of Trump’s Rose Garden announcement, “uncertainty is now at the maximum level.” It will likely take months for the full effects to play out, he added.
AICPA recently surveyed 305 of its members, and found that 59% expected tariffs would harm their organization, while 14% thought it would be a positive for their business.
The tariffs will have “about a 1% drag on GDP growth” this year, Andrew Phillips, global government and infrastructure economics, finance, and tax leader, said during an EY panel media briefing.
“Given that 1% drag on GDP growth, I think at this point we’ll be lucky to see positive growth for the year,” Phillips added.
Response time. According to the EY panel, the Trump administration’s tariff rollouts have made it difficult for businesses to make long-term decisions.
“Every company is in a different spot, according to the discussions we’ve had, and so we just are really emphasizing, with all the uncertainty, know your structure, know your position, have modeling put in place,” Martin Fiore, EY Americas deputy vice chair of tax, said, “so as we go through the next rounds of discussions over many months, you have an understanding of your structure.”
Companies will raise prices, though that will vary by several factors. Heavily regulated firms or those with high margins may choose or need to absorb the additional costs, while those with already low margins will likely pass more on to customers.
EY’s commentary tracks with the findings of a recent Gartner survey, in which three-fifths of CFOs said they planned to absorb 10% or less of the tariffs within their own cost base. Respondents on average said their organizations will pass on about 73% of tariff costs to customers.
Companies have been stockpiling inventories when they can, to give them a short-term buffer against the tariffs, the EY experts said. Some manufacturers may opt to reshore operations over the longer term, but it would take years for new plants to come online, and the companies also want to be sure the tariffs are here to stay.
Companies in industries subject to trade restrictions have experience modeling out the impacts of these latest tariffs. Businesses that didn’t historically have that exposure are now “creating links” between their supply chain, trade, and tax professionals, Ana Maria Romero, US-East operating model effectiveness transfer pricing leader at EY, said during the briefing.
“Whatever mitigation strategies companies may choose to do because of supply chain realignment have an immediate impact on the operating model, which has an immediate impact on tax,” she said. “And so, we’re seeing tax departments become much more involved in understanding downstream impacts of any kind of mitigation strategies the business is considering.”