Thriving in Chaos: Some Suggestions

Tariffs for all (albeit temporarily at a lower level, unless you’re China). Stock markets crashing. Businesses reeling. Seventy years of (more or less) stability overthrown. It can seem like chaos, and begs the question: how to thrive?

I propose a couple of possibilities for consideration.

First, look to the eye of the storm. In the case of the Trump Administration, that “eye” is tariffs. There will be tariffs. Amounts may (per the latest statement) vary and are yet to be determined (unless you’re China) but tariffs there will be. Trump has been unfailing in extolling the “beauty” of tariffs. He did so during his first Administration, during the hiatus, and regularly since his installation in January. Laying aside the debate of whether tariffs – especially at the levels proposed – are appropriate or even rational, it is clear that free trade is out as far as the US Administration is concerned and tariffs are in.

Embracing this position allows for future planning. For instance, it currently appears that 10-25% tariffs are likely for the foreseeable future against the majority of imports from the world, with only a few highly-targeted exclusions. Higher punitive tariffs against China appear highly likely for the foreseeable future, making Chinese inputs across a range of activities problematic. Likewise, Chinese retaliation via bans, restrictions or price manipulation of commodities and certain finished products (like magnets) also is highly likely. Supply chain and production disruptions, higher prices and lower margins consequently seem inevitable as well.

Second, pay attention to developments on the margin. Take Russia for instance. If the war in Ukraine can be ended in a fair manner, preliminary indicators point to the US lifting sanctions against Russia and encouraging US companies to enter Russia. Reportedly Russia’s sovereign fund already is talking to some US mining companies about potential projects, which makes sense when considering the vast quantity of mined and processed materials which might not be readily available or affordable from China. Better relations with Russia potentially also could attract US investment to countries like Kazakhstan and Uzbekistan, which so far have flown largely under the US industrial radar despite rich resource bases.  Expanding US-Russia relations also makes sense from a policy perspective to try to create some space between Russia and China, utilizing possible US investment in Russia to do so.

The US also is paying more attention to Africa, which again makes sense. Albeit that the business climate in many African nations is far from ideal, it also is true that mines (and other businesses) can be built more quickly, there is a large educated and eager workforce, abundant natural resources that sometimes, as in the DRC, are of astonishingly high grade, and the US remains a preferred business partner (versus China). Despite looming fiscal constraints, funding sources like the Development Finance Corporation (DFC) and Export Import Bank (EXIM) have been instructed to be more engaged in supporting US businesses trying to enter the African market. And again, this makes sense from a policy perspective as well. Constraining additional access by China to African resources and potentially diminishing China’s existing holdings in favor of US companies is consistent with the objective of reducing China’s economic hegemony.

So yes, while difficult, it is possible to not only survive but thrive in the age of change in which we find ourselves, and which seems certain to be “the new normal” for the next couple of years at least.