The McKinsey Podcast Tariffs and trade: Preparing for the unpredictable
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Jul 3, 2025 Cindy Levy and Shubham Singhal, global co-leaders of McKinsey’s geopolitics work, dive into the intricate world of tariffs and trade dynamics. They highlight the unpredictable economic landscape shaped by U.S.-China relations and the importance of scenario planning for businesses. The duo discusses the concept of 'nerve centers'—strategic hubs for making informed decisions amid geopolitical volatility. They also share insights on emerging investment themes, including shifts in manufacturing and the growing significance of technology in global supply chains.
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Tariff Impact on U.S. Imports
- Tariff changes raised the weighted average tariff rate on goods imported into the U.S. from 2% to approximately 20-25%.
- This shift affects about 37% of U.S. manufacturing imports and prompts reassessment of manufacturing locations globally.
Tariff Scenarios and Impact
- Tariff scenarios range from an 8% de-escalation to a possible 29% escalation within 12 months.
- Companies must assess impacts on cost, demand, and competitive advantage under these varying scenarios.
Linking Tariffs to Macroeconomics
- Macroeconomic outcomes depend not only on tariffs but also on fiscal policy and consumer demand shifts.
- Businesses must evaluate both tariff effects and broader economic factors to understand potential recessions and demand changes.