The imposition of sweeping tariffs by the Trump administration has created unprecedented challenges for corporate boards across North America. With 25% duties on imports from Canada and Mexico, plus additional tariffs on China, companies face what one executive described as "uncharted territory" in global trade relations. Boards must now guide their organizations through this complex new landscape while balancing short-term crisis management with long-term strategic positioning.
The Scale and Impact
The tariff situation has immediate consequences. The Trump administration's implementation of 25% tariffs on Canadian and Mexican goods and increased tariffs on Chinese imports to 20% has triggered retaliatory measures, creating a cascade of trade barriers that threaten established supply chains and business models.
As one HBR article notes, "The short-term impact — price shocks, disruptions to supply availability, and so on — could produce major swings in expenses and revenues, make budgets and forecasts meaningless, hurt stock prices, and even reignite inflation or cause a recession."
Big-box retail chain Target has already warned of profit pressures related to the tariffs. CEO Brian Cornell acknowledgedsome items may soon become more expensive, with prices of fresh fruits and vegetables from Mexico poised to escalate quickly. Only about half of the company's products are made in the U.S., making them particularly vulnerable to these changes.
Governance Imperatives for U.S. Boards
American boards face the dual challenge of managing immediate cost implications while positioning their companies for whatever trade reality emerges. The traditional annual strategy cycle is insufficient in this environment.
The first priority should be the establishment of a dedicated trade response committee. This group should meet weekly during the initial phase, include directors with trade expertise, and have authority to approve rapid responses within defined parameters. This committee should receive real-time analysis of tariff impacts on costs, pricing, and margins to inform their decisions.
Supply chain restructuring demands board-level attention. U.S. boards must request comprehensive mapping of all supplier tiers and their exposure to tariffs. The concept of "tariff engineering" – identifying ways to source items from low-tariff areas – requires a war room approach with procurement, logistics, operations, finance, legal, and commercial leaders working together and empowered to make purchasing and production decisions quickly.
The potential for consumer price increases creates reputational risks that boards must manage. When the Trump administration first applied tariffs in 2018 and 2019, many consumer and retail companies were able to pass on 30% or even 50% of the tariff impact through price increases. Today's consumers, already pushing back against inflation, may be less tolerant of further increases.
Compensation committees face particular challenges. They should consider temporary adjustments to performance metrics, add specific tariff mitigation targets to executive scorecards, and ensure executives are incentivized for long-term resilience, not just short-term margin protection.
Canadian and Mexican Board Considerations
For Canadian and Mexican boards, the governance challenges are equally significant but with different dimensions. Prime Minister Justin Trudeau's response to the tariffs was clear: "This is going to be tough. But this country is worth fighting for." His government's retaliatory tariffs on $30 billion of U.S. goods, with plans to expand counter tariffs to cover another $125 billion of U.S. goods in 21 days, creates a complex trade environment.
Boards in these countries must establish direct engagement with relevant ministries and agencies. They should participate in industry coalitions to advocate for exemptions and monitor proposed measures beyond tariffs. Canadian boards should review eligibility for the emergency relief measures Trudeau has promised to help affected businesses and workers.
The workforce and community impact requires particular attention. Mexican boards face significant challenges, especially in the automotive sector. Continental, the German automotive supplier with more than 23,000 employees in Mexico, has already announced it will review its production capacity there as its shares slid 12% in Frankfurt on concerns about the tariff impact.
Industry-Specific Board Considerations
Automotive boards face perhaps the greatest challenge, with Bernstein estimating "an annual hit of up to $40bn on the American automotive sector if trade flows remain unchanged." The firm suggested more than $13 billion in automotive cash flows would probably be wiped out for General Motors, Ford and Chrysler owner Stellantis in fiscal year 2026 if the tariffs remained in place. These companies have complex international supply chains, with some vehicles crossing borders as many as eight times during assembly.
For industrial manufacturers, boards should assess reshoring feasibility for critical components and review contract terms with suppliers and customers for force majeure provisions. They must challenge management on automation investments to offset higher labor costs.
Retail boards face immediate pricing decisions. Target's chief commercial officer noted they might need to be strategic about which items see price increases: "maybe we'll take pricing up a little bit on stockings to cover where we are in Christmas ornaments." This category-by-category approach requires board-level guidance on pricing strategy.
Creating Strategic Advantage
While most board attention will naturally focus on defense, the trade crisis also presents strategic opportunities. Acquisition opportunities may emerge as competitors struggle with tariff impacts. Boards should direct management to identify weakened competitors or suppliers and consider vertical integration of critical suppliers to secure supply chains.
Customer relationships may actually be enhanced through this period if handled skillfully. Boards should approve investments in enhanced service offerings to offset price increases and consider strategic partnerships to share tariff burdens.
Geographic diversification beyond North America takes on new urgency. Boards should accelerate entry plans into markets outside the tariff zones and consider manufacturing investments in neutral third countries.
Long-term Restructuring
Beyond immediate crisis response, boards must guide fundamental supply chain transformation. As the HBR article notes, "Because supply-chain vulnerability — including ongoing tariff skirmishes, if not wars — will be with us for the foreseeable future, you must develop or accelerate plans to redesign supply networks."
This redesign involves strategically realigning supply chains using a total-cost-of-ownership approach. Levers include relocating supply sources and manufacturing sites based on markets served, cost structure, tariff impacts, and logistics considerations. The HBR article cites an example of a major appliance manufacturer that mitigated tariff risks by relocating 30% of its global production out of China to countries like Vietnam, Singapore, India, and Mexico, generating $22 million (13%) in annual savings.
Companies need tools, talent, and processes that allow them to match purchasing needs with up-to-the-minute data about trade restrictions, suppliers, and potential alternatives. This information must be coupled with sales and operations planning and thus with flexible production, distribution, and other capabilities.
The Path Forward
The Wall Street Journal has called these tariffs the "dumbest" in history, noting that "Mr. Trump is whacking friends, not adversaries." Trudeau echoed this sentiment, saying "Americans will lose jobs. Americans will pay more for groceries, for gas, for cars, for homes."
Yet regardless of the wisdom of the tariffs, boards must prepare for them to remain in place for an extended period. At the same time, President Trump's volatility means they could be withdrawn suddenly, requiring equal agility in the opposite direction.
Three key governance principles should guide boards through this period:
- Maintain constant vigilance on both risks and opportunities as the situation evolves
- Ensure management balances short-term tactical responses with long-term strategic transformation
- View this crisis as an opportunity to build more resilient, flexible business models for the future
Companies that approach this challenge with dedicated board-level attention and a commitment to fundamental transformation will be best positioned to emerge stronger, regardless of how long these trade tensions last.