Trade chaos: when even the rulebook has been burnt

Kevin Phillips reflects on how today's emerging global trade war makes previous economic challenges look like business as usual, and why adaptable accounting systems are more critical than ever.

I have long advocated for accounting tools that allow you to budget and forecast quickly and easily. At first, this was to keep up with the increased pace of change and influx of data as the world digitalised. Then, it was to identify and make the most of opportunities during and after the pandemic. Last year, it was to deal with geopolitical uncertainty – the wars in Ukraine and the Middle East, and the host of elections and regime changes during 2024.

But weirdly, the uncertainty we faced during 2024 now looks like business as usual. It was measurable, definable, and operated with something of an internal logic and historical precedent. By contrast, 2025 seems to be anything but! While elections are, for the most part, over, the fallout has been staggering. The new American administration’s apparent intention is to break with precedents, disregard international rules and guidelines, and generally operate as an autocracy.

This moves the world into a place of uncertainty with little precedent or logic to guide us when thinking strategically about our businesses. Which means that, today, our need to adopt flexible financial systems is more urgent than ever.

The services vs goods disconnect

Take just one aspect of the recent on-again-off-again tariff saga. Peculiarly, the US’s focus is almost exclusively on manufacturing and traditional post-industrial revolution activities. This narrow focus ignores a critical fact: when it comes to services, as opposed to goods, the US maintains a trade surplus with its three biggest trading partners, which partially (though not entirely) offsets the goods trade deficit.

This disconnect between policy and economic reality becomes starker when we consider that services businesses account for more than three-quarters of US GDP and over 75% of US stock market capitalisation.

Tariffs are undoubtedly a blunt instrument, but today it seems like they are being swung like a machete with no logic or control, even hitting unlikely targets such as penguins!

Planning amid policy whiplash

The US trade policy creates an unprecedented challenge for businesses worldwide. The issue isn't only unfavourable business policies. These are exacerbated by their constantly shifting nature, which renders strategic planning nearly impossible. Consider the second week of April: tariffs were announced, reversed, modified, and then partially reinstated. Global markets suffered their most severe volatility since the pandemic, with trillions wiped from values only to partially recover after each reversal.

This erratic approach leaves companies paralysed by impossible choices. Should manufacturing firms invest billions in US operations, knowing regulations might change overnight? Or do they just walk away from the largest economy and market in the world? If they do move operations to the US, they face dual challenges: how to source materials without incurring unsustainable tariff costs, and where to find workers in a country with historically low unemployment rates and tightening immigration policies. With no clear path forward, businesses remain in a holding pattern, unable to move confidently in any direction.

Contrast this with 2024's "known" uncertainties that operated within a familiar framework. Today's chaos follows no discernible pattern, lacks any internal consistency, and defies prediction. The level of adaptability now required exceeds anything in recent memory.

The business planning paradox

Despite this uncertainty, companies that spent 2024 on hold – waiting out wars and elections – can no longer afford this luxury. Pressing pause for another year (or four, as there is little likelihood that things will stabilise in 12 months) means further losing competitive advantage.

Forward momentum must inevitably happen. Though major capex investments might be postponed, operational expenses and strategic smaller initiatives will have to proceed. Even amid uncertainty, growth opportunities will emerge this year, and businesses simply cannot remain dormant indefinitely.

Adaptability as the new constant

In the face of unprecedented chaos, businesses require extreme adaptability. With economic contraction on the horizon – consumer spending declining and corporate revenues dropping as a fallout of the trade war – organisations face increased pressure to streamline operations, achieve more with less and be able to turn on a dime.

This cannot be achieved with bodies at desks and fingers on keyboards. Manually extracting data from various sources, importing it into spreadsheets, manipulating it and then laboriously constructing board materials is not feasible or sustainable.

Businesses must tap into technology to give them financial tools that enable rapid budget adjustments and forecast revisions as circumstances evolve and whims yo-yo. Board reports should be generated with one click or tap, not weeks of mundane, error-prone work.

For sure, perfect forecasting remains impossible in today's environment, but tools supporting swift scenario modelling provide some flexibility for navigating emerging challenges.

Navigating the unpredictable

The escalating trade tensions are unlikely to deliver their apparent objectives:  the promised new US jobs or recovering the supposed $6 trillion debt it claims to be owed by the world. Instead, the tariff changes are already negatively impacting the US economy, contrary to earlier assurances.

Nevertheless, companies must navigate this landscape, making informed decisions with available information. The key lies in implementing systems flexible enough to respond quickly when circumstances change. The need for robust financial planning tools has never been more pressing.

As usual, when commenting on current events, I need to point out that this information was accurate when I wrote this in mid-April. Who knows what has happened between then and you reading this article! But, for some light relief amidst the bewilderment, perhaps you noticed we discussed the US’s unpredictable trade policy without once mentioning Voldemort, he who must not be named? That's surely worth something in these uncertain times.

As published in AccountingWeb - May 2025