The CFO as strategic navigator in a new world order
The unpredictable course US President Donald Trump sets has fundamentally changed the international playing field. Old certainties, such as stable markets, reliable alliances, and dependable deliveries, are a thing of the past. There is a new reality. The announced – and in some cases already imposed – import tariffs will have major consequences for many companies. Can you still rely on existing supply chains? What if the tariffs on your products increase by tens of percent? Are there alternative trade routes if partners disappear? How do you build a business model that can hold up, even if tomorrow everything is different?
The role of the modern CFO is crucial in these turbulent times. Now more than ever, financial leaders should be the stable force within organizations. They should look ahead and adjust where possible. CFOs have never before been so busy considering scenarios, became clear at Deloitte’s recent CFO dinner on the theme Navigating through global dynamics.
The impact of the trade war varies from sector to sector. Companies active in the automotive and technology sectors are struggling, while companies that operate internationally or depend on the US or China for their raw materials are also feeling the pinch. The economic effects of the trade war are comparable to those of the COVID pandemic, according to Mohamed Bouker, partner at Deloitte. ‘The shock is less abrupt, but the impact is just as great. Just as during the coronavirus crisis, companies need to take a critical look at their supply chains. Some companies will have to tap into new markets, find alternative suppliers, and opt for geographical diversification. Managers are also taking a wait-and-see approach and major investment decisions or plans such as IPOs are being postponed.’
Despite the uncertainty, the new world order also offers opportunities. Whether it concerns battery technology, defense-related production, or food supply, those who are prepared to rethink their strategy can gain a head start. Conversely, companies that fail to anticipate proactively will find themselves left behind.
Dangerous imbalance
The trade war started by the US is leading to substantial trade tariffs for almost every country. Trump is particularly at loggerheads with China, imposing sky-high levies on this country, which led China in turn to introduce hefty import tariffs on American products. Yet it is not only about economic interests. The US and China are engaged in a battle for global influence and technological dominance, argues Sebastian Heilmann, a German political scientist and China expert at the University of Trier.
China’s growing dominance is a significant international threat. Over the past few decades, the Asian country has become the undisputed world leader in industrial production. ‘China is way ahead in battery technology, semiconductors, electric vehicles, AI and robotics. Thanks to massive state support and innovation, these vital sectors are growing rapidly. The ecosystem is efficient, open source and future oriented.’
According to Heilmann, there is a dangerous imbalance in the global financial system. ‘China has enormous capital reserves that stem from export surpluses and high savings. The US, on the other hand, has sky-high debts and a culture of overconsumption. This means that the US is dependent on countries such as China to finance its debts through government bonds. This system is vulnerable: if confidence in US government bonds disappears, it could disrupt the global economy – a scenario that came dangerously close to happening in 2025.’
The escalating trade conflict could lead to a rapid decoupling of the US and Chinese economies. Heilmann predicts this to have a major impact on internationally operating companies. US companies too will be affected as almost half of Chinese exports concern components and raw materials for American factories. China is better prepared in this respect. The country has diversified its supply chains, especially for food and essential raw materials. It has entered into new trade relations with Brazil, Argentina and several African countries, among others. As a result, its dependence on US agriculture has decreased significantly.
More resilient than expected
Europe is in the eye of a geopolitical storm. First, the war between Russia and Ukraine has turned into a hybrid conflict that, with sabotage and cyber-attacks, is directed against the collective West. In addition, Europe is struggling with the US’s abrupt change of course. The country is no longer a loyal ally in security but is also imposing trade barriers on Europe. Lastly, Europe is already experiencing increasing competitive pressure from China. This is unlikely to diminish in the coming years.
For Europe, strengthening its strategic autonomy is the only solution. ‘Without independence, the continent risks becoming a pawn of the major powers,’ warns Heilmann.
Despite the uncertainties outlined by Heilmann, Europe has reason for optimism. Only ten percent of European exports go to the US. This makes Europe more resilient than is often thought. However, there is work to be done. Many national rules and bureaucratic barriers hinder the free movement of capital, goods, services and labor. According to the IMF, this amounts to an internal tariff of forty-five percent – more than double Trump’s proposed import duties. ‘If Europe succeeds in harmonising the internal market, member states will be less affected by trade tariffs and the economy will grow strongly.’ The European Union has enormous potential, Heilmann encourages. The internal market is and remains the most important market for European companies. In addition, Europe must tap into new markets – especially if America continues to isolate its market. Major growth opportunities lie in Southeast Asia, in countries such as India and Indonesia. We are at a tipping point. According to Heilmann, there are signs that Europe is rising to the challenge. History also teaches us that Europe tends to do the right things when under pressure.
Larger liquidity buffers
How are CFOs preparing for these geopolitical developments? Never before did they need to devise so many scenarios as in these turbulent times, as became clear during round table sessions prior to the CFO dinner. Pre-made contingency plans provide a company with guidance in the first weeks of a crisis. After that, it is a matter of adjusting and responding flexibly to unforeseen events.
Many companies see China’s increasing dominance as a significant risk. Companies with a large sales market in that country realize how vulnerable their position is. The prospect that China might decide to ban Dutch products in response to US trade restrictions is worrying. If it comes to that, divesting business units in China will be inevitable, but not a pretty picture.
Many CFOs are now increasing their liquidity buffers. This choice was inspired by the lessons of the financial crisis, when many companies suddenly needed extra financing. Even financially healthy companies can get into trouble if everyone seeks liquidity at the same time, so the argument goes. A larger buffer then becomes not a luxury, but an absolute necessity. The current crisis offers some opportunities too, in that competitors that are struggling become easy takeover targets.
Companies are trying to reduce their dependence on vulnerable suppliers, but this is not always easy. In the battery sector, for example, European manufacturers are willing to pay more for locally produced batteries, but the price difference with Chinese products remains significant. Moreover, alternatives are not always available on the European market. Attempts to limit Chinese imports through regulations are running into objections about practicality.
A number of CFOs are calling for state aid to make strategic European industries more resilient, following the Chinese example. But even if Europe were to invest heavily in local battery technology now, it would take at least four to five years before the first factories were operational. Until then, Chinese batteries will remain indispensable, for example for the automotive industry. The question is whether Europe will be able to compete in the long term. If America closes its market to China, Chinese exports will shift to Europe, resulting in an even larger, cheaper flow of products.
Collective defense
Many companies have learned lessons from the coronavirus pandemic and the financial crisis. These events served as a wake-up call and led to greater resilience. But are these lessons sufficient for future crises? Is the business community prepared for a war situation? This is the question posed by Lieutenant Admiral Rob Bauer, former Commander of the Armed Forces and chairman of the NATO Military Committee, who stepped down in early 2025.
The tanks may not yet be rolling through the streets, but the conflict with Ukraine could escalate. ‘The geopolitical power shift is taking us back to an era of collective defense. Security is no longer the responsibility solely of the armed forces – it is the responsibility of society as a whole. Businesses cannot remain on the sidelines either. The army wins battles, but a strong economy wins wars,’ is Bauer’s compelling message.
Companies provide products and services such as logistics, IT, energy, food, and communication, that are crucial to the Netherlands and its allies. If this stops, society stops. Increasing resilience requires action. That means diversifying supply chains, examining geopolitical dependencies, getting digital and physical security in order, and training personnel for emergencies. Entrepreneurs will have to change their mindset. For years, the focus was on maximum efficiency – producing what is needed and delivering just in time. There is nothing wrong with that strategy in peacetime. But during a crisis, ‘just enough’ is often ‘just too little’. ‘The focus should no longer be on maximum efficiency, but on maximum effectiveness. Businesses can be affected directly and indirectly. They must therefore build up larger buffers and consider alternative routes. By working together across sectors, we can strengthen our food and energy supplies, our digital networks and our logistics.
In eighty years of peace, the Netherlands has become accustomed to the idea that risks can be completely avoided, but that is a dangerous misconception. Looking away is not an option. A frequently asked question is whether Russia will attack the Netherlands. That depends largely depends on the population itself. Leaders, policymakers and citizens must be prepared to show leadership. NATO represents half of the world’s economic and military power. Putin is gambling on division and complacency. ‘But if Europe can unite, we will strengthen our defense and prove him wrong. Like a burglar in the street, he will rattle the locks, but ultimately, will pass by.’
Not a doomsayer, but a realist
Many major crises – from climate change to the threat of war – do not come unexpectedly. We just need to be willing to see them. Board members have the duty of making unthinkable scenarios discussable in the boardroom. A good board member is therefore not a doomsayer, but a realist with a sense of responsibility, says former director and member of several boards, Pauline van der Meer Mohr. ‘Certainly, since the Trump administration took office, some situations are beyond our wildest expectations. As a result, we tend not to anticipate them. Can we imagine what would happen if the trade relationship with China actually collapsed? What would that mean for our semiconductor industry? For the supply of critical raw materials?’ Unpredictability has never been greater. For example, we never thought that a democratic ally – such as the US under the Trump administration – would put pressure on our ESG principles. Companies doing business in the US market are forced to distance themselves from their diversity and inclusion policies. This is a devilish dilemma for the companies involved. On the one hand, they do not want to yield, but on the other hand, there often is considerable turnover at stake. Van der Meer Mohr puts this into perspective by saying that removing the clauses on D&I from the CSR report does not necessarily mean that a company is abandoning its diversity policy. ‘As an organization, you can continue to uphold your values in practice,’ Van der Meer Mohr believes. During the plenary session, a single CFOs said he or she would rather resign than to bow to this pressure.
New world order
The geopolitical and economic unrest are set to continue for some time. Stable trade relations, predictable markets, reliable alliances – all these old certainties are a thing of the past. A new reality and a new world order are slowly emerging. CFOs must take on the role of strategic navigator who charts the right course for his or her organization. Companies will have to move with new trade flows, identify new market opportunities, and exploit them. Yet this is nothing new for seasoned CFOs. The current generation of financial leaders has learned from the financial crisis, the COVID pandemic and the start of the war in Ukraine. Thanks to that experience, the current geopolitical turmoil is a challenge, but at the same time, also, business as usual.
This article was published in Management Scope 05 2025.