Many companies have adopted a wait and see approach to the ongoing uncertainty and unpredictability of the US administration’s trade policies. But beneath the confusion, important long-term themes have accelerated and begun to emerge.

Treasury Today interviewees report an increasing expectation that tariffs on imports into the US will settle around a 10% baseline. It’s a level that now applies to many countries, although some goods and countries are exempt and some countries have announced higher reciprocal tariffs. Furthermore, the Trump administration risks reigniting April’s market turbulence if it hikes tariffs to previous levels; Europe and China have pushed back, and Trump has switched his focus to doing deals.

Coalescence around this tariff baseline and a wider re-evaluation of global trade patterns has introduced new risk for companies dependent on one country for both their supply chain and source of demand. Treasury and trade experts predict more diversification with the emergence of new international trade routes supported by new bilateral trade agreements. For example, a recent HSBC survey found Asian firms are looking to trade more with South Asia, Europe and the Middle East while a quarter of respondent companieswant to trade less with North America.

China/UK trade is one corridor that could benefit. Relations between China and the UK have cooled since former Tory chancellor George Osborne sought a “golden era” of bilateral relations a decade ago. Speaking at the Association of Corporate Treasurers annual conference in Wales, Richard Crump, Managing Director of bus group Pelican Engineering says his company would welcome stronger trade ties with China. Pelican began selling China-made buses in the UK in 2014. Now the company is the 2025 market leader in coach and bus sales off the back of demand for electric buses.

Elsewhere, the aerospace industry – renowned for variable customer demand and a slow supply chain – is also preparing for new trade corridors. Boeing recently said it is prepared to look for alternative buyers for its planes destined for Chinese airlines, for example. Down the supply chain, executives at companies like Senior plc, which manufactures components for the aerospace, defence and energy markets and draws on a global supply chain in 14 countries, says supply chain visibility has become essential. Speaking at the ACT conference, Director of Treasury, Tom Bindloss, explains tariffs are likely to hit the company’s operations in countries like Mexico and Canada, but around 50% of Senior’s production is based in the US, offering some protection from tariffs.

Senior’s supply chain has built up over decades and moving production from one location to another could take several years. Moreover, the company is partly protected from a spike in costs from higher tariffs because Senior’s contracts have an Incoterms clause where the company expects its customers to pay tariffs. However, Bindloss flagged potential bottlenecks coming down the track that he has less control over like the supply of magnets – essential in defence manufacturing but where supply is already limited by China widening export controls of rare earth minerals.

Vivek Ramachandran, Head of Global Trade Solutions at HSBC believes levels of supply chain diversification will depend on the industry because different sectors tend to have their own unique supply chains. “Companies have to figure out how to meet US demand without sourcing from high tariff countries, and re-shaping supply chains doesn’t happen overnight,” he told Treasury Today.

Natasha Condon, Global Head of Trade Sales at J.P. Morgan agreed, adding that analysing and stress testing where the impact of tariffs will hit companies with complex supply chains is challenging. “We had one client who was confident there was no impact, but analysis showed that three layers down their supply chain there was a tariff impact they hadn’t realised was there. It’s happening to a lot of people.”

Working capital, trade finance and strategic treasury come to the fore

So far interviewees don’t report a sudden spike in liquidity drawdowns, treasury tapping credit lines or dramatic new bond issuance. But the trade war has reinforced the importance of working capital strategies on hand to support challenges like financing the impact of moving prices, the need to cover more import duty or the cost of holding back deliveries and holding more inventory. In short, companies need working capital at the ready lest they need to quickly deploy cash in different regions and sectors.

“Whenever there is a shock in the world, the first thing a CFO will do is pick up the phone and call their Treasurer and ask ‘do we have enough cash’,” says Baris Kalay, head of Corporate Sales for Europe Middle East, and Africa (EMEA) at Bank of America. “The second question is, ‘can we access it’.

For example, Crump says Pelican Engineering aims to hold a cash buffer of around £15m to £20m. He reflects that it is possible the firm’s Chinese manufacturer could lower its prices to accommodate suddenly higher tariffs depending what the increases were. Still, Pelican ensures it has money on hand to navigate the significant tariff risk it holds in the six months between order and delivery of its buses from China.

Optimising working capital and extracting as much value as possible out of the working capital cycle is a complex equation. Strategies must ensure suppliers aren’t being squeezed too much on one hand or, on the other, treasury hasn’t extended payments terms to put too much buyer risk on books. In the current climate, treasurers are benchmarking their cash positions and leaning into structured programmes to manage working capital in strategies that ensure their ability to consolidate cash and get it out of local subsidiaries.

Trade finance has also become an essential tool to optimise working capital management. Supply chain finance products are being used to support difficult negotiations between suppliers and buyers on who pays the economic burden of tariffs. Supply chain finance products allow a buyer to offer their suppliers cheap financing using buyers credit lines and are being used to share the cost of tariffs, says Condon. She also believes old fashioned LCs will help corporates move into new markets allowing banks to step into the gap and cover the initial risk. “That is the purpose of the traditional letter of credit,” she reflects.

“When the market is volatile there is an opportunity for treasury to speak in the boardroom and to the CFO. They come to treasury to hear what our view is and it’s an opportunity.”

Ian Cooper, Group Treasurer, 3i

Banks are launching new tools to help. HSBC has just launched a financing product to help US clients facing an increase in upfront import duties whereby the bank will pay duties charged to US importers upfront, with customers granted flexibility on repayment terms depending on their working capital cycle. HSBC’s Ramachandran believes that in the current environment, working capital management is not just the remit of treasury. It is a strategic lever held at CEO and board level and essential for agile decision making.

Ian Cooper, Group Treasurer, 3i, the investment company specialising in private equity and infrastructure says that market conditions and the challenge of valuing companies in the current climate has led to a reduction in M&A activity at the investment group. Treasury strategies at the company have included bringing forward refinancing its RFC to boost its liquidity position and increasing the hedging position. He adds that the importance of working capital has elevated the role of treasury, saying “when the market is volatile there is an opportunity for treasury to speak in the boardroom and to the CFO. They come to treasury to hear what our view is and it’s an opportunity.”

Navigating FX risk

Treasury teams have also scrambled to secure their FX strategies. For example, leading up to April, corporates with material China exposures used FX options to hedge against a material depreciation of RMB, says James O’Donnell, Corporate FX Sales, Barclays. But he also says ongoing uncertainty has led many corporations to react differently depending on their hedging policy and confidence in their exposures. Some have paused hedging temporarily, while others have been able to opportunistically top-up. Others have been more focused on the funding side, deciding whether to pre-hedge future issuance or add to net investment hedges where budget rates can be achieved or bettered.

BofA’s Kalay also speaks to the heightened FX risk ahead as economies begin to diverge on how they manage interest rate and inflation risk. “Growth and inflation rates vary for different countries which is impacting how they manage interest rates with an impact on FX rates. Managing FX risk will continue to be incredibly important.” It means that companies that report in one currency but have large operations in another face new risks and are adjusting their hedging policies and day-to-day operational strategies.

Accelerating trends

Tariffs, and the upheaval in trade, have accelerated other trends too. For example, the current trade climate has highlighted the importance of supply chain transparency that typically falls under ESG. “Tariffs have forced companies to understand what is in their supply chain,” says Ramachandran. “Visibility into supply chains is much more important in a world of tariffs because the import duty depends on where the value add has taken place. Companies really care who is in their supply chain.”

The trade war could also push more companies into offering services. The service sector has not been subject to the same level of tariffs – although in a rare example China said it will restrict Hollywood imports in response to US tariffs.

Services, particularly digital services, are growing faster than the trade in goods and Ramachandran believes companies will increasingly alter their business models to incorporate services offering goods under subscriptions or usage-based models rather than a one-time sale. He suggests corporations will begin to monetise contracts and move to a billing system that taps into today’s B2B e-commerce platforms that trade with anonymous customers. “Companies are starting to think about their business models and explore the potential of moving away from traditional manufacturing to selling products under leases and utilising as-a-service models.”

It’s a trend BoA’s Kalay also notices, and which goes hand-in-hand with the evolution in real time payments, allowing companies to receive instant payments from clients in a cost efficient and secure environment. “We are having more and more e-commerce conversations with our clients, discussing models like working on a subscription basis or using an intermediary to provide their services. It is something that we are watching very closely,” he says.

Today, most trade with a non-US counterparty is conducted in dollars and treasurers don’t see any sign of this changing in the short term, other than a few noting that more business is being done in RMB. However, companies are beginning to think about a world of non-dollar denominated trade and heightened dollar risk. Treasury teams have begun scenario planning how this could impact access to liquidity pools and funding, and how they should hedge that risk, for example.

“So far, any change in the use of the US dollar in global trade flows is more theory than practice. On a limited basis, we are doing more RMB trade finance than three years ago, but this is linked to our expansion in China. We are doing more in euros too, however the majority of trade flows remains in the US dollar. We will react to what our clients are looking for, but as a trend, we don’t see it as a huge move yet,” reflects Condon.

Risks ahead

Some Treasury Today interviewees warn tariffs and the upheaval in global trade could also cause corporate jeopardy. Companies are having to juggle a downward revision in GDP growth and uncertainties about consumer demand. Speaking at the ACT in Wales, Josef Pospisil, Deputy Head of Corporate Ratings EMEA, Fitch Ratings warned that sectors like the autos, already weighted down by the costly switch to EV, are particularly vulnerable. Companies with a higher cost of debt, insufficient hedging or restricted access to capital are at risk of downgrades, he says.

And the cost of debt and level of future interest rates is also uncertain because inflation may cause a delay to rate cuts. Corporates are also keeping a wary eye on market instability triggered by President Donald Trump’s new tax bill. The legislation which seeks to cut taxes without cutting spending could add more than US$3trn to the deficit over the next decade, putting investors on edge and spiking bond yields. It makes raising money in the capital markets more complicated as treasury and their banking partners try to judge the best window for issuance and optimum funding costs in yet another management distraction that is forcing companies to revise their carefully laid plans.