Uncertainty is the sovereign that has ruled since the beginning of the year, elevated to power by the U.S. president and further strengthened following the Liberation Day of April 2. This uncertainty severely prejudices any business daring to make forecasts about the future; therefore, it severely prejudices investments. In such a scenario, companies are acting in various ways, by taking into account both legal-economic and geopolitical perspectives.
Legal and economic responses: adapting in the short term
First, exporting companies can evaluate economic responses based on a study of existing contracts and production chains. These responses may include relocating the main production (i.e., the core of the product) to a country that has imposed lower tariffs, such as the UK, since U.S. customs applies the tariffs of the country where the most important part of the production takes place. Alternatively, given the time required to open or enhance a production site, one can consider lowering as much as possible the cost of the product that reaches U.S. customs. This can be done by deducting costs and ancillary services (such as intermediary services). Another option is to adopt a more conservative, wait-and-see approach, awaiting a more favorable commercial situation. In this case, goods can be stored in customs warehouses, which are tax-free, or shipments can simply be delayed.
Geopolitical response: managing systemic risk
From a geopolitical point of view, attention shifts to the relationship between states. Primarily, what causes uncertainty is a deteriorating relationship, either due to strong competition or for strictly political reasons. Consider, for example, the U.S.-China relationship. These two superpowers are today’s greatest rivals, and to undermine each other’s sphere of influence, they have adopted policies primarily of an economic nature, such as the relocation of production sites.
The era of de-risking
For the last two decades, China has been the world’s factory. All multinationals have moved production there due to extremely low costs. The result has been the creation of a pronounced interdependence between the economies of many countries. Starting from this premise, it is clear that a clean break (so-called decoupling) is not feasible. One cannot impose on companies to leave the rival country overnight due to the high level of economic interdependence. What can be done, however, is to adopt a more gradual policy of relocating production sites to other low-cost and high-productivity countries. This policy, known as derisking, is exemplified by the China+1 strategy (or even China+2). Under this strategy, while keeping sites in China, companies also diversify production in one or two additional countries to mitigate the risks of relying too heavily on a single, politically sensitive country.
The Apple Case
Already during Trump’s first term, and later with the supply chain crisis caused by the pandemic, diversification began toward countries like Vietnam, Mexico, and India. This trend is now strengthening under the shadow of sovereign uncertainty. The most recent example is Apple. The company recently announced that it is considering moving all iPhone production from China (80% of current production) to India by the end of 2026. India offers low costs, increasing productivity, and no tariffs (suspended on April 9 for 90 days), with promising prospects for trade agreements.