Is Your Supply Chain Ready for a NAFTA Overhaul?

NAFTA renegotiations could range from adjustments to the rules of origin for product content, and more stringent labor standards, to the extreme of withdrawal and a return to World Trade Organization most-favored-nation tariffs. These changes would have important implications for the supply chain and profitability of U.S.-based companies. However, there is a high level of uncertainty about the ultimate outcome and consequences for companies, in part because the effect could be offset or aggravated by currency-rate adjustments. Leadership teams can limit the negative consequences of NAFTA withdrawal and currency moves by adopting an approach that anticipates a range of future scenarios. Companies that develop a strategy for these uncertainties will be able to pivot faster than the competition when details about a new trade agreement become clear. Timing is key, no matter which scenario unfolds. While planning actions for each possible outcome, companies should pair each action with a signpost that triggers it. Companies can choose among three types of action detailed in the article: No-regret moves, options and hedges, and big bets.