The business impact of tariffs and changing trade dynamics remains a top concern for organizations across industries—and especially for large multinational companies (MNCs). The leaders of global organizations are seeking to both protect against disruptions and create value in today’s evolving business environment. This week, we look at a few ways that MNCs can navigate tariffs and global trade developments—and the challenges they present—to survive and thrive in an increasingly fragmenting world.

REARRANGING ROUTES

Amid the ongoing uncertainty around US–China trade, companies are considering how they might rearrange trade of thousands of products, from T-shirts and fireworks to semiconductors and rare earth magnets. A new McKinsey Global Institute analysis establishes a “rearrangement ratio” to help leaders answer this question. McKinsey’s Olivia White, Chris Bradley, Michael Birshan, Sven Smit, and their coauthors note that rearrangement can take many forms, such as reducing purchases, replacing imported items with similar ones, or accelerating domestic production. The ratio finds, for example, that US firms would have more difficulty replacing consumer goods from China than they would its business input imports, and that Europe would play a key role in trade rearrangement as both an exporter and importer.

Lead by adapting to global change.