The first few months of President Donald Trump 2.0 have drawn comparisons to the deregulation era of Ronald Reagan, the industrial policy of Alexander Hamilton, the roaring ebullience of the 1920s, the fervid patriotism of the 1950s, and the harsh cultural divisions of the 1960s.
But when it comes to one of Trump’s signature policy initiatives, tariffs on foreign goods entering America, the precedent in history is clear: The increases in tariffs imposed or suggested by Trump would bring U.S. import taxes to a level last seen some 80 years ago, in the mid-1940s. Those were the last years of a protectionist era in U.S. trade policy, which started in the 1920s and endured through the Great Depression and World War II.
The 1947 establishment of the General Agreement on Tariffs and Trade (GATT), which effectively lowered global trade barriers, brought that chapter to a close, reducing tariffs to promote international trade. Lowering trade barriers after a nearly apocalyptic war left most of the U.S.’s industrialized peers in disarray was a clear benefit for American manufacturers, and the GATT set off the era of globalization that has only accelerated since. The GATT evolved into the World Trade Organization and was a precursor to the North American Free Trade Agreement that went into effect in 1994, supercharging the flow of goods between the U.S., Canada, and Mexico.
We appear to be in the midst of another sea change in trade policy. Trump’s ever-shifting America First agenda has provoked an escalating trade war with the U.S.’s three largest trading partners: its two North American neighbors and China. And it penalizes the raw materials for some of the most American of goods—big cars, beer cans, homes, computer processors. Even the universally reviled Smoot-Hawley Tariff Act of 1930, which imposed a maximum 41% levy, affected only 1.4% of GDP, while Trump’s promised tariffs as of March affect about 5% of the U.S. economy, or roughly $1.5 trillion worth of goods, according to the Peterson Institute for International Economics.
The business world is, to put it mildly, worried. Trade policy uncertainty, which measures sentiment across news reports, hit a new peak two months into Trump’s second term and is now “off the charts,” the Tax Foundation’s Erica York told me. (Its previous peak was during Trump’s first term.)
So what’s a CEO to do? The fight-or-flight, freeze-or-fawn reaction, much discussed in evolutionary biology, can be instructive here.
First, there’s “freeze.” The adage that markets hate uncertainty is true, and uncertainty has been pretty much the only constant since January. Dealmaking this year got off to the worst start in a decade; CEOs’ mood fell to a 12-year low; and investors shifted from equities to gold, sending the S&P 500 into correction territory. “That really created the uncertainty that unraveled the bullish sentiment in the market this year,” said Adam Turnquist of LPL Financial. “It’s impossible to really plan if you’re a CEO or small business.”
For some companies, “flight”—toward manufacturing within U.S. borders, that is—is one way to hedge bets. International conglomerates are now promising to build factories in the U.S. or at least consider it. Several global makers of autos, electronics, and liquor have nodded to expanding U.S. production to get around tariffs, with Honda building a Civic Hybrid in Indiana rather than Mexico, and Volkswagen and Volvo considering moving production stateside.
South Korea’s Hyundai Motor Co., LG Electronics, and Samsung are all mulling increasing their U.S. operations, while Taiwanese electronics makers Compal and Inventec are both reportedly scoping out U.S. production sites in Texas. Luxury conglomerate LVMH credited U.S. policy with pushing it to “seriously” consider ditching France to build out its U.S. presence. And sooner or later, tariff supporters say, U.S.-based multinationals are likely to follow suit and “reshore” their production in the States.
Peak free trade
Trade agreements drove U.S. tariffs down in the 2000s.
1.2%
Average U.S. tariff rate on imports in 2008
8.4%
Estimated average 2025 tariff rate based on Trump’s proposals
Source: Tax Foundation
This may mean the tariffs are having the intended result of rebuilding U.S. industry—or merely that companies are asserting their willingness to align with the new political reality. It’s relatively easy to promise a factory; building a new one can take years. And with American manufacturing—and construction—relying extensively upon imported materials subject to tariffs, prices have already shot up across the board. Indeed, given the wild swings in prices and regulations, many of these nascent plans are better seen as prudent signaling or, at best, statements of optimism about the U.S. project, as opposed to solid promises with deadlines and jobs attached.
In parallel, there’s “fawn”: When the rules are changing day to day, get in good with the people making the rules. To that effect, industry leaders are flocking to the White House, solo or in small groups, to convince the administration of the rightness of their desired policies. Witness the front row of Trump’s inauguration ceremony, where leaders of Big Tech companies congregated after contributing millions to the inauguration fund’s record haul, or corporate leaders paying $5 million apiece to attend a “candlelight dinner” at Mar-a-Lago.
That leaves, finally, the strategy of “fight”—perhaps better phrased as “negotiate carefully.” CEOs in some highly exposed industries have been vocal about the potential for disaster from tariffs, perhaps figuring they have little to lose. Lobbying for an exemption, Ford’s Jim Farley warned that 25% tariffs would “blow a hole” in the auto industry. Alcoa’s William Oplinger told a reporter that the aluminum industry could shed 12% of jobs.
Many other business leaders, while privately saying they’re losing faith in the president, are loath to risk his wrath by criticizing him publicly. “What they’ve learned from Trump 1.0 is, you can’t poke the bear,” said Yale professor in the practice of management Jeffrey Sonnenfeld. Or at least, he added, “you need to do it collectively.” That’s why some CEOs are leaning on trade associations to make their case rather than sticking their necks out. The National Association of Manufacturers, for instance, has said that “the stakes couldn’t be higher” for its members.
Ultimately, whatever path you plan to take, don’t do it alone: Now more than ever, business leaders should consult with peers—and even competitors—to figure out how to surf the tariff waves.
This article appears in the April/May 2025 issue of Fortune with the headline “How to survive a trade war.”
This story was originally featured on Fortune.com
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