“In a world where economic unpredictability is the only constant, leaders must balance wage demands against a backdrop of volatile tariffs and currency swings, not just to survive, but to lead with clarity amid the chaos.”
Jon McNeish, CEO of MacGregor Black
What will tariff and currency fluctuations mean for wage demands and the pressures to keep pace with increased costs? Will bosses and HR managers face spiralling wage demands at the office door?
You probably don’t want to know how many times we started this insight piece before we had to scrap it and start over. We were the same as many in business, watching closely at the start of April when US President Donald Trump finally unveiled stage one of his long-threatened tariff wars on the rest of the global economy with his oversized league table perched on the presidential lectern.
Since then, it’s not too unkind to say we then saw more flip-flops from the US Government revealed than a big day at the Haviana warehouse. The resulting fallout, to put it mildly, was something of a dog’s dinner for the world’s economical, financial, and industrial experts to try to serve into a digestible three-course meal.
The Reality of Tariff Turbulence
What will Trump’s tariff promises actually mean for those in positions of responsibility when it comes to keeping a happy and motivated workforce?
Those watching the Presidential campaign at the back end of 2024 will know that Trump’s tariffs, his ‘favourite word in the whole wide world,’ was the ticket he would force more than any other during campaigning. His team insisted that this would Make America Great Again.
In his eyes, the common equation was to make foreign imports into the States expensive, generating better competitive demand for American products. Except history tells us this doesn’t always work.
Now a month on from those announcements, and we’re starting to see real-world impacts. Global banking giant HSBC lays the blame squarely at what it calls ‘macroeconomic protectionist trade policies’ that account for a 17% drop in its first-quarter profits.
Let’s be clear: we’re a far cry from the Great Depression, but Trump playing fast and loose with the economy cost the markets billions, and global economists were left scratching their heads on what might come next.
Good luck to us, then, trying to fathom out how this is going to affect us, those many millions at the sharp end of business, not really knowing whether they can confidently plan for growth or batten down the hatches for rough seas ahead.
As most businesses will know, you just want some predictability. Even if it’s bad, and you know it’s going to be bad, you can at least cut your cloth accordingly. Trying to plan around Trump’s announcements, which, for a while, seemed an hourly bout of tariff tennis with nations around the world, was impossible.
Wage Pressures Meet Economic Instability
Whether Trump’s administration simply underestimates their country’s reliance on imported goods and services is unclear. But level-headed economic patterns immediately assume some pressures on those holding the salary purse string when the cost of those goods inevitably rises.
Higher prices for fuel, heating, food, and other products that the tariff war generates inevitably lead to the proverbial knock on the boss’s desk to discuss a little extra in the monthly wage packet.
Businesses have a number of options, and none of them will sit easily on maintaining a healthy bottom line. Submitting to the wage demands of the workforce may keep them happy but add commercial pressure elsewhere on the business. Something has to give. Don’t offer them the raises they feel they need, and you run the risk of losing your talent to those in your industry who might be happier to sail closer to the profitability wind.
These uncertain times could be the platform for the brave to make bold decisions on rewarding staff well. Equally, there doesn’t seem to be an industry that doesn’t feel susceptible at the moment, so how risky are you really feeling?
Do you raise your prices to meet wage demands? Well, yes, of course, but then how will that sit with your customers who’ll be feeling the pinch too? Think bigger picture, and if all of us simply start increasing prices, you’re a part of the next wage-price spiral. No business, no government, and no economy wants any part of that.
Following Trump’s tariff announcements, the International Monetary Fund (IMF) downgraded its US growth forecasts from January’s 2.7% to 1.8%, announced at the end of April. And in the old adage of the US sneezing and the rest of the world catching the cold, the IMF also retracted its growth forecasts for the UK economy, down to just 1.1%. Bad news for UK Prime Minister Kier Starmer’s economic priorities.
This was partly due to the market reactions. They did not augur well for the global instability that Trump’s big gestures created. In the US, Wall Street stocks tumbled, with the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average all respectively experiencing falls of 3.45%, 4.31%, and 2.54% on the day the US President presented his very visual tariff league tables.
To put the effects into perspective, the 3-day performance of the S&P in the aftermath of the original tariff announcements was among the worst it’s experienced since the Second World War.
We all know what happened next. Trump, unwilling to have his name tagged to one of the worst economic backward steps seen since the 1940s, rowed back on the announcement.
Currency Swings and Global Workforce Challenges
Why does the stock market value matter to us normal folk and what our workforces will be feeling? Economics dictates that when we see our paper wealth detract (anyone with a pension, for example, will know a percentage of that is invested in stock markets), our spending habits slow with it. No business wants to see a negative mood swing that hinders our confidence to hit the shops, pop out for a pint, or even consider the big-ticket items like cars, holidays, and home improvements.
And those trading internationally will know only too well how currency fluctuations can have both positive and devastatingly negative effects on the commercial viability of your product or service that has global appeal.
Those with global workforces know only too well that these movements have the potential to lessen the value of their wages in certain territories, thus leading to isolated pockets where regional bosses are under pressure to react favourably to their staff’s wage demands. Even on the flipside, those suddenly feeling a little more flush due to currency volatility often take this opportunity to make hay while the sun shines. A win-win for them if the price of goods goes down AND you can negotiate salary increases.
All told, we go back to a point made earlier. Global economies like predictability. Even if it’s bad. The tariff bomb dropped on those economies, even in the States, looks like causing waves that nobody will be able to confidently surf for some time yet.
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