Trump tariffs will test crisis leadership skills

Too often in a crisis, leaders may recognise that some of their assumptions are wrong but fail to account for the power of the ripple effect.

- Gautam Mukunda

President Donald Trump's announcement, abeyance and (in the case of China) escalation of tariffs has thrown markets into turmoil, creating levels of uncertainty approaching those produced by Covid-19 and even threatening the bond market. Yet in the days since the administration declared a 90-day pause on many of the duties, markets appear to have stabilised. This surface calm risks luring leaders into perhaps the biggest mistake one can make when navigating a crisis: failing to update your mental models to properly account for the new world you're now living in.

Crises are where reputations and fortunes are made and destroyed. For example, Mr Jamie Dimon and Mr Alan Mulally became icons because of their performance during the global financial crisis of 2008. It's a moment when the stakes are higher, the timeframes are shorter, and even the best leaders don't know everything they need to know. All too often, they don't even know what questions they should be asking.

A crisis is often triggered by some formerly unquestioned assumption abruptly breaking down. The 2008 financial crisis, for example, sprang from the belief that the US would never suffer a nationwide decline in housing prices. But the real problem isn't the initial mistake. It's the ripple effect - what happens when that first false assumption starts to undermine more and more of our bedrock beliefs.