Good morning. President Trump announced on Wednesday a 90-day pause on the “reciprocal” tariffs announced last week. During the time-out, a 10% universal tariff will be in effect. However, tariffs on China would not be paused, rising instead to 125% and escalating the standoff between the world's top two powers. Tariff uncertainty, though, has played a major role in CFO scenario planning.
“I think planning 10 years ago was a lot more certain than planning is today,” Tom Barkin, president and CEO of the Federal Reserve Bank of Richmond, told me following the Economic Club of Washington, D.C.’s event on Wednesday.
Barkin began his current role in 2018. Before that, he had a 30-year career at McKinsey, where he became CFO and also served as chief risk officer. I asked Barkin if he had any advice for finance chiefs during these uncertain times.
“I think if you're going to next year's plan, you've got to think through a wider range of scenarios,” he said. A prime example is Wednesday’s shift in the tariff landscape, he noted. “Resilience, that's a big point to think about and optionality. I think that's the world we seem to be in,” Barkin said.
During a fireside chat with Barbara Humpton, chair of the Economic Club Global Initiative and president and CEO of Siemens USA, Barkin shared some of the leadership lessons he learned while at McKinsey, such as collaboration is key.
Barkin said he ran the southern office for 10 years. “If you want to get things done nationally, you have to talk to the West Coast office and the New York office, and people have different views,” he explained.
His takeaway: “Most people aren't really all that difficult; they just want to be listened to.”
There’s a big difference in just trying to get things done, as opposed to “trying to understand where everyone's coming from and then finding a path forward that works for the greater majority,” he said.
Regarding the economy, Barkin said that just three months ago unemployment was 4.1%, inflation was down to 2.6%, the GDP grew 2.5% last quarter, and business optimism spiked after the election. “Seemed like things were in pretty good shape,” he said. “I should probably stop there, but I'll keep going because what's happened since then is there's just this deep fog of uncertainty that's surrounding businesses.”
He’s monitoring consumer spending or “precautionary behavior” to indicate any impending downturn. “That's why I'm looking at the weekly spend data, which you can get from the various credit card companies to see whether you're seeing any signals there,” he said.
There’s a lot of talk when the equity market corrects, but equity market correction is not the thing that leads to a consumer pullback, Barkin said. You have to look at the complete picture, he said.
Sheryl Estrada
sheryl.estrada@fortune.com
