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Hi everyone. Here is Ricardo Vargas. And today, of course, I want to talk about the current market instability caused by the US tariffs and all these global trade tensions. While many of us see these issues as problems for governments or financial markets, we need to understand there is a real impact on the projects we are handling, and this is something that has been on the top of my mind for the past few days, you know, and I want to share with you some practical tips here on how to manage your projects during these very challenging times. And my first tip is to review your international dependencies. And of course, we all know that, you know, we built a society in the past decades based on global trade. So you have suppliers from different places combining things in a third country and then delivering this to a fourth one. But I think taking a close look at your supply chain. Identify which suppliers, especially the international ones are crucial for your project, and determine if their products or services are affected by tariffs or trade policies. And this review may reveal you a need to adjust your project budget, and your project deadlines. And honestly, it's not just about price. For example, last Friday, Land Rover decided to stop shipping cars to the US. And why? Because they said it's so uncertain that we just prefer to wait and see what happens. So we are not shipping. So this is not just about you spending 20% more or 30% more on a product or a service that you are bringing overseas, but it may represent delays in getting the goods you need to deliver your project.
Another example of this it's there are many unintended and indirect consequences of that. For example, this morning, China said that it is reviewing its position on TikTok in the US because of trade. And you may ask me what TikTok has to do with trade, but, you know, it's the relationship between countries. This is the consequence of this very volatile environment. So you need to understand that your project schedule may be affected, you may raise risks you may have over budget, uh, because of these tensions that we are seeing. And this drives me to the second tip. You need to diversify your supply chain. Relying on a single supplier or country can be quite risky today. Look for alternative sources in different regions, even local options. While these alternatives may not be as low-cost today or the most effective cost, they can offer more stability in the long run. Diversification helps you avoid being caught off guard if a particular market is hit by new tariffs. So if you, for example, if you are building a project where you rely, for example, you are an American company and you were relying, for example, 90% of your supply chain in Vietnam. I'm using this just as an example. And then suddenly there is a 54% tax tariff on that. You know, suddenly your project that was a viable project becomes completely lost in terms of the value delivery that you are proposing for your project.
So if, for example, most of your revenue and you are an American entity comes from, for example, services or products you deliver in China, then China brings a reciprocal tariff in the US of 34%. Well, this changes everything. So this is why diversification helps you to reduce your risks. The tip number three is to update your risk analysis. Now of course, if you are good at risk management you need to become paranoid. It's time to update your project risk matrix. And now, beyond technical and scheduling risks, you need to understand political risks, economic risks, and trade-related factors. Consider scenarios like sudden cost increases, customs delays, or currency fluctuations, and prepare clear contingency plans for each of these risks so you are ready, or at least more prepared if conditions change. And tip number four. Of course, at this moment everybody wants to have information and news. So do not keep your stakeholders blindfolded in the dark. Keep all of them in the loop. Explain how the changing global market may impact timelines, budgets, and project deliverables. Open and honest communication will build trust and managing expectations clearly can prevent larger issues down the road. And honestly, there is no single organization and there is no single project today on this planet that is relaxed and calm. Because what we built in the past decades was a global trade system, where countries are so interconnected that, you know, if you shake something, you impact.
It was an optimization of the value chain that is now changing completely. So you need to communicate because, of course, companies imagine companies like Apple today, imagine companies with a large supply chain and a large market in China, a huge market in the US, and suddenly even having a great product, You're caught off guard and look what happened with the stocks. We are talking about the GDP of many countries that were lost. Just to give you an idea, just last week and I'm not even talking about today, I'm recording this podcast. But just last week the financial markets lost 2.5 trillion. This is about 10% of the economy of the US and 100% of the Brazilian economy. Just to give you an idea. So communication and transparency at this moment are critical. Remember when you are in crisis mode and I believe we are now, it's critically important to communicate. And my last but not least tip: look for local alternatives. Finally, consider local sourcing. Sometimes the solution is right around the corner. Local supplies might help you to avoid uncertainty on international tariffs and lengthy logistics. And of course, when I say that, I'm saying not everything is possible down the corner, but you need to be more creative. Because honestly, when you thought about that before, you said, okay, it's much easier to buy this from a huge supplier overseas than produce here. But now, maybe during all these conditions, it's worth it for you, at least at this moment, to find local solutions.
And let me give you an example. In South Sudan, when I was working at the UN, we had such a dramatic it was not because of tariffs, but we had such a dramatic challenge in bringing, for example, bricks to the construction site in Juba in South Sudan that we decided to build a mini factory of bricks, you know, using local suppliers. Of course, it's it's more expensive than buying them if they were available, but because they weren't available. So the decision to build them locally not only helped to develop this local marketplace but also helped us to do the job we had to do. So look for these local alternatives. Of course, when I'm talking about, for example, AI technology or something that you need to import, then it's different. But you need to think always about that. And just to wrap up, navigating these trade tariffs and marketing stabilities requires clear-eyed assessment and very proactive planning by reviewing your dependencies, diversifying your supply chain, updating your risk analysis, creating a very open communication process, and exploring local alternatives. At least you can steer your project through these uncertain times with more confidence. I'm not saying it will save all the problems, but at least it's far better than sit and wait. So thank you for listening. I hope you have a wonderful week and see you next week with another 5 Minutes Podcast.
