11.13.25 CSP with Davy - Risks CEOs are Watching For

Steve Odland: [00:00:00] Welcome to C-Suite Perspectives, a signature series by The Conference Board. I'm Steve Odland from The Conference Board and the host of this podcast series. And in today's conversation, we're going to talk about what CEOs are worried about now? What are the risks they're looking at? What are their companies worried about as we approach the new year?

Joining me today is David Young. He's the president of the Committee for Economic Development, which is the public policy center of The Conference Board. David, welcome.

David Young: Thank you, Steve. Great to be here.

Steve Odland: So David, you interview and interact with CEOs every single day. You hear about their concerns and what's going on. I think if you look back over 2025, gosh, is there any subject that has been more discussed than tariffs? What are CEOs saying about tariffs today?

David Young: Yeah, Steve, I think you're exactly right. If you look back over the last 12 months, it's really hard to find another topic out there that has been [00:01:00] discussed more or that has been more instrumental than tariffs, but even more widely than tariffs, trade policy, in general. I think, as you know, CEOs, they like predictability. They like certainty. That helps them make long-term, viable, sustainable strategic investment decisions. And the fluctuation and uncertainty that has been caused around the whole conversation with regards to tariffs has certainly provided a greater number of variables for these CEOs to make their decisions.

It is very interesting, as the year has gone by, there were some sweeping tariffs made at the beginning, and now you're seeing a move towards more and more trade agreements and bilateral trade negotiations taking place on behalf of the US government. I think that the general consensus, as well, especially when you speak to economists, they [00:02:00] view tariffs as a tax.

And a lot of the CEOs who are CED Trustees that we're talking to, are trying to wrestle with, OK, what do we then do? Do we absorb those increased costs within our existing operating structures and business models, or are there opportunities to pass that price increase along to the consumer? And I think there's an interesting part there, is you better know your consumer very well. If you're going to pass on increased costs to them, you better understand the price elasticity and also the future demand. So we're definitely seeing the CEOs that we're speaking to wrestling with a wide variety of drivers and restrainers with regards to tariffs.

The other thing I think that is important to take into account is how the tariffs then impact very complex supply chains that are global and fast moving. And [00:03:00] how can CEOs then look at these supply chains and build in greater operational agility, greater diversity, greater resilience to ensure that they are shoring up the financial viability of their businesses, their returns to shareholders, and also resilience within those global supply chains? And we can get into a little bit more detail.

Steve Odland: Yeah, and I think one of the biggest concerns was that these tariffs would flow through to the consumer primarily and drive a great level of inflation, but in fact, they are being absorbed a bit along the supply chain. So, the early suppliers or the ingredient suppliers. Some of the foreign suppliers are absorbing 10 to 20% of it. And you see the end consumer, depending on the product and the company, absorbing 30 to 50%, but the rest are hitting the margins of the manufacturers and the retailers in between.

So it's really spread [00:04:00] out. Nevertheless, that's a drag on margins and profitability, but it is getting through to the consumer, and that raises concerns.

David Young: Yeah, and I think you bring up a great point here. I think it is, it's on a case-by-case basis. Industry by industry, company-by-company basis as to how each of those companies are navigating these challenges and where the price increases, if they are applicable, where they are being absorbed.

It's interesting that we have this conversation with a busy retail season coming up. And when we speak to the CEOs and I ask them, "Hey, how are you actually navigating some of these challenges?" And the general thinking is some organizations, some companies can lean in and have an ability to adjust and pivot, and others are kind of taking more of a wait-and-see approach.

But if you're in the retail industry, and you are approaching this busy holiday season, [00:05:00] you may not have the ability to wait and see, cause you have to make pricing decisions now based on what you're hoping to be a busy commercial season. And that means you have to anticipate what future demand will be. You have to understand your end user, your consumer, and you have to understand how price is going to fluctuate as a result of potentially increasing prices.

And so that's why I say I think this is one of the best examples out there in terms of, it really does show that there isn't a one-strategy-fits-all with how people, CEOs, and organizations can approach navigating the uncertain times caused by tariffs.

Steve Odland: Yeah, and you don't know if it's permanent. I mean, when you look at the objectives of the administration, some of the objective is to raise money. And the projection is that it will raise about $400 billion, which is a lot of money. But another objective is to get [00:06:00] to better trade deals, more fair trade deals. So they're launching the tariffs in order to get the other countries to lower the barriers, which means that they're temporary.

Others are being used for geopolitical purposes, to punish certain countries for buying Russian oil. So there's a lot of different objectives in this, but to the extent that the objectives are short term and are cured, then the tariffs should come down. The price, the cost should come down.

And so companies have to deal with that because a lot of companies can't really get price reductions through retailers or through to the consumer. And so they have to be careful about not raising the prices too much, in case these things come down, because they can't adjust it. So all of these things are part of the risk profile.

David Young: Yeah, and I think, so two quick points on this one. One, if you're not sure of the long-term direction with regards to specific tariffs, how do these CEOs then make long-term investment policy [00:07:00] strategic decisions? And so when there is this incentive and push to onshore manufacturing, let's say, back to the US, you are seeing more and more CEOs having to take a slightly more wait-and-see approach because they need to understand what the long-term perspectives and trajectory is.

The other part I want to mention here is so, beyond just the companies, when we look at countries and how they are navigating this changing environment, on a phone call last week with a notable CEO, he said, "David, it's really interesting. When you start looking at bilateral negotiations with the US, they don't take place in isolation." Countries are actually competing with other countries when it comes to tariffs. So it's not just a potential tariff increase from the US on another country. It's what other countries are negotiating with the US, [00:08:00] and how each of these other countries are related to each other with regards to the US. So is it more favorable to France versus Italy and the UK, or are we all on an even playing field?

Steve Odland: It's interesting, you've got a lot of CEOs who are out there, American CEOs who are out there lobbying for more tariffs on competitors, essentially, at foreign competitors because they're trying to get a leg up on the competition here, which, you scratch your head a little bit, and you go, "Wow, do we really want that going on?"

But that's happening, as well. Here now there is the Supreme Court case, which is out there, which likely won't be, the decision likely won't be announced till next year sometime. But talk just a minute about that, and how that could impact things. Because that's another layer of uncertainty and risk.

David Young: Yep. Absolutely. So as you've alluded to, the US Supreme Court held oral arguments [00:09:00] challenging President Trump's use of the International Emergency Economic Powers Act, that's IEEPA. And this relates to his authority to impose global tariffs. If IEEPA authority is lost. I think it's important that everyone understand that the administration still has fallback options.

The administration for quite some time has always been pretty clear that tariffs were a central mechanism that they, to some extent, liked when it came to trade policy. So I think it's important that when, even if that authority is lost, there are other mechanisms at the disposal of the administration to continue additional tariffs, and four I just want to mention here.

There's Section 122. This allows a 15% tariff for 150 days. It's immediate but temporary. [00:10:00] Then we've got Section 301. This targets countries for unfair trade practices. For example, this has been used on China before. We've got Section 232. This is tariffs on industries for national security reasons, steel, autos, two examples on that one. And there's even Section 338. This is from the 1930s, Steve. And it's a law permitting up to 50% retaliatory tariffs. It's never actually been used.

So I think it is important that, regardless of the Supreme Court's decision, albeit very important, there has to be this understanding that most likely, for the next three years of this administration, tariffs in some way, shape, or form won't go away. They are viewed as a valued and valuable mechanism by which to alter trade policy.

Steve Odland: OK. So what you're saying is even if the Supreme Court [00:11:00] holds for the plaintiffs and overturns the president's use of tariffs under this IEEPA, this emergency law, there are lots of other reasons that or laws that the president could just reinstate the tariffs.

So your point is, it's a core fundamental strategy. It's going to be out there in one shape or form, at one value, and so, we've got to deal with it. The other thing you said earlier, which is interesting, is there is a national security element to this, the reshoring of manufacturing. And they're not explaining it quite this strategically, but. They're trying to get to basic materials, metals, rare earth minerals, oil, manufacturing of pharmaceuticals, and chips and all the things in order to supply the defense industry and ensure national security.

So that's another overlay to this whole use of tariffs to try to bring this back. And your point is that CEOs are trying to react and adjust to all of that, [00:12:00] too.

David Young: Yeah, so a couple things here to unpack. In 12 months' time, Steve, when we do this podcast again, we're going to be talking about tariffs. I have no doubt about that. And we'll be talking about trade, trade relations, and CEOs have to take that on board and start really thoroughly, diligently looking at their global supply chains, how that impacts their operations and their financial viability, and also, as best they can, understanding their consumers.

The other thing, when you mentioned national security, the question is out there, do you want to be reliant, does the United States want to be reliant on other countries? Some of those countries viewed in some way, shape, or form as adversaries, do we want to be reliant on them for national inputs to our infrastructure, to medical equipment, that are central to the future viability and safety and security of the United States? That's the [00:13:00] question at the crux of this.

Steve Odland: Yeah. Really important questions. We're talking about tariffs and the risks of that CEOs are facing today. We're going to take a short break and be right back.

Welcome back to C-Suite Perspectives. I'm your host, Steve Odland, from The Conference Board, and I'm joined today by David Young, who's the president of the Committee for Economic Development, which is the public policy center of The Conference Board.

OK, so Davy, we talked a lot before the break about tariffs, of course, but another piece of tariffs was to deal with the debt. And one of the key concerns of CEOs today is the level of the debt, which is right around 100% debt-to-GDP levels. It's very high. The interest on the debt exceeds the total of our national defense spending, which itself exceeds the next nine countries. This debt level is important, and the other piece of tariffs is to try to provide revenue. What are CEOs saying about the debt?

David Young: Yeah, [00:14:00] so as we go back over the past couple years: fiscal responsibility, debt levels, continuing deficits are a central and increasingly important part of the conversation, and at the forefront of CEOs. And I say increasingly because the debt is increasing. If you look out, you said 100% of debt to GDP, it's not reducing, it's not reducing to where CED would ideally like that goal to be, which is closer to 70%. In fact, if you look out over the next decade, there are strong arguments out there to say it's going to reach and or potentially exceed 200%.

When we look at the mechanisms here, there are five variables, I think, important to consider when we look at debt and deficits. We can tax more, we can curb spending, we can grow our way out of it. And then we've got to consider inflation rates and interest [00:15:00] rates. Steve, you mentioned interest rates. They're critical because if the debt level is increasing, we've got to service that debt. And the higher interest rates are, the higher that cost of borrowing will be.

So all these five factors cause this very intrinsic, complex web of causation here. As you start looking at them, it's really hard to figure out what is the golden ticket that's going to get out of this, right? And I think one of the key things that has to be recognized is there has to be greater, growing nonpartisan conversations between elected officials, recognizing the need and severity to find a solution.

The problem here is sometimes what's in your personal, individual interest is not in the interest of the whole, and that is something where there is a real wrestle between how [00:16:00] exactly do we get out of this. And as you know, policy makers often don't agree, hold different opinions. And when you look at, hey, should we tax more? Can we curb spending? How do we control interest rates? It begins to get very complex.

But the thing is, the problem is not going away, and it's only getting worse. And we need real leadership and decision makers to come together as a group in a collaborative way to figure out what the answer is. Because if the current trajectory continues, and CEOs recognize this, it will not be in anyone's best interest, whether it's the current generation or generations to come.

Steve Odland: But the current administration's strategy is pretty well articulated. First of all, they want 200 basis points worth of interest rates cuts so that they can refinance the debt at a lower level and cut interest payments by hundreds of billions of dollars. They've got tariffs in there, which they're trying to raise a half a trillion dollars a year, and then they're trying to cut a [00:17:00] trillion dollars in spending. That would essentially eliminate a $2 trillion annual deficit. And then they're trying to ignite growth of the economy to grow into the current debt level over the next 20 years.

So that's the strategy. They're not getting it all done. But this whole thing is a risk to CEOs, right? Because you look at the US dollar, you look at the growth trajectory of the economy. All of that is linked right back to their forecast for their firms and all of their financing costs, and everything else. So these are all intertwined risks.

David Young: Yep, intertwined, and affect the attractiveness of the US as an environment within which to invest. And just on the point there that you mentioned, just growing your way out of it, and attracting investment back into the US. There are some really enlightening examples of organizations that in the last year have really brought manufacturing and investment back to the US.

Walmart just made an announcement of a [00:18:00] $350 billion commitment back to American manufacturing. What does that actually mean? There's 750,000 American jobs coming back. Apple, $600 billion. Nvidia, $500 billion. IBM, $150 billion. And I've got plenty of examples here in terms of saying, "Hey, what is happening in the US, and how do we actually attract investment and growth as one of those five dynamics to start moving the needle in the right direction??

Steve Odland: Yeah. Well, the other thing is, even though there've been layoffs, we're sitting here at a record unemployment low. So we don't have the employment available. We don't have the skill sets available. At the same time, we're trying to bring American jobs back. So the people aren't there for it.

And that kind of feeds right into the whole H-1B issue, when they're charging a hundred thousand dollars per H-1B visa, which is too expensive for any of these positions. And so this is another [00:19:00] layer of risk, right? Where is the labor going to come from when these jobs come back?

David Young: Yeah. So two dimensions to this. You can either import talent, or you can grow talent. Part of CED's Trustee base is university presidents, and sitting down with them over the last couple months, it is fascinating that there is this deep realization and appreciation of the changing world that we're living and operating in—fueled, again, by the impact of AI. And how these organizations can and should change to really make sure that we're growing the talent that is needed in the future.

So this is not just upskilling, it is also reskilling, and it's also changing academic agendas and syllabus to make sure we are developing the talent domestically as best we can. And I think that goes hand in hand with making sure we can attract foreign talent [00:20:00] that helps us move up the value chain and grow economically.

Steve Odland: Another aspect is growth and productivity. So through the '90s, we achieved about a hundred basis points with the GDP growth from the productivity added through the digital revolution, the introduction of PCs, and all the tools, programs, apps that went with that. We're now on the precipice of yet another digital revolution with AI and its introduction. And the hope is that we can achieve that kind of productivity once again for the next decade. And if that happens, that contributes a lot.

But here again, CEOs are rapidly trying to figure out how to deploy AI. And one of their biggest risks that they tell us about is that the competitors are going to move faster and they're going to get left behind. So lots of different layers of risk here.

David Young: Yep. I mean, an unquestionable part is the risk. And I think there has to be this appreciation that every company's [00:21:00] going to misstep in this realm. I think, when we look at AI, where are we in the maturity of it? We're in the infancy stage, everyone's trying to learn, right? We've got multiple generations now in the workforce trying to get their heads around it.

So I think there has to be this—we say this, you and I, Steve, have spoken about this—this ability to lean into the unknown when it comes to AI and test and test and test, and create these environments where we can do that efficiently and effectively. And the better we can do that, the better we can deploy it internally to drive those operational efficiency gains.

With regards to the return on investment of those activities, it's hard to see, but the CEOs and senior executives have to be diligent and thorough with regards to how exactly they are deploying AI. And I think you can also, in some respect, reverse engineer it. Where is AI most [00:22:00] applicable and practical to give us the best, most efficient, most effective gains possible?

Steve Odland: Yeah. But if you can deploy AI in all of these repetitive tasks and take out that labor that is being used for these low intellectual kinds of jobs, it does give you hopefully the ability to redeploy labor into higher-order work. And that's essentially what happened through the '90s, and hopefully can be then a source, but those are different skills than what those people are doing today. So you have to then deal with reskilling—another whole set of challenges.

David Young: Yep. And maybe with that realization, maybe the creation of new industries and new businesses that are enabled to help upskill and reskill. So I'm a big believer that its glass is half full and there should be optimism behind it, as there has been in the past.

Steve Odland: Yeah, that's absolutely correct. And so we'll see. I mean, there's a lot of money being thrown at this, and [00:23:00] they've got to try a lot of different things, but it could be this great source. Another thing that was impacting organizations is the government shutdown that we went through. But there's another possibility of going through this again at the end of January, because the CR that went through is, again, only temporary. It goes back to Washington not functioning properly in the Congress, not passing budgets, and having regular order. Is this ever going to end?

David Young: The government has passed the budget on time, since 1977, four times. The last was in 1997. So if we go on history, is it going to end? No. Very unlikely. The hope is that the lessons can be learned and policymakers, hopefully, can be more efficient and effective and talk collaboratively across the aisle in recognition that this is having direct and indirect impact on citizens [00:24:00] and businesses and economic growth.

You're exactly right to say that, come early next year, we could be in exactly the same situation that the US has been going through, the longest shutdown in US history. I'm hopeful we're not in that situation, and policymakers and decisionmakers have taken on board the political, economic, and social implications that have happened over the last few weeks. But businesses and CEOs, they should prepare for every scenario, as should individuals that could potentially go again without paycheck. So, there's scenario planning at every level, sadly, at the moment in life, whether it's at the government level, at the business level, and at the individual level.

But yeah, the year will start off, 2026, in a precarious position knowing that they've got to finalize a budget for the year.

Steve Odland: Yeah. And The Conference Board's tool, the Gray Swans tool, could be very useful to CEOs and business leaders. You can access that at [00:25:00] our website, tcb.org, and just put gray swans into the search bar. But we have a tool that allows people to customize the kind of risks that would impact their company and industry and what they should do about it. So it could be useful.

So David, to wrap up, what are the top two or three risks as the CEOs should be thinking about as they enter 2026?

David Young: Yeah, so Steve, a couple of these, we've obviously talked about trade policy and tariffs to continue in the year ahead. And CEOs can't take that seriously enough. The second fiscal responsibility, debt, deficit, and the budget for the year ahead. And then the other challenge I think will be just the partisan divide. And this is not just in the US, this is around the world. This partisan divide, and how to bridge it, and what is the role of business in helping to facilitate that, to move the nation forward? It is, as we know, in everyone's best interest. And it does [00:26:00] take nonpartisan, collaborative dialogues and discussions to come up with effective, long-term, sustainable policy decisions, and that is in the best interest of every individual, every company, and the nation as a whole.

Steve Odland: Yeah, and business leaders should engage with The Conference Board. I mean, we're facing exogenous pressures like we've never seen before, in terms of impact on businesses, whether it's inflation, tariffs, trades, supply chains, geopolitical situations, on and on and on and on and on.

And normally, you look at your company, your customers, your competitors. But more and more, it's the outside world, all of these other forces that are impacting the businesses more than ever before and hence, have created the greater risk profile. But we're here, and we exist to provide trusted insights for what's ahead for all of our members.

David Young, thanks for being with us today.

David Young: Thank you, Steve. And just to emphasize that last point, and we hear this across the CED [00:27:00] Trustees, that they want that dialogue from a diverse range of backgrounds, whether it's academia and the university presidents, whether it's CEOs and also policymakers.

And the more we can facilitate that at The Conference Board, the more we can move effective recommendations and solutions forward.

Steve Odland: That's terrific. Well, thank you very much, and thanks to all of you for listening to C-Suite Perspectives. I'm Steve Odland, and this series has been brought to you by The Conference Board.