Research Paper

The End of Economic Certainty

What the Canada–US trade conflict tells us about the new operating environment for global business

The disappearance of a once-stable assumption

The latest escalation between Canada and the United States may look, at first sight, like another chapter in Donald Trump's tariff campaign.

It is more consequential than that.

Canada's decision to retaliate against new US tariffs, following the collapse of the latest round of negotiations, illustrates something broader: one of the assumptions underpinning global business for decades is beginning to disappear.

That assumption was simple: major trading relationships, once established, could largely be taken for granted.

They can no longer.

For executives, this is not primarily a political question. It is an operating-model question.

The event is local. The signal is global.

The immediate dispute is between two deeply integrated economies.

The United States remains Canada's dominant trading partner. In 2025, 71.7% of Canada's merchandise exports were destined for the United States, down from 75.9% in 2024.

The economic interdependence is therefore enormous.

Yet the political relationship is changing.

Washington is increasingly using tariffs not simply as a trade instrument, but as a broader tool of economic and geopolitical leverage. Ottawa, in turn, is seeking greater diversification towards other international markets.

The significance lies less in the individual tariff measures than in the message they send to businesses:

Economic relationships that once appeared structural can become transactional surprisingly quickly.

For decades, North American companies could optimise their businesses around an assumption of relatively frictionless cross-border trade.

That assumption is now being tested.

And Canada is unlikely to be the last example.

From efficiency to resilience

The global operating model of the past three decades was built around a powerful economic logic:

Globalisation → Specialisation → Concentration → Efficiency

Companies moved production to the lowest-cost locations, concentrated suppliers, reduced inventories and built increasingly interconnected supply chains.

It worked.

But it also created dependencies.

The pandemic exposed some of them. The war in Ukraine exposed others. Disruption around major maritime routes has added another layer of vulnerability. Trade tensions between the US and China have demonstrated that technology and industrial supply chains can become geopolitical assets.

The latest Canada–US confrontation adds something different: the possibility that even historically close allies can become sources of commercial uncertainty.

This changes the management equation.

The question is no longer simply:

How do we operate as efficiently as possible?

It increasingly becomes:

How efficiently can we operate while retaining the ability to adapt when the environment changes?

That is a very different question.

Resilience has a cost

Alternative suppliers cost more.

Additional inventory costs more.

Redundant technology costs more.

Multiple production locations cost more.

Maintaining optionality costs more.

But the absence of resilience also has a price, and that price only becomes visible when something goes wrong.

The hidden balance sheet of geopolitical risk

This is where the issue becomes particularly relevant for CEOs and COOs.

Traditional financial reporting captures assets, liabilities, revenues and costs.

It does not necessarily capture strategic dependency.

A company may look financially efficient while being highly exposed to a single country, supplier, technology platform, logistics route or regulatory regime.

Consider a few simple questions:

• What percentage of revenue depends on one geographic market?
• How many critical suppliers can actually be replaced within 30, 60 or 90 days?
• Which parts of the technology stack depend on a single provider?
• How quickly could production be relocated?
• What happens if a major trade corridor becomes unavailable?
• How much additional working capital would resilience require?
• Which regulatory or geopolitical assumptions are embedded in today's business plan?

These questions rarely sit comfortably within one department.

They cut across procurement, operations, finance, technology, risk, compliance and strategy.

That is precisely why geopolitical risk is increasingly becoming an operating-model issue.

The next competitive advantage: organisational optionality

The companies best positioned for the next decade may not be those with the lowest structural cost base.

They may be those that can reconfigure themselves fastest.

This does not mean abandoning efficiency.

It means changing the definition of efficiency.

A resilient organisation needs to know:

What can change, how quickly it can change, and what it will cost to change it.

That requires management teams to understand their critical dependencies before a crisis occurs.

It also requires something that many organisations struggle with: connecting strategy with execution.

Strategy is only the beginning

A board may decide to diversify geographically.

But diversification means new suppliers, new contracts, new technology, new financing arrangements, new regulatory requirements, new people and potentially new operating entities.

The strategic decision is only the beginning.

The real challenge is implementation.

The changing role of the COO

This is where the role of the COO is evolving.

The modern COO is no longer simply responsible for making the existing machine run efficiently.

Increasingly, the role is to ensure that the machine can change direction when the environment requires it.

The operating model is becoming a strategic asset

The Canada–US dispute is therefore more than another tariff episode.

It is another indication that the operating environment in which companies plan, invest and allocate capital is becoming less predictable.

For executives, the answer is not to forecast every possible geopolitical shock.

That is impossible.

The answer is to understand where the organisation is vulnerable, identify which assumptions matter most, and build enough flexibility into the operating model to respond when those assumptions change.

The strategic question for management is therefore shifting:

Not "What will happen next?"

but:

"How prepared are we if our assumptions prove wrong?"

That distinction may become one of the defining management challenges of the next decade.

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Christophe Schmid — Strategic COO | Fractional Executive | Transformation & Governance Advisor