Seeing Around Corners

How Scenario Wargaming Can Help C-Suite Executives Navigate Trump's Tariffs

A C-Suite Quick Take

Imagine you are an executive at a leading European defense contractor. Your firm has spent decades cultivating relationships with U.S. military procurement officials, investing in joint ventures, and navigating the complex regulatory maze that governs transatlantic defense trade. Then, in November 2024, Donald Trump is re-elected as the 47th President of the United States. Almost overnight, the rules of engagement change.

The new administration, driven by its signature brand of economic nationalism, slaps a 25% tariff on European steel and aluminum imports. But tariffs, in the hands of Trump 47, are more than just economic tools. They are also bargaining chips, deployed and withdrawn with dizzying speed. One week, they are a means of addressing trade imbalances. The next, they serve as leverage in an unrelated immigration dispute. And just when you think you’ve understood the game, the administration pivots again, using tariffs to fund tax cuts.

For C-Suite executives, the implications are profound. The board is looking for answers: absorb the cost of tariffs or pass them on to customers? Relocate manufacturing to the U.S. to sidestep restrictions? Or preemptively shift focus to other markets, anticipating further deterioration in U.S.-EU trade relations? These are not hypothetical dilemmas. They are real, urgent, and confoundingly complex.

The traditional tools of strategic planning - five-year roadmaps, financial models, competitive benchmarking - are woefully inadequate in the face of such volatility. This is where scenario wargaming comes in, a synthesis of scenario analysis and game theory designed to help leaders anticipate, adapt, and act with confidence in high-uncertainty environments.

How can executives make sense of an unpredictable world? A structured, five-step approach can help transform ambiguity into actionable strategy.

Step 1: Identify Key Policy Actions

Start with the known variables. What are the major policy shifts that could impact your business? Under Trump 47, the most immediate concerns include increased tariffs, enhanced "Buy American" mandates, and a possible expansion of U.S. defense spending, favoring domestic firms over European competitors. At the same time, EU policymakers may respond with their own “Buy European” initiatives, prioritizing EU-based firms over their American competitors. Meanwhile, shifts in export controls could either tighten or loosen market access to China and other strategic regions.

The challenge isn’t just understanding these policies in isolation but recognizing how they interact. Will NATO allies come under pressure to increase defense spending, and if so, who will benefit? Will Europe retaliate with its own protectionist measures to favor European defense firms? In short, executives must map not just one decision but an entire cascade of consequences.

Step 2: Identify Key Decision-Makers and Influencers

Next, identify the actors who can alter the course of events. The Trump administration and EU policymakers are the most obvious players, but they are not alone. U.S. defense contractors - Lockheed Martin, Boeing, Raytheon - will undoubtedly use their lobbying power to shape policies in their favor. NATO, European governments, and emerging defense markets in India and the Middle East will all react, each according to their own interests.

Critically, internal company stakeholders – the board, investors, and supply chain partners - are also players in this wargame. How they react to uncertainty (pulling back investments, demanding risk mitigation, accelerating diversification strategies) can be just as consequential as external shifts.

Step 3: Map Interests and Strategies

Once the stakeholders are identified, the next step is to map out their incentives and likely moves. The Trump administration may double down on economic nationalism, but it also values pragmatic deals. European leaders may retaliate against tariffs, but they also seek to preserve transatlantic unity. Understanding these competing motivations enables executives to anticipate probable scenarios rather than merely reacting to events.

For instance, if U.S. defense policy becomes more protectionist, should the company proactively deepen ties within the EU? Should it prioritize non-U.S. markets like India and the UAE? Or should it form strategic alliances with American firms to maintain U.S. market access? These decisions require more than intuition - they demand structured, scenario-driven analysis.

Step 4: Apply Scenario Analysis and Game Theory

Now comes the heart of the process: modeling different futures. Consider a range of plausible outcomes:

• Scenario A: Hard Protectionism – Trump 47 enforces strict "Buy American" policies, excluding European firms from major U.S. contracts. The EU retaliates, increasing defense spending to reduce reliance on U.S. technology, benefitting European firms positioned to capitalize on “Buy European” policies.

• Scenario B: Selective Cooperation – Trump prioritizes NATO unity, allowing European firms to maintain a foothold in the U.S. market while focusing protectionist efforts on China.

• Scenario C: Global Realignment – The U.S. and Europe drift apart strategically, forcing European firms to pivot to Indo-Pacific and Middle Eastern markets for growth.

By applying game theory, executives can anticipate countermoves. If the company relocates production to the U.S., how will European regulators respond? If it doubles down on EU contracts instead, will U.S. firms pressure Washington to impose further restrictions? Running these simulations helps leaders preempt surprises and prepare strategic responses in advance.

Step 5: Craft a Competitive Response Strategy

With the insights gained, executives must distinguish between no-regret moves (actions that are beneficial across multiple scenarios) and high-commitment moves (those that only make sense in a specific scenario).

No-regret moves might include strengthening lobbying efforts in both Washington and Brussels; diversifying into non-U.S. markets, particularly in Asia and the Middle East; investing in next-generation defense technologies to maintain competitiveness; and/or aligning with EU defense policies to capitalize on “Buy European” opportunities. High-commitment moves, such as relocating production to the U.S. or exiting the American market altogether, require more deliberation, as they carry significant risks if the strategic landscape shifts again.

For C-Suite executives leading global enterprises, the ability to anticipate and adapt is no longer a luxury; it is a competitive necessity. The election of Trump 47 is just one example of the profound disruptions that define today’s business landscape. By integrating scenario wargaming into their strategic playbook, executives can move beyond reactionary decision-making. They can see around corners, anticipate challenges before they arise, and make decisions with confidence - even in the face of radical uncertainty.