The rundown: How Trump’s tariffs could put marketers in a recession frame of mind

For most marketers, the emergence of tariffs poses the same dilemma as a recession or pandemic: You can spend your way through it, or spend less.

Here’s a rundown of the key points and potential implications.

The background

President Trump spent a lot of his most recent election campaign talking up tariffs – taxes levied by a country’s government on imported goods and services. The idea is to strengthen domestic manufacturing and other industries. Many fiscal observers are skeptical of that approach. “The U.S. will be one of the main victims — in the resulting harm to its own economy and its standing in the world,” read the Financial Times’ latest editorial on the subject.

It’s a concern for agency, brand and media execs, because they fear rising production and logistics costs might end up causing ad spend to fall, as marketers shave costs.

OK, so what’s actually changed – and what might change later?

• The U.S. has instituted a 10% tariff on Chinese imported goods.
• It’s closed a loophole known as “de minimis” affecting foreign exporters (see below for more).
• Meanwhile, China has put in place its own tariffs on U.S. exports.
• Trump said he’s set to announce new 25% tariffs on steel and aluminum this week – and retaliatory tariffs on every country that already maintains tariffs on U.S. goods
• Meanwhile, a 25% tariff on Canadian and Mexican goods, and a 10% tax on Canadian energy, as well as retaliatory tariffs from Canada and Mexico on U.S. exports, have all been put off until the end of the month.

I don’t speak Latin, what’s “de minimis”?

It’s a rule that allowed exporters to ship packages worth less than $800 into the U.S. duty-free, originally designed for U.S. tourists. (Digiday sibling Modern Retail has a great explanation on how the changes will directly affect retailers.) 

That matters for marketers because some brands – particularly low-cost Chinese e-commerce giants Temu and Shein – benefit from that rule. It’s enabled them to ship cheap electronics and apparel to American consumers, often for far less than the price of domestic equivalents. A $5 baseball cap, anyone?

The consequences are already piling up. On Feb. 4, the U.S. Postal Service briefly stopped accepting packages from China, causing chaos in the shipping world. Temu adjusted quickly, emphasizing U.S. products in lieu of its usual showcase of items mostly from sellers based in China.

OK, but why does this matter for ad spend?

Well, Temu and Shein have become major digital advertisers in the U.S. in recent years. According to The Wall Street Journal, Temu parent firm PDD Holdings spent almost $2 billion on advertising with Meta in 2023. The company accounted for 3% of 2024 U.S. ad spend on X alone, per Sensor Tower data.

If their U.S. businesses are significantly curtailed, that ad spend could drop. ”The U.S. is a huge market for them, and up until this point, it had a pretty significant growth opportunity … It will definitely cause them to at least reassess where their budget is going,” eMarketer analyst Rachel Wolff told Digiday.

That could include an overall cut to their ad spend, or just a juggling of budgets from the U.S. into markets with rosier possibilities. At the beginning of February, Shein re-entered the Indian market after a five year absence, for example. While Meta itself can probably take the hit (in the last quarter of 2024 its metaverse unit Reality Labs lost more than double what Temu spent on advertising with Meta’s platforms in a year), those changes could still make waves in the U.S., potentially bringing down CPMs on paid social.

Are they the only companies impacted?

Not at all. Temu and Shein are just tall poppies; the Chinese tariffs will affect all importers from that country. Future measures – in addition to the Mexico and Canada tariffs, Trump on Feb. 2 publicly floated the idea of tariffs against goods from the European Union – mean the impacts could be much more widespread.

Australian brand Bydee, for example, has already begun adding duty costs to its online checkout for sales to the U.S, per Digiday sibling Glossy.

Higher operating costs likely mean higher consumer prices, which could hurt sales. Even if a company decides to swallow the higher costs, its profit margins will inevitably be thinner. In either scenario, CFOs at brands targeting U.S. consumers are going to be eyeing their company’s marketing budgets and wondering if they couldn’t be trimmed.

Think back to the last recessions, in 2020 and 2008. Global ad spend fell between 2008-2011, only rising beyond 2008 investment levels four years after the Credit Crunch; U.S. ad spend growth was slower during 2020 than it had been 2018-2019.

The incoming steel and aluminum tariffs would likely mean higher costs for industries reliant on those materials, such as automotive firms. Speaking during its Q4 results on Feb. 5, Ford president and CEO Jim Farley warned tariffs would see higher consumer prices and “billions of dollars of industry profits wiped out.”

Meanwhile tariffs targeting the EU might hit pharmaceutical brands based there. Auto and pharma categories are big brand spenders – for example, they represent the second- and third-largest category sources of revenue for WPP, per its 2024 interim results.

”There’s going to be an indirect impact for media across the board,” said Maureen Kerr, partner at consultancy firm Arthur D. Little.

So, what’s to be done?

There’s no modern precedent for Trump’s tariff policies. But for marketers at the companies in the crosshairs, the choices available are similar to those they faced during recent recessions (such as in 2008 or 2020).

That could mean a straight-up cut in companies’ marketing budgets, noted industry analyst Brian Weiser. “The vast majority of companies make a budget for advertising [based] on a percentage of revenue basis. Pretty simply, if the revenue goes down so too does their advertising,” he said.

Or it could see marketers think harder about how they measure marketing impact – and shift dollars into channels considered to have more immediate effects. 

”It forces you to be more conservative about how you allocate your ad dollars,” said eMarketer’s Wolff. Following the conservative line could prompt advertisers to focus on lower-funnel, performance-oriented channels, such as CTV or retail media. “Ultimately it just comes down to performance and ROI.”

Alternatively, there’s the option of spending through it. Investing in a company’s brand can help it justify price rises to consumers and guard against rival brands hoping to pick up market share.

”I don’t think there would be a downturn in our marketing budget,” said Joshua Scherz, founder of Bela, a premium seafood brand that imports its products from Portugal. Were Trump’s mooted EU tariffs to go ahead, it might be on the hook for higher import costs.

There’s precedent for meeting the challenge head-on, though. During the 2008 recession, Reckitt Benckiser increased marketing investments by 25%, ultimately generating an 8% revenue increase and a 14% rise in profits. Trump’s tariffs might not pose as widespread a challenge to brands, but it’s a similar drill.

In Bela’s case, the company has just invested in its first rebrand and launched a DTC business to reach the growing number of consumers intrigued by tinned fish. Despite the clouds on the horizon, Scherz is loath to pull back.

“Tariffs would hurt the consumer, sure, and I think everybody understands that we’d have to raise our prices if there was a significant tariff,” he explained. “We do not plan on changing marketing budgets based on tariffs or price increases … We are doubling down in storytelling mediums.”