Tariff confusion leaves US advertisers ‘paralysed’ and ‘sombre’

NEW YORK - Persuading people to spend money in a time of unpredictable tariffs is proving to be a complicated calculation for the US$380 billion (S$496 billion) American advertising industry.

Should a retailer commit to holiday television commercials for toys manufactured by newly vulnerable trading partners? How do social media companies account for the potential disappearance of Chinese companies that have spent billions of dollars promoting their wares? How does an automaker pitch vehicles that may cost consumers thousands of dollars more than they did a year ago?

“You’re going to introduce uncertainty about how they make stuff, let alone what’s going to happen to consumers in terms of their propensity to buy?” said Mr Brian Wieser, a veteran industry executive who runs consulting firm Madison and Wall. “That’s going to cause advertisers to really curtail their ad spending.”

Major companies were left in the lurch in April as the Trump administration declared new tariffs, soon imposed them, reversed course a few days later, and then doubled down on targeting China. Now, those advertisers feel “paralysed”, said Mr Jay Pattisall, a principal analyst at Forrester, a research firm. Several companies declined to elaborate on their marketing strategies for the coming months or said they were in “wait and see” mode.

“We are as in the dark about this as I think everybody else is,” Mr Pattisall said. “It is such a volatile situation because the decision-making is quite volatile.”

Companies’ willingness to invest in marketing and promotion is often viewed as a proxy for the health of the global economy, a sort of indicator of whether gross domestic product might grow or contract. The tariffs could potentially trigger an economic domino effect, causing consumers to close their wallets, corporations to streamline their spending, and marketing to take a back seat, said several advertising experts.

Analysts for research firm MoffettNathanson wrote in an investor note: “In a world where a recession hits the US, advertising will be hit harder – even in a relatively mild and quick recession scenario.”

Some companies are circulating ads urging consumers to buy before the tariffs start pushing up prices. On Facebook, auto dealerships in California, Michigan, Utah and elsewhere told shoppers to “lock in pre-tariff pricing before rates go up” and “check out our tariff-free pricing”. A home goods merchant in Minneapolis offered discounts on vintage Chinese items “in *celebration* of the tariff tirade”.

Executives at Omnicom Group, one of the largest advertising agency groups in the world, said during the company’s first-quarter earnings call on April 22 that it was waiting for some of its larger clients to signal how they planned to proceed with marketing spending when they announced their own earnings over the next few weeks. Omnicom also lowered part of its revenue forecast for the year.

US President Donald Trump’s unorthodox trade tactics have clouded the future for an industry that still leans heavily on planning. In a few weeks, industry executives will converge in New York City for the annual upfront presentations, where media giants such as Disney, NBC Universal and Netflix show off their new TV and streaming offerings in the hope of locking in months-long advertising contracts. Comic-Con International, a major event for pop culture marketing, is scheduled for July in San Diego.

WARC, a research firm, downgraded its expectations for ad spending growth over the next two years by US$19.8 billion, explaining that “the risk of prolonged stagflation – and outright recession – has grown in key economies, exacerbated by new trade tariffs”.

Caution will reign for now, said Mr Martin Sorrell, the founder of S4 Capital and a former head of WPP, one of the world’s largest ad companies.

“Generally, the mood is going to be quite sombre,” he said.

As tariffs on foreign-made goods loom, some companies are advertising their American manufacturing bona fides. Ford Motor posted a video the day after the tariffs were announced that claimed the company employed the most hourly auto workers and assembled the most vehicles in the country. The spot, which closed with the words “From America. For America”, was promoted by Mr Trump on his social media platform, Truth Social.

Trade volatility will force companies to seek out flexibility in advertising deals, allowing them to reallocate their budgets or pause ad campaigns partway through, several analysts said. Digital advertising, where messages can be quickly tweaked and results are easier to measure, will also help keep costs in line, they said.

Publicis, a large French advertising agency group, acknowledged on April 22 that clients “facing a very challenging situation” around tariffs and inflation could cut their marketing budgets.

But after the Covid-19 pandemic and a war in Ukraine, the firm and its clients are used to unpredictability, said CEO Arthur Sadoun during a call with analysts about first-quarter earnings.

“Our clients are definitely cautious, but they are also very competitive, and they are looking for opportunities to grow despite the uncertainty,” he said. NYTIMES