‘Agencies may get squeezed everywhere’: US tariffs cause ad industry angst
US president Donald Trump’s wide-reaching tariffs, announced on 2 April, are likely to have severe negative consequences on ad budgets globally, according to analysts.
Despite being telegraphed, the taxes on imports to the US were far more draconian than initially expected by investors. Global markets reacted negatively, with major US indexes on Thursday registering their worst single-day losses since the Covid-19 pandemic.
In the media and advertising industries, the reaction has been that of significant uncertainty. Marketing budgets are typically among the first cuts made by brands looking to save money during an economic downturn and fears of a global recession have increased in response to the tariff announcement.
On Thursday, JP Morgan said it now estimates a 60% chance of a global recession — a 20 percentage point increase from earlier this year.
“Economic slowdown or recession and reduced consumer spend would naturally impact ad budgets,” said Jamie MacEwan, senior media analyst at research group Enders Analysis. “[It] is a real risk because of the sheer scale of the tariffs and their impact on the actual flow of goods.”
He told The Media Leader that business confidence also “shouldn’t be underrated as a factor, because marketing plans are based on business plans and the uncertainty around tariffs will put some of those into a holding pattern”.
‘Economic turmoil’
Sentiment has varied among ad industry leaders. On Stagwell’s virtual investor day call on Thursday, CEO Mark Penn characterised Wall Street’s reaction to the tariffs as “overblown”. On the other hand, S4 Capital CEO Sir Martin Sorrell has said the tariffs have “increased all levels of uncertainty” among clients, arguing that they will herald a new era of slower growth, higher inflation and higher interest rates — all of which will be worse for business.
UK exports received a 10% import tariff on goods shipped to the US. While this amounts to less than most other countries (the EU received 20% tariffs, while China and Vietnam saw 34% and 46% respectively), given the globalised economy businesses around the world are likely to feel the pressure.
“Europe and the UK may look like more attractive regions for these businesses in light of US policies, but that still won’t make up for the wider economic turmoil caused by tariffs,” MacEwan explained.
The tariffs are expected to take effect on Saturday unless deals are struck to remove or reduce them.
According to the Financial Times, the Trump administration has already floated tariff relief to China as a bargaining chip for its approval of a TikTok sale. China, however, responded on Friday to the tariffs with its own retaliatory tariff of 34% on US imports.
Meanwhile, the UK is working “at pace” to secure a new trade deal with the US, according to treasury minister James Murray.
“Anything which has a negative impact on the global economy will inevitably have an impact on the global advertising industry,” a spokesperson for the Advertising Association told The Media Leader.
“We are talking to the Department for Business and Trade on behalf of our members about how the UK best navigates this situation, including how we can further strengthen the UK’s position as a leader in global advertising services, led by the work of our UK Advertising Exports Group.”
Marketing budgets ‘potentially on the block’
Media analyst Alex DeGroote told The Media Leader he expects the tariffs will be “bad for ad budgets globally, specifically for companies like Nike, Adidas and other apparel and luxury goods companies”.
Noting that such companies, as well as many consumer tech manufacturers like Apple, have massive operations in Asia, they will be “frantically re-budgeting” given the tariffs’ main regional focus in Asia.
“It’s hard to be precise on numbers as there is an element of negotiation to play out,” said DeGroote. “Agencies may get squeezed everywhere. Advertising tends to follow GDP and I’m pretty sure global GDP will be cut for 2025/2026.”
The new economic landscape is likely to be negative for media owners. Not only could ad revenues fall as brands reconsider their own budgets, but costs are likely to rise.
According to a report from Oliver Darcy, founder of news site Status, Disney CEO Bob Iger warned staff this week that tariffs will likely drive up Disney’s costs.
Another media executive was quoted as warning: “If I were a media company that relies on advertising, I’d be making sure my contingency plans are ready to go and preparing my cutbacks and layoffs right now.”
Lindsey Clay, CEO of TV marketing body Thinkbox, admitted to The Media Leader that given the tariffs create “more uncertainty [and] more unpredictability”, “marketing budgets are potentially on the block”.
A tax on advertising?
But Clay warned that there is strong evidence of the “danger of cutting advertising, the loss of competitive advantage if you do, [and] the damage to price sensitivity”.
“Marketers have the evidence to make smart, surgical decisions if and when cuts have to be made,” she continued, pointing out that Thinkbox’s Profit Ability 2 dataset indicated big brands have already been over-investing in social media.
“I hope that during this bedlam, marketers look to the evidence to guide them through and help them deploy budgets for maximum effect. Brands need safe havens at a time like this, places they can rely on to deliver, defend their price premiums and help them emerge from the chaos with the least damage possible.”
In his Substack Madison & Wall, media analyst Brian Wieser suggested that digital media and retail media giants such as Meta and Amazon are most likely to be impacted, as much of the products advertised and sold via their services originate from China and Vietnam.
“The new policies could almost be described as a tax on advertising,” Wieser wrote.
Speaking more broadly, DeGroote concluded: “It feels like Trump wants to unwind free trade, in favour of domestic protectionism.
“Given the size of the US economy, its consumer base and its digital giants, this will be hard to withstand for anyone.”