Tariffs and the economy—everything brands and agencies need to know about the changing market

As economic uncertainty and fears of a recession mount, marketers are grappling with how best to implement their playbooks and attract customers who may be less inclined than ever to spend. A CMO Survey from Duke University released earlier this month found that nearly half of chief marketing officers are “less optimistic” about the U.S. economy compared with the previous quarter; 43.5% of the marketing leaders have decreased their marketing spending as inflation takes a toll on budgets. Indeed, the report found that marketing budgets grew 3.3% in the year ended Feb. 12, 2025, down from the 5.8% 12-month growth reported in the fall of 2024. Now, with the implementation of President Donald Trump’s more widespread tariff plan, the financial outlook appears bleaker as retailers scramble to adjust pricing and supply chains and still remain financially solvent. How close are we to a recession? On Thursday, JPMorgan raised its global recession expectation to 60% from 40% before the tariff announcement. Goldman Sachs, meanwhile, bumped up estimates for inflation and unemployment. Some early signs point to a recession having already begun. Consumer sentiment is on the decline; a recent University of Michigan survey reported a reading of 57.0 for March, an 11.9% decline from February and a 28.2% decline from one year earlier. Consumers have also been hitting the pause button on their retail subscriptions, customer data and analytics platform Decile recently found, as shoppers worry about their finances. A research note on retail and lifestyle brands such as Birkenstock, Nike and Levi Strauss from BTIG Analyst Janine Stichter last week referenced “concern around the implementation of tariffs, sticky inflation, and near-term recession fears.” And late last week, the stock market took a nosedive following Trump’s sweeping tariff strategy, announced on what he called “Liberation Day.” More on that below. More on the economy What should marketers be doing? Marketers have been in planning mode for an uncertain economy, and even a recession, for a while now. The widening income gap between affluent consumers and low-income shoppers has brands grappling with how best to arrange a product portfolio and avoid the “mushy middle” by picking a consumer group to target. Brand experts say marketers should continue to push value in their marketing, a message that will be all the more appealing amid the increase in costs associated with the new tariffs. Consumers are expected to gravitate more toward private label offerings when it comes to everyday essentials like groceries, and marketers such as Aldi, which tout their inexpensive items, will be well positioned. In his “Slams Laptop Shut” newsletter last week, Nathan Jun Poekert, a CMO advisor and marketing consultant, advised brands to optimize those performance marketing channels that are currently effective and reduce channels that are not so immediately measurable, such as print and out-of-home, in the near term. “If you have been focusing a ton of effort at convincing customers to reconsider you as anything but a discount retailer, you may have to put that on pause and just focus on the things that consumers will care about over the course of the next few years: savings,” he wrote. Brands that are already viewed as low-cost alternatives are expected to do well. For example, executives at Planet Fitness recently spoke to analysts about the lower-end gym chain’s outlook and the impact of a potential recession. The executives noted the likelihood of consumers trading down from luxury fitness offerings to a budget brand as well as more favorable interest rates for franchisees looking to open locations, according to a research note from BMO Capital Markets Senior Analyst Simeon Siegel. “We continue to expect [Planet Fitness’] strong underlying business will drive long-term value,” Siegel wrote. Sign up for our CMO Strategy newsletter How will tariffs affect marketing? In numerous ways that are changing on an often daily basis. Brands have been cautiously wading around the issue for weeks now as they try to gauge exactly what tariffs will mean for their pricing and sourcing. Last month, some smaller Canadian retailers began including tariff-free language in their social media ads. More recently, some brands incorporated more urgency in their communications to customers. For example, Tennis Express, a sportswear retailer, emailed its customers with the subject line, “Beat the Tariffs! Last Chance to Save!” ahead of April 9, when Trump’s so-called reciprocal tariffs are set to take effect. A recent study from Kantar found that 80% of U.S. consumers are concerned about how tariffs will impact their finances. As a result, many have already suspended their spending and are putting more energy into deal-hunting and looking for low-priced alternatives. Now, following last week’s “Liberation Day,” brands are scrambling even more. The new tariff expansion includes 10% tariffs on all imports as well as reciprocal tariffs on countries that have tariffs on U.S. imports. Trump has vowed to tax the “worst offenders,” including the European Union, China and Vietnam. The news is bleak for brands such as Nike that manufacture in China and Vietnam, or for brands such as Bogg Bags that had been exploring Vietnam as a less expensive factory alternative. Clothiers such as Gap, Victoria’s Secret and Ralph Lauren will also face pressure after manufacturing shifts to Vietnam, according to data from Bloomberg Intelligence. Indeed, according to Nike’s annual filing, Vietnamese factories accounted for 50% of its footwear and 28% of its apparel manufacturing in fiscal 2024. The brand manufactured 18% of its footwear and 16% of its apparel in China. Ironically, Nike has been working for years to diversify its supply chain. Also read: Nike Jordan’s LinkedIn agency search causes divide Already, some brands have boosted prices. Raen, an eyewear brand in Oceanside, California, increased prices on all its products on April 1—most hikes were around 13%. The company cited “rising production costs” as playing a role in the decision, which is the first increase in several years. Some brand consultants say tariffs will test brand loyalty as price drives purchase decisions. Small retailers, in particular, are already feeling the pinch. On Thursday, Little King, a Beacon, New York-based shop that sells goods from around the globe, posted a plea on social media urging customers to shop local. “We’re doing everything we can to absorb costs and keep our prices approachable, but the reality is that these changes put extra strain on independent retailers like us,” Little King wrote, adding that “Unlike big-box stores, we don’t have massive margins or bulk buying power.” Nintendo on Friday delayed pre-orders for its Switch 2 game console, which had been set to begin April 9, “in order to assess the potential impact of tariffs and evolving market conditions,” the company told CNBC. Of course, those brands that do the bulk of their manufacturing in the U.S. are already in a good spot and experts expect them to tout their American-made wares in marketing moving forward. New Balance, the footwear brand, is currently promoting its “Made in USA Spring/Summer Seasonal Collection.” How are marketers responding to the auto tariffs? Ad budgets could get squeezed as automakers and dealers contend with what experts predict will be rising prices and slowing demand in response to Trump slapping a 25% tax on vehicles built outside the U.S. Of the roughly 16 million cars and pickup trucks sold in the U.S. last year, 46% were imported, according to S&P Global Mobility, which specializes in automotive data. Volvo, Mazda, Volkswagen and Hyundai Motor (including Genesis and Kia) imported at least 60% of their vehicles sold in the U.S. in 2024, according to S&P, with Ford at the low end with about 20% imports. Ford seized on its U.S.-made advantage with a campaign called “From America, For America” that touts its American manufacturing footprint and plugs a new limited-time discount that lets all consumers pay the same prices for vehicles that Ford employees pay. Stellantis, which imports about 40% of its vehicles, followed suit and offered a similar employee pricing deal that began Friday. Hyundai on Friday pledged not to raise the manufacturer’s suggested retail price on vehicles in a promotion ending June 2. It rekindled the “Customer Assurance” label for the program, a marketing phrase it has used in other uncertain economic times. It is expected to plug the initiative with new ads. In the short term, demand has spiked as consumers rush to buy cars before prices go up, and some dealers have fed this demand with tariff-specific messaging and advertising. How will the economy affect media budgets? Media buyers have begun planning for the worst, a difficult position ahead of an upfront season in which they are required to make long-term ad commitments. Overall, experts predict a decline in media spending as brands become more constrained financially. Yet some said media companies might offer discounts or other financial incentives to spur ad spending. While buyers won’t have much flexibility from their brand clients, they might get better offers from media sellers eager to get rid of excess inventory, experts said. How will consumer travel plans change? As consumers pull back on tangible purchases, it’s likely that their budgets for experiences such as concerts and travel might be affected as well. A recent study from Beach.com, a travel site, found that 61% of Americans say a recession would impact their travel plans this year; 72% said they would make adjustments to such travel plans because of the economy. The report cited an expected increase in budget-friendly hoteliers or home-sharing services such as Airbnbs as well as more affordable destinations. “The fundamental idea is that people what to travel—what we learned through COVID is it’s clearly in people’s DNA they will travel if they can and want to,” said Peggy Roe, executive VP and chief customer officer at Marriott International, which last week began airing a new campaign designed to inspire travelers. “What they’re feeling now in the U.S. is that drop in consumer confidence, which is what we’re all worried about,” she added, noting that it’s still early to tell how Americans will react. Roe said tourism is currently booming in other parts of the world, including India and Japan. However, as companies tighten their belts, business travel may see a decline, despite its recent return to pre-pandemic levels. “With consumer sentiment dropping and tariffs, there’s so much uncertainty right now,” Roe said. How will ad agencies be affected by the economic downturn? Last month, federal cuts by the Department of Government Efficiency (DOGE) led to the elimination of several ad agency contracts. For example, the Department of Veterans Affairs and the U.S. Agency for International Development specifically saw cuts. The Department of Homeland Security and the Department of Health and Human Services also paused some marketing campaigns, leaving many agencies in limbo. More recent forecasts project weaker 2025 ad sales growth. Last week, IPG Mediabrands-owned Magna, the intelligence firm, revised its growth forecast to 4.3% from 4.9% in December. Magna cited the “risk of a trade war” as a potential factor in ad budget pullbacks this year. Ad job employment is already seeing the fallout. In March, employment in advertising, public relations and related services dropped by 600 jobs, its fourth consecutive monthly decline. In 2024, marketing organizations increased headcount by 5.3%, according to the Duke CMO survey. The report forecast “similar growth projected for the coming year.” One caveat: it was published April 1, one day before Trump rolled out his sweeping tariff plan. Contributing: E.J. Schultz

Tariffs and the economy—everything brands and agencies need to know about the changing market

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