How Tariffs Are Reshaping Marketing and Commerce: A Pivot Toward Performance
In today’s rapidly changing economic landscape, tariffs are significantly impacting digital advertising strategies. As brands navigate this intricate web of changes, it’s essential for marketers to pivot their focus towards performance channels to maintain consumer trust and engagement.
Understanding Tariff Impacts on Marketing Strategies
According to analyst Cindy Liu, "Brands and retailers are going to face really tough trade-offs." She emphasizes that transparent messaging about price changes is crucial for maintaining consumer trust during these tumultuous times. The way brands communicate and adapt their marketing strategies in response to tariff fluctuations will be a key determinant of their success.
Three Tariff Scenarios to Navigate
The forecasting team at eMarketer has identified three potential tariff scenarios to help businesses strategically navigate this shifting trade environment:
1. Limited Scenario
In this scenario, expect 25% global blanket tariffs across major U.S. trading partners and 20% tariffs on Chinese goods.
2. Moderate Scenario
Here, we see partial tariffs with some negotiated relief—a situation that’s "still a pretty significant shift," says Zak Stambor.
3. Heavy Scenario
This entails full implementation of announced tariffs and global retaliatory measures, with profound implications for ad spending.
Under the moderate scenario, total ad spending is projected to reach approximately $407 billion. Only the heavy scenario could trigger an actual year-over-year decline in total ad spending.
The Digital Channel Divide: Who Wins and Who Loses?
The effect of tariffs varies significantly across digital channels:
Flattening Growth on Social Platforms
Social media advertising may stall, potentially seeing growth flattening to just 1.5% under the heavy tariff scenario. Stambor points out that brands like Temu and Shein, which heavily invest in platforms like TikTok and Meta, will likely pull back on their advertising spending—causing further disruptions.
Resilience in Search Advertising
In contrast, search advertising is expected to be the most resilient channel, with only a 7.1% reduction in spending between limited and heavy tariff scenarios. "Advertisers are focusing their limited budgets on performance, benefiting search," Orozco notes.
Connected TV Faces Challenges
Connected TV (CTV) may experience the highest spending reductions among digital channels, exceeding 12% under a heavy tariff scenario. As Stambor indicates, CTV is currently a branding vehicle and thus vulnerable to shifts toward performance-driven advertising.
Adapting to Changing Customer Behavior
The retail sector is bracing for devastating impacts, with around $300 billion projected in lost sales under the heavy tariff scenario—representing a 7.9% reduction from baseline projections.
Liu points out that "higher prices are forcing consumers to pull back and focus on essentials." Even those consumers eager to buy face the risk of products being unavailable.
Interestingly, consumer behavior is shifting rapidly in response to tariff news. As individuals anticipate impending price increases, they are accelerating their purchases. However, Stambor warns of a potential slump in demand later in the year as higher prices and weakened consumer confidence take hold.
Stay Ahead of the Curve
Marketers must stay vigilant and adapt quickly to these fluctuating circumstances. By embracing performance channels and fostering transparent communication, brands can better navigate the complexities of the new tariff landscape and retain consumer loyalty.
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Originally featured in the EMARKETER Daily newsletter, subscribe here for further marketing insights, statistics, and trends.
