How Tariffs Will Affect Marketing, Is The Trump Playbook Working For The Economy? How A Recession Will Affect Marketing

0:00All right, so we're going to talk about how tariffs will affect marketing. So both Neil and I have this in our topics. And I think we want to talk about the short term and then the long term as well. So you have one around businesses in general. And I think our high level on this one, we'll just kick it off, is tariffs in general are going to affect us, our businesses. Neil and I both have agencies because our clients will be affected by tariffs and therefore we will also be affected. Because usually what happens if people need to make cuts, one of the first things to go is usually marketing spend or marketing agencies.

0:33So I think in the short term, net net, and we can dive into this a little bit because I have some more thoughts, but I think there's going to be significant short term pain. And I think before we go into a little more, so just so everyone knows, Trump kind of pulled out this entire poster showing the tariffs that, like Vietnam, for example, I think has 96 % tariffs on U.S. goods. And then I think we're going in at 47 % on them. So he's got this whole reciprocal tariff chart. And the whole thought here is that maybe they can try to raise, I don't know, 600 billion or a trillion or so in revenue or in tariff revenue.

1:10I don't know if that's going to happen. And obviously, a lot of business people are in an uproar right now, especially if you're in e-commerce right now. You're in an uproar because you're trying to figure out what to do because, you know, you offshore to like Vietnam or China, for example. Yeah. Clients are going to get hit. if people have a demand for a product, let's call it an iPhone because it's something we can all relate to, and it's$1 ,000. If you now had to pay$1 ,500 for that same iPhone, even though the product is amazing, you'll reconsider if you're going to buy it. You may not buy it as frequently to upgrade your phone.

1:47You may not just even make the purchase. You may move to older model, or you may move to a different product like a Samsung phone. It impacts people no matter what because whether someone wants a product or not, money comes into play and people aren't blessed with unlimited money. Even some of these billionaires that you see on the Forbes list, when they buy corporations, a lot of times they got to sell stock to pay their bills. And none of us are those people. So for the average consumer, it really is going to hit hard. Yeah. And I think maybe this goes into, this kind of goes hand in hand. So talking about this, this Trump playbook, right?

2:23And neither of us are trying to be political here, but how do you think the Trump playbook is working for the economy right now? Do you think it's going to be good for the economy long term and what do you think it's going to be like for the short term? Short term, I think it's going to be crap. It has been for Q1. I don't think Q2 is just going to maxly pick up unless he is willing to play ball and what's confusing for me and I think most people out there they say one thing and then the next day they can do something else. A great example of this is we're recording this podcast two days into tariffs.

2:58The first day when they said that they were going to do it, it was after market close. That was on a Wednesday. On Thursday, the market tanked and the White House explicitly said, this isn't some ploy to get people to the table to negotiate. We've suffered lots of pain over decades. These are the tariffs and this is what people have to end up paying. and then all of a sudden I think Trump came out and said hey we're actually open to discussions and negotiations which got announced uh this morning Friday which is when we're recording but you're seeing conflicting messages and we saw this similar to Mexico and Canada sometimes there were tariffs sometimes they were removed sometimes they're back I don't actually know where it stands with all those countries but because of that I think we're going to see short term pain long term i don't think he wants to go as a president who crushed the economy so i do believe it'll end up being fixed um i'm i'm not economist so i don't know how these policies will impact us in the long run but i don't think he wants to be known as a president who tanked the economy when do you think the economy goes good again if you're to guess we're not economists for the guests?

4:12I don't think this year is going to be great. And you could say, oh, it's really good at the second half of the year. I don't think things recover that fast because we also still have inflation. Eric's mentioned stagflation on some of our past podcast episodes. Maybe things start getting better in 2026, 2027. Yeah, I think 2026, maybe probably for sure, in my mind, at least the second half is actually also when a lot of investors are looking at, oh, things are going to hopefully rip. But here's another thing. I want to add another wrinkle here on whether this Trump playbook is working or not. And again, neither of us are being political here.

4:50So this guy, Bill Bartheit, he tweeted this. And so we can both agree here that Trump has a pretty good team. He has Scott Besant, who actually did the whole Bank of England trade back in the 90s, right? Howard Lutnick was prone. And you got Elon Musk, right? And all these other people. and so we do also know that the 10-year rate is down to it's a three handle now meaning that it went from around four percent now it's at three right so it's coming down and if we're looking at real-time inflation it's currently below two percent but real time that's only like you know you know very recent right um where do you get real-time inflation from so everyone can i this is from bill bar i think you have to just google real-time inflation there's like calculators and things like that.

5:31And so also keep in mind, too, we also have, what,$7 trillion in expiring notes. And also the debt that we have, too, is very large, right? Like, what,$36 trillion or something like that? And so Trump has mentioned this before, but someone asked him, he was like, so if you were to ask, what would you do about the Fed? Do you have any influence on the Fed? He's like, well, I'm sure if I went to Jerome Powell and I asked him to do something, he'll probably listen. And I think this is also his way of forcing the Fed to cut rates, right? And then get quantitative easing going again. Quantitative easing, sorry.

6:07Hopefully, Doge can cut, I don't know, a trillion, 1.5 trillion. And there's all this other stuff going on, right? But the point of saying all this is that I think short-term pain, and Scott Besson has said this himself to the Treasury Secretary, he's like, there's going to be short-term pain, long-term, it's setting us up because you're going to have all these gains coming from AI in the future, hopefully, and robotic productivity. So I'm optimistic long-term, but in my mind, and I've talked to some other people, I'm like, you know, we've been kicking the can down the road for a very long time.

6:37Usually with economies, you have cycles where things get, you know, there's, there's a clean out that needs to happen and then things get good again. We haven't really had that since 2008, right? Then 2020, right when it happened, we had the two quarters of, of, of, of, we actually had a recession, but nobody likes to call it a recession. Immediately QE started. That's the first time in my life i was like oh okay that's how it works yeah uh and speaking of rate cuts you saw how there's now probability instead of three rate cuts it's going to be four rate cuts this year um the fifth rate cut i think it was at 30 something percentile uh a 0.5 rate cut in june went up from uh in the teens to i believe 43 is what the market's betting now yeah yeah i i think it's and trump has said this for a long time he wants to he wants to cut rates it's time and i think we've held these rates high for quite a while i mean these rates have been higher since how long we started raising rates in 2022 right uh yeah and then they started really going up fast it wasn't slow and gradual like we're used to and by the way in this case if we're talking about stagflation you can't stagflation is where you have high interest rates and then also the economy is basically not not doing well right um so you have inflation happening and low productivity productivity is stagflation isn't that high inflation and high inflation low productivity low productivity yeah ignore the what eric said on interest rates he meant inflation yeah sorry sorry my bad um but look i think it's gonna be it's gonna affect marketing i think it's going to affect businesses overall um and you know maybe i have a next topic right right after this how a recession will affect marketing but you know the atlanta fed is already putting in a negative 3.5 percent GDP and this stuff gets revised all the time um so I think that's for q1 already for q2 nothing's feeling good right now but here's the weird thing nothing feels good but I feel so optimistic about the the future and I'm not saying it's because of Trump or anything I just feel the world's going to go into a good place and I feel like this correction has been overdue for a while and I don't think a lot of people are gonna like me saying that but I feel like it has been overdue and it's not going to be favorable for us but I do feel like it's been overdue I can't look at marketing as a whole and saying I'm optimistic anytime soon.

8:49But if I look at my business specifically, and I'm evaluating numbers, we're getting kicked. The sad part about my business, and this is also a good part, is in 2022, when the economy started getting bad, we were still growing because we had invested so much to expand globally. And a lot of our growth is coming globally because we're so small. When you start from zero in a lot of countries, it's not hard to close revenue even in a bad economy. You can close something, just not as much as you could in, in theory, in a good economy. When I look internationally, we've grown a lot and it's our fastest growing segment of our business.

9:33But with all the tariffs, the part of our business that's getting hit the hardest right now is international it used to be the u.s used to get hit the hardest now it's international is getting hit the hardest do you think it's fair that we put these reciprocal discounted tariffs on these other countries i was talking to uh short answer is i do think it's fair um but you know long answer is i was talking to a buddy named orlando and he's like man like Avicii and all these people um and it was funny I was on a call with him the other day and I saw that Avicii movie and the guy Ash he was on the call as well I didn't know that Ash works with Orlando and I was like oh cool you know who that guy is I didn't know who he was I eventually put two and two together I did not understand on the call that he was in music yeah but when I watched a documentary on Netflix I'm like wait I was talking to this guy on zoom um but really nice guy humble and when i was talking to orlando he's like i live in sweden and i don't know what the rate is but i believe he said like 25 i'm ish i could be off he was a tariff right yeah he's like we've been charging you 25 for decades yeah he's just like and he's like why didn't america charge u.s or why didn't america charge sweden taxes for ages so what that means globally i don't know i'm not an economist but the whole concept of bringing back manufacturing in the united states which i believe is a point of the tariffs maybe i'm wrong because they keep saying that on tv and when he announced them he had a lot of auto union people there i don't understand that either because you and i are a big believer in ai automation robots I believe within five years, 10 at the latest, if people are really slow, people won't be assembling cars and all be done by robots anyways.

11:32I think so. The quote I like to go back to all the time from Thomas Sowell is there are no solutions, only tradeoffs. And so you think about the last 45 years or so, it's been a lot of deindustrialization in the United States. So people have, you know, if you're an entrepreneur, if I can get costs cheaper in China or Vietnam or something, if I'm an e-commerce entrepreneur, I'm going to do it. Right. because that's business. I'm trying to bring my costs down. But that has not been good for the United States overall where all the chips now are offshore. So I think bringing the chips back is going to be a good thing.

12:03I think try to bring as many jobs as we can back. And you're right, there's probably gonna be a lot of automation too, probably next five, 10 years or so. But I do think the message is correct. I think we should be looking inward more. And I will say the one thing that China does really well that I think the US is learning is China focuses on itself. And I think we've been too focused outward. We need to focus inward. And so, again, there's no solutions-only trade-offs. I think none of these solutions are perfect. But we've gotten to this point, and now we need to do something in order to get us out of these predicaments.

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14:43but i think there's a big difference between china and us although china is changing typically corporations in china are chinese corporations and they focus on the chinese market you've seen that change over the last handful of years where their car companies like the byd's i believe it's called byd yeah you're seeing them more globally like when i go to brazil or places like that we're in germany we walked right by a byd studio yeah yeah and then tiktok right by dances they're doing stuff globally. But typically you are seeing more corporations like Baidu where it was China and solely focused on China.

15:19You look at a lot of US companies and they do things globally. A lot of the big US corporations aren't really US. They're just global corporations, whether it's Apple or Google or Microsoft and the list goes on and on. So when you look at tariffs and some of these companies have physical products like Apple, but some of these companies own their plants and the manufacturing in some of these other countries. Not all of them do, and they're bringing their products back here, and even though they're making money in Vietnam, they're paying taxes on that money in the United States when they repatriate.

15:58Not everyone does, but a prime example with my corporation, we're in 28 countries. We take surplus money from other countries, bring it back into the United States, and we pay taxes on that money. So not necessarily all the jobs are based in the US, but we're bringing back the money, paying taxes on it. And when our jobs are not in the United States, in most cases, because the jobs can't be in the United States, when a corporation wants us to help them with marketing in Australia, and they have Australian division, we need feet on the ground to talk to their Australia representatives. Yep. The one thing I'll say to this, and then we can move on to how this will, this terrorist will affect marketing or how a recession will affect marketing.

16:43I don't know if you saw this video, but you know, Nancy Pelosi, so Nancy Pelosi speaker, I think she was speaker of the house before, but she's a Democrat, right? So Trump's Republican. So obviously they're on different sides. There's a 96 video. Someone found a 96 video of Nancy Pelosi saying, we need to charge all these other countries like China, for example, we're getting ripped off, blah, blah, blah. And so I think the point is, both sides have been saying this, that we need to kind of get our fair share. And by the way, I think Trump likes to do deals, he's going to negotiate with all these people.

17:13I don't think it's, you know, I think 96 % getting charged, Vietnam charging us that right, we're charging 47%. We'll probably bring it down more. Because here's the thing we we do a lot more the united states is we do a lot of business with the world right and they're not necessarily going to give us that much revenue anyway um so i think a lot of this is um you know a negotiating tactic they say it's not a negotiating tactic i think there's a lot of negotiation that will happen especially with china i agree with you on the negotiating but i think there's one big difference from 1996 to now which you and i clearly will agree on is back in 1996, we weren't a technology, I'm using the wrong terminology here, but the world wasn't centered around technology.

17:54I understand it was booming at the time, but we're truly in a different world with all the tech that we have. Back then, companies like Exxon were the biggest corporations in the world by far. In today's world, how much money are we making globally from tech? When Google makes money in Vietnam, Tom, again, I'm not an economist or a politician. I'm 99 % sure there's no tariffs on that. Same with Microsoft or all these software companies that we're making an arm and a leg for. But we're the ones, when you look at it from a global aspect, we really do dominate technology from a revenue aspect compared to the rest of the world.

18:32I understand China has been creating a lot of tech forward companies. India has as well. I would say China is the closest after the US. But we're generating a lot of revenue from that and we're generating a much bigger surplus in the rest of the world. I would say from all the technology side Look, the last thing I think we'll say about this is, you know, I think the US is trying to get its fair share I mean, I believe the trade deficit with China the US trade deficit was like eight hundred negative 800 billion But China's surplus with us is 1.1 trillion. And so, you know, I think at the end of the day, like I It's um We should negotiate this stuff.

19:08So let's talk about this I agree. So JP Morgan just raised recession odds to 60%. Let's talk about how that will affect marketing. So we can go back and forth here. I think number one, what's going to happen is corporate spending overall is going to tighten up quite a bit. And that means the SaaS subscriptions, these agency fees and all these types of things will get scrutinized a lot more. And these are usually the first things that get either frozen, paused or just cut outright. Yes. and I was talking to a buddy of mine who has one of the largest investment banks, private investment banks in the United States called Cascadia and he was telling me, he's just like all this stuff, literally texting this morning, I was just pulling it up right now, he's like it's not helping.

19:53A lot of deals aren't going through. A lot of people are pausing buying and I think you're going to continually see more and more of this over time because of the chances of recession, and that's going to reduce how many people spend on marketing. We've gotten hit up by so many private equity companies when they buy companies being like, hey, can you help us with this corporation here? We're interested in getting help for marketing. And I believe that's going to slow down because people just aren't spending. Yep. I think we are going to see an even bigger rise in cash-flowing startups. So what I mean by that is solo founders or teams of like five to 10 people.

20:35So I think because of all this AI enablement, we're going to see people building a lot more because layoffs will happen for sure. Right. Layoffs will happen. Usually it's not just, you know, people tend to forget. There's multiple rounds. Usually people like to say cut deep, but people, a lot of people don't listen to that. And so a lot of people will end up starting companies. And I think we're going to see a lot of people, small teams, big businesses rise out of this. And, you know, I think about Peter Lovell that has that airplane game, right? He acquired like a ton of, he had like 74 million impressions or something like that.

21:06So I think we're going to see a lot more of that. I do think one aspect of marketing is going to boom. That's any channel that can show a direct ROI within 30 days. So if a company pays you money for marketing and you can show ROI in 30 days, whether it's like affiliate marketing or paid advertising, and you can show better ROI than they're getting, I do believe that that is a huge opportunity to make a ton of money in. Another example of this is like conversion optimization and a bad economy. You got to still produce results and create growth because it's too hard to raise money. Get your stock prices to go up if you can't figure out more levers for growth.

21:46Dude, it's interesting. I spoke to a lawyer yesterday and he was like, dude, Eric, I'm seeing so many companies in distress more than I've ever seen in the last couple months or so. I'm like, is there anything good? He's like, not that you would want unless you want a construction company. I'm like, I'm good. And so but I think to your point, I think customer acquisition costs, this is an opportunity for people. Usually what happens is everyone starts to pull back on advertising. That's your chance because your customer acquisition costs are going to come down. So if you have something good going on, this is where you double and you triple down.

22:19Just like when you buy stocks and when things are not going so well. Yes. Yeah. Anything else? No, I think that's pretty much it for the economy. Yeah. But anyway, that is it for today, guys. Please don't forget to rate, review, subscribe, and we'll see you tomorrow.