Advertisers expect ad spend slowdown amid tariff uncertainty

The possibility of a trade war with China, Mexico, and Canada could cause advertisers to slash budgets and rein in spending, analysts and industry executives told Marketing Brew.

This week, the Trump administration’s 25% tariffs on goods from Mexico and Canada briefly went into effect, along with an additional 10% tariff on goods from China. President Donald Trump has also said that details about reciprocal tariffs on other US trading partners will be revealed in early April. While the details around the tariffs have continued to change—the administration deferred some of the tariffs on Mexico and Canada and carved out a one-month exemption for automakers—the implications that they could have on business costs and inflation represent considerable challenges for Madison Avenue.

“The fundamental issue on tariffs is they cause uncertainty,” Martin Sorrell, founder and executive chairman of S4 Capital and founder and former CEO of WPP, told Marketing Brew. In uncertain times, he added, “clients delay decision-making—they either postpone, or they cancel, or they delay.”

Ninety-four percent of US advertisers said they were concerned about the impact of tariffs on ad spend, according to a survey of 100 “advertising decision-makers” by the Interactive Advertising Bureau conducted in February. Of those surveyed, 45% said they planned to reduce overall ad spend.

“Due to the potential impact of the recently imposed tariffs, the 2025 ad market is expected to tighten, adding to overall economic uncertainty,” the industry trade group warned. “This impact will likely be most noticeable mid-year, with the retail, consumer electronics, and media sectors seeing the largest reductions.”

Tariff troubles

Business leaders have warned that tariffs could have near-immediate effects on prices and will “clearly” cause inflation, particularly in the short term. Even President Trump acknowledged the economic volatility in a speech to Congress on Tuesday, saying he expected “a little disturbance.”

In the post-pandemic inflationary period of 2022, many companies passed costs on to consumers, driving the price of goods up. In some cases, those companies then reinvested those profits into advertising, Kate Scott-Dawkins, global president of business intelligence at GroupM, told Marketing Brew.

“You could say, ‘Well, another period of higher inflation, maybe we’ll see a similar result,’” she said. “The question is whether there’s still room in American pocketbooks to go through another period of rapid inflation right after we just had one.”

Companies have two options when wrestling with tariffs, Sorrell said. “Will those tariff costs be passed on? Or will they be absorbed by clients, their profitability affected, in which case it will have an impact on advertising.” he said. “If they pass it on, ultimately it may cause inflation and, therefore [cause] interest rates to rise, which also won’t be good news.”

Tariffs affecting automakers could have an outsized impact on the advertising industry. The category spent $2.6 billion on linear TV ads in 2024, according to iSpot, and auto advertising represents between 7% and 13% of the major holding companies’ global revenue base, according to an estimate from the firm Madison and Wall. Automakers have received a 30-day reprieve.

Ruben Schreurs, group CEO of the media investment and analyst firm Ebiquity, which works with many of the largest global advertisers, including US automakers like Ford and General Motors, said the tariffs could spell disaster.

“I see this having the potential of becoming an economic crisis,” Schreurs said.

Big Tech companies, which absorb huge quantities of ad spend, may also see effects from the disruption. Both Google and Meta have benefited from a flood of ad spend from the Chinese e-commerce marketplaces Shein and Temu, which faced business pressures from a closed loophole that had allowed them to ship wares that cost less than $800 to the US duty-free. Trump delayed the repeal of that exception in February after a backlog of packages began piling up at Customs entry points, but other tariffs on goods imported from China remain in effect for now.

Bank of America estimates that the two companies account for between 2% and 4% of Meta and Google’s ad spend, with Temu as one of Google’s top five advertisers in terms of ad spend as of 2023, according to the Wall Street Journal. Google, Meta, and Amazon declined to comment for this story.

If advertisers do see a pullback, expect those companies to feel it too, Scott-Dawkins said, if only because “they represent such a large portion of the total industry.”

Companies across industries are already bracing for the fallout. Walmart has reportedly asked its Chinese suppliers to bear the brunt of the tariffs, according to Bloomberg, while the Japanese brands Sony and Suntory are opting to stockpile inventory in the US, Reuters reported.

The increasing tensions from trade partners could mean other less favorable business conditions for brands. The Liquor Control Board of Ontario, which controls the sale of most alcoholic beverages in the Canadian province, pulled American alcohol brands from store shelves in retaliation, which executives have signaled could pose bigger problems.

“That’s worse than a tariff,” Lawson Whiting, the president and CEO of Brown‑Forman Corp., which owns liquor brands like Jack Daniel’s and Woodford Reserve, told investors this week. “It’s literally taking your sales away, completely removing our products from the shelves.”