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

In episode #2949, Eric Siu and Neil Patel discuss the impact of tariffs on marketing and businesses, both short-term and long-term economic outlooks. They explore the broader economic impact on businesses and emphasize that companies able to demonstrate quick ROI in their marketing efforts can still find success despite the downturn. TIME-STAMPED SHOW NOTES (00:00) Impact of Tariffs on Marketing (08:00) Short-Term vs Long-Term Economic Outlook (17:03) Recession and Its Effects on Marketing Prefer single topic episodes? Head over to our YouTube channel. To suggest a topic, go to https://www.marketingschool.io. For more content from Eric and Neil, check out Eric’s Leveling Up with Eric Siu YouTube channel and Neil’s Neil Patel YouTube channel. Connect with Us: Single Grain << Eric's ad agency NP Digital << Neil’s ad agency X @neilpatel, @ericosiu Instagram @neilpatel, @ericosiu Drop Us a Review If You Enjoyed the Episode!

• 0:00Speaker 00

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• 0:43Speaker 00

  So you have one around businesses in general. And I think our high level on this, and 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. So, 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 gonna 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 US goods.

• 1:27Speaker 00

  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. I don't know if that's going to happen. And obviously, a lot of business people are in uproar right now, especially if you're in e-commerce right now, you're in uproar, because you're trying to figure out what to do, because you know, you offshore to like Vietnam or China, for example.

• 1:57Speaker 01

  Yeah, um, clients are gonna 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 a thousand bucks. If you now had to pay a thousand five hundred dollars for that same iPhone, even though the product is amazing, you'll reconsider. If you're gonna buy it, you may not buy it as frequently to upgrade your phone. You 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 uh blessed with unlimited money. Even some of these billionaires that you see on the Forbes list.

• 2:40Speaker 01

  When they buy corporations, a lot of times they gotta sell stock to pay their bills. And none of us are those people. So for the average consumer, it really is gonna hit hard.

• 2:49Speaker 00

  Yeah, and I think maybe this goes into um this kind of goes hand in hand. So talking about this this Trump playbook, right? And neither of us are trying to be political here. But what do you think? How do you think the Trump playbook is working for the economy right now? Do you think? Do you think it's going to be good for the economy long term? And what do you think it's gonna be like for the short term?

• 3:08Speaker 01

  Short term, I think it's gonna be crap. It has been for Q one. I don't think Q two is just gonna actually 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. The first day when they said that they were gonna do it, it was after market closed. 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. Uh, we've suffered lots of pain over decades. Um, these are the tariffs and this is what people have to end up paying.

• 3:54Speaker 01

  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

• 4:36Speaker 01

  but I don't think he wants to be known as a president who tanked the economy

• 4:41Speaker 00

  when do you think the economy goes good again if you're to guess we're not economists but if you're to guess

• 4:46Speaker 01

  I don't think this year is going to be great um and you could say oh it's really good at the second half of a year I don't think things recovered 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

• 5:03Speaker 00

  yeah I think 2026 maybe probably for sure in my mind at least the the second half um is actually also when a lot of investors are looking at oh things are going to hopefully rip um 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 um so this guy Bill Burt height 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 um Howard Lutnick was prone and you you got Elon Musk right and all these other people um and so

• 5:41Speaker 00

  we do also know that the 10 year rate is down to it's a three handle now meaning that it went from around 4% now it's at 3 right so it's coming down and if we're looking at real time inflation it's currently below 2% but real time that's only like you know you know very recent right

• 5:56Speaker 01

  um where do you get real time inflation from so everyone can

• 6:00Speaker 00

  I this is from Bill Barr. I think you have to just Google real time inflation. There's like calculators and things like that. Um, and so also keep in mind too, we also have what seven trillion in expiring notes. Um, and also are the the debt that we have to is is very large, right? Like what 36 trillion or something like that?

• 6:18Speaker 01

  Yeah.

• 6:19Speaker 00

  Um, and so Trump has mentioned this before, but he like someone asked him 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, you know, do something, he he will probably listen. Um, and I I think this is this is also his way of forcing the Fed to cut rates, right? And then get quantitative easing going again, quantitative easing, sorry. Um, hopefully Doge can cut, I don't know, a trillion, 1.5 trillion. Um, and there's all this other stuff going on, right? But the point of saying all this is that. Um, I think short term pain and Scott Beson has said this himself to the the Treasury Secretary. He's like, there's going to be short term pain. Long term, it's setting us up because you you're going to have all these gains coming from from AI in the future, hopefully.

• 6:59Speaker 00

  Um, and robotic productivity. So I'm optimistic long term, but in my mind, and I've talked to some other people, I'm I'm like. You know, we've been kicking the can down the road for a very long time. Usually 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? That 2020, right when it happened, we had the two quarters 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.

• 7:30Speaker 01

  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.

• 7:53Speaker 00

  Yeah. Yeah, I I think it's and 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?

• 8:07Speaker 01

  Uh, yeah, and then they started really going up fast. It wasn't slow and gradual like we're used to.

• 8:13Speaker 00

  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? So you have inflation happening and low productivity.

• 8:25Speaker 01

  Is stagflation, isn't that high inflation and?

• 8:28Speaker 00

  High inflation, low productive, low productivity.

• 8:31Speaker 01

  Yeah, ignore the what Eric said on interest rates, he meant inflation.

• 8:34Speaker 00

  Yeah, sorry, sorry, my bad. But look, I think it's gonna be, it's gonna affect marketing. I think it's going to affect businesses overall. And you know, maybe I have a next topic right after this, how recession will affect marketing. But you know, the Atlanta Fed is already putting in a negative three point five percent GDP and this stuff gets revised all the time. So I think that's for Q one already, for Q two, 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 gonna 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 gonna be favorable for us, but I do feel like it's been overdue.

• 9:17Speaker 01

  I can't look at marketing as a whole and saying I'm optimistic anytime soon. But if I look at my business specifically and I'm evaluating numbers, we're we're getting kicked. The sad part about my business, and this is also a good part, is in two thousand, uh, twenty twenty two. 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.

• 10:00Speaker 01

  When I look internationally, we've grown a lot and it's our fastest uh, growing segment of our business. But with all the tariffs, the part of our business that's getting hit the hardest right now is international. It used to be the US used to get hit the hardest, now it's international is getting hit the hardest.

• 10:20Speaker 00

  Do you think it's fair that we put these reciprocal discounted tariffs on these other countries?

• 10:26Speaker 01

  I was talking to, uh, or short answer is, I do think it's fair.

• 10:33Speaker 01

  But you know, long answer is I was talking to a buddy named Orlando and he used to like manage 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.

• 10:54Speaker 00

  You know who that guy is?

• 10:56Speaker 01

  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.

• 11:02Speaker 00

  Yeah.

• 11:03Speaker 01

  But when I watched the 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% ish. I could be off.

• 11:17Speaker 00

  The tariff rate?

• 11:18Speaker 01

  Yeah. He was like, we've been charging you 25% for decades.

• 11:21Speaker 00

  Yeah.

• 11:21Speaker 01

  He's just like, and he's like, why didn't America charge? US or why didn't America charge Sweden taxes for ages? Uh, 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 I keep saying that on TV. And when he announced him, 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.

• 12:06Speaker 00

  I think so. The quote I like to go back to all the time from Thomas Sowell is there are no solutions, only trade offs. 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? Cause that's, that's business. I'm trying to bring my costs down. Um, but that has not been good for the United States, um, overall where, you know, all the chips now are offshore. So we're trying, I think bringing the chips back is going to be a good thing. Um, I think try to bring as many jobs as we can back and you're right, there's probably going to be a lot of automation too, probably next five. Ten years or so, but I do think the message is correct. I think we should be looking inward more.

• 12:48Speaker 00

  And I will say the one thing that China does really well, that I think the US is is learning is China focuses on itself. Right. And I think we've been too focused outward. We need to focus inward. And so, again, no solutions, there's no solutions, only trade offs. I think none of these solutions are perfect. But we've gotten to this point. Now we need to do something in order to get us out of, you know, these predicaments. Frictionless Growth Marketing hosted by Sonya Thompson is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Frictionless Growth Marketing hosted by Sonya Thompson shows how modern brands grow by removing the friction in their marketing and customer experience that pushes customers away every single day, often without leaders even realizing it. Each episode delivers practical insights, real brand examples, and conversations with marketing leaders,

• 13:32Speaker 00

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• 13:44Speaker 01

  But 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 BYDs, I believe it's called BYD. You're seeing them more globally, like when I go to Brazil or places like that.

• 14:05Speaker 00

  We were in Germany, we walked right by a BYD, BYD studio, yeah.

• 14:08Speaker 01

  Yeah. And then TikTok, right? Bydans is, they're doing stuff globally. But typically you're seeing more corporations like Baidu where it was China and solely focused on China. You 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.

• 14:53Speaker 01

  And even though they're making money in Vietnam, they're paying taxes on that money in the United States when they repatriate. Not 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.

• 15:35Speaker 00

  Yep. The one thing I'll say to this, and then we could move on to how this will, this tariffs will affect marketing, or how a recession will affect marketing. Um, I 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, um, the point is, both sides have been saying this, that we need to kind of get our fair share. Um, and by the way, I, I, I think Trump likes to do deals. He's good at negotiate with all these people. I don't think it's, you know, I, I think 96% getting charged, um, Vietnam's charging us that, right? We're charging 47%.

• 16:20Speaker 00

  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.

• 16:39Speaker 01

  I, 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 techn- technology, I'm using the wrong terminology here, but the world wasn't centered around technology. I understand it was booming at that 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.

• 17:05Speaker 00

  Yep.

• 17:05Speaker 01

  In today's world, how much money are we making globally from tech? When Google makes money in Vietnam, 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. I 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 than the rest of the world, I would say, from all the technology side.

• 17:50Speaker 00

  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 eight hundred billion. But China's surplus with us is 1.1 trillion. And so, you know, I think at the end of the day, like, it's, um, we should negotiate this stuff. So let's talk about this.

• 18:10Speaker 01

  Totally agree.

• 18:11Speaker 00

  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.

• 18:36Speaker 01

  Yes, and I was talking to a buddy of mine who has one of the largest, uh, uh, investment banks, private investment banks in the United States called Cascadia. And, you know, 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. A 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, um, you know, 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,

• 19:17Speaker 01

  "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.

• 19:25Speaker 00

  Yep. I think we are going to see a even bigger rise in cash flowing startups. So what I mean by that is solo founders or teams of like five to 10 people. So I think we're going to, 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 it's, 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, I think about Peter Levels that has that, that, that airplane game, right? He acquired like a ton of, he had like 74 million impressions or something like that. So I think we're going to see a lot more of that.

• 20:09Speaker 01

  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.

• 20:46Speaker 00

  Dude, I, it's interesting. I, I spoke to, 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." Wow. In the last couple of 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, 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're triple down. Just like when you, you, you buy stocks and when things are not going so well.

• 21:23Speaker 01

  Yes.

• 21:23Speaker 00

  Yeah. Anything else?

• 21:25Speaker 01

  No, I think that's pretty much it for the economy.

• 21:29Speaker 00

  Yeah. But anyway, that is it for today, guys. Please don't forget to rate, review, subscribe and we'll see you tomorrow.