As brands world-wide assess the policies of the incoming Trump administration, one that stands out is the promise of tariffs. Should they happen, they will have a cascading impact on consumers and how brands engage with their customers. Until there is more clarity on how tariffs might be implemented, brands are facing 2025 with a high degree of uncertainty. This is the time to dig into your marketing playbook to ensure you continue to engage your customers and build brand loyalty.
What will be impacted?
Good question. President-elect Trump has singled out China, Mexico, and Canada in recent weeks, which could raise prices on raw materials for manufactured goods, as well as consumer goods like cars, groceries, gas, clothing, consumer electronics and appliances, and adult beverages. The number one beer in the U.S. right now happens to be a Mexican import.
Responding to a policy that is still on the drawing board is a sizeable gamble for brands. Our economy depends on supply chains around the world, as well as lower cost labor overseas, and moving all that infrastructure onshore to avoid tariffs altogether would be a herculean and likely unsustainable undertaking for most.
It’s possible the new administration will have more targeted tariffs, as we saw under the first Trump administration, and continued through the Biden administration. Until there is more guidance from the Trump administration, many manufacturers and retailers are taking a defensive position as they plan for 2025 and beyond.
Impact on consumer goods
Generally, tariffs are used to try to level an unequal playing field for industries that struggle when a foreign government floods markets with cheaper goods. The hope is consumers will simply “buy American”. In fact, there might be opportunity for some industries to profit if targeted, one-time tariffs prompt consumers to switch brands. For example, American whiskey brands could benefit if consumers shy away from Canadian brands made more expensive by tariffs.
The Tax Foundation, a non-partisan tax policy group that produces research and analysis on tax policies estimates the tariffs imposed by the first Trump administration and continued under President Biden, cost U.S. households an additional $200-$300 in tax collections annually, on average. If consumers start feeling the pain from rising prices due to tariffs, particularly in categories they interact with regularly, like fuel and groceries, they might pull back on more discretionary purchases.
Tariffs could also have a more widespread impact than the imported goods they target. In one scenario, as prices could rise in one category of foreign products, similar brands in the U.S. that don’t fall under tariffs could raise prices as well, if they believe the market will bear it. That could eventually prompt consumers to switch to cheaper alternatives, as they did when inflation was rising during the pandemic. In another scenario, countries hit by tariffs could retaliate, initiating a trade war, slowing down the economy, and possibly slowing job growth, which impacts the ability of consumers to spend.
Strategies for brands
Large and small brands aren’t sleeping on the promise of tariffs, even if it’s unclear how they would roll out. Some are expediting orders from overseas suppliers, hoping to build in a way to cushion later price increases. Large brands, like shoemaker Steve Madden, are moving production out of China.
For many brands, this is the time to control what you can control, and that is your relationship with your customers. As brands had to do when inflation was driving consumers to lower-priced alternatives, or to not buy at all, this is the time to do an inventory of your marketing tactics with an eye on how tariffs might directly impact your ability to deliver the quality and value your customers expect.
Loyalty programs offer a time-tested strategy to excite customers about your brand and incentivize them to choose your brand over a competitor. What in the new year can improve your loyalty program, or make it stand out if shoppers aren’t fully aware of it? Loyalty programs aren’t just for shoppers. Many brands find success with programs that incentivize retailers and their team members to help showcase your brand to shoppers. At Arrowhead, we have helped numerous clients develop loyalty programs that help increase in-store sales not just by offering incentives to highlight a brand, but also through knowledge-based programs that train salespeople how to best position your brand and reward them for doing so.
While the incoming president has promised action on tariffs on “day one”, we might also see tariffs roll out over several months or years if they are used as a negotiating tool. That increases the need to be able to respond quickly to market conditions. A quick-to-market (QTM) strategy can help brands spin up a campaign to incentivize shoppers without a lot of lead time and expense. The key is having a platform that gives you a template to streamline decisions, and preferably one that is agnostic to the scale of the campaign – big or small, it works because it is a templated format. Some brands might choose to build such a platform in-house, while others rely on an outside partner that has a ready-to-go solution. Arrowhead’s QTM was designed to help brands move quickly and at scale – with our compliance features built-in, so our clients are always protected, not matter which solution they choose.
If tariff’s drive-up prices, consumers will be looking for deals on their favorite products or cheaper alternatives. This could be an opportunity to attract new shoppers who would find more value in your product or offer a way to lessen the blow on any price increases for a product they already love. Coupons and rebates are proven strategies that may nudge shoppers toward your product when comparing products directly.
You control your brand strategy
Brands may try to influence economic policy, whether it’s through legislative channels, or public opinion. In the end, the only thing brands can truly mange is how they react to policies and conditions that impact the economy. Brands control the relationship they have with their customers. Evaluating that relationship now, working with your marketing team or your promotional partner can help you find ways to engage, delight and show value to your customers to help weather changes that come as a new administration plots its course for the U.S. economy.
