Podcast summary

The conversation discusses the impact of tariffs on the US economy, particularly the potential effects on businesses and consumers. The speakers analyse the long-term implications of tariffs, including the potential for import substitution, changes in consumer behaviour, and the need for businesses to reevaluate their processes and product lines. They also highlight the importance of staying informed on economic developments and proactively adapting to the changing market conditions. 

 

Transcript

Transcripts are auto-generated.

Kiran Kapur (00:04):
Hello and welcome to Opinionated marketers with Charles Nixon and me Kiran Kapur. Charles, we've sort of avoided talking about tariffs and what we need to do with tariffs, but I think the time has come and I understand you've written a thesis on this. So perhaps you could start with the point of tariffs.

Charles Nixon (00:21):
My original degree was on economic warfare and specialised in the use of tariffs From the point of view of the US versus interesting those days was Japan. The subject basically is a Macroeconomic one. So the aspect of putting a tariff on is not necessarily a short term win. It takes a long time for these things to have effect. The stockpiles of products that are already in America won't be subject to them, and therefore they will be sold. They will bring in new products from different market. So there will be a big impact for other countries who will look to get around the tariffs and sell their goods. So there is an impact on the macro level for countries with lower tariffs. Though I see this morning that some of those countries have had very major tariffs put on us. I think it was 3000%. It's an area which is fraught with difficulties because it takes a long time, as I say.

(01:24):
And the main impact that Trump seems to want is to create import substitution industries. So basically, American companies will make the products which were otherwise brought in by Chinese, and because they will now have tariffs on them, they will be able to sell at a competitive rate even though their costs of production are higher in the US than they are in China. That takes time. Business decisions have to be made plant invested in people recruited capacity expanded. There are some big announcements over the last few weeks of companies saying that they are going to do this. Reality will be that it will take several years. The impact on the economy will happen more or less straight away into terms of the prices going up for imported goods that are being brought in with just in time delivery as opposed to stockpiled. And so we now have the prospect of rising inflation in America.

(02:23):
That in itself will add to the pressures to change the policy. And if he's using it as a bargaining tool, that increases the pressure for him to renege or to change the tariffs on the basis that he can get a concession out of the company. That's a country that's been tariffed. The other aspect, I suppose, is that it does make you reassess the requirements for products. So there becomes the issue, which is that, do I really need this type of product or this many products and consumers then start to change their buying. And that in itself is something that's unpredictable, but can bring about some rather interesting opportunities for marketers.

Kiran Kapur (03:07):
It is interesting. I mean, I think one of the things that people talk about with the tariffs is that it's likely to cause a recession. And one of the questions I know I'm getting from the students is, what do companies do in recession? Many of them don't remember a previous real recession and now think that this is what's coming. And I think one of the things as you said is that you reappraise everything. So if you're running a business at the moment, if you're working from business at the moment, now is a very good time to be sort of just polishing up all the processes, having a really think about, do we need this particular products? Do we need this product line? Can we change a supply chain? Can we improve a process? We've got AI around, can we use other things that will help us to just make ourselves more efficient? And that is how you prepare for a recession.

Charles Nixon (03:54):
Yes, I think it'll be quite an interesting stimulus for the takeup of AI in areas where it can be immediately impactful in terms of reducing costs. Rationalisation, product lines is an interesting one. I note that Tobler owner decided to stop making dark chocolate versions, much to my chagrin because I liked them, but generally speaking, they don't sell. So why carry on marketing them and distributing them? Money can be saved in limited revenue lost. So yes, a rationalisation, a consideration of do we need to do this? Do we need that range of products? These are things that we should always be doing, but they aren't always something that's at the front of mind. A recession or a potential recession or change in the economics brought about by tariffs does bring this about. So we could see a very interesting time as companies innovate and bring about those changes which they've had on the back burner for some time.

Kiran Kapur (04:49):
The other thing that does come about is actually people do start [thinking]. It can affect consumption, it can make people think about the way they consume it can make companies think about other things, and the idea that it might actually improve some of the environmental side maybe could be a good outcome from this.

Charles Nixon (05:07):
Yes, that's a very good one because you start to think about your air miles, the carbon footprint of foods, and you start to look at whether or not it might be better to buy local. That's the idea. It doesn't always work out that way from an environmental point of view, because there was this argument recently about whether or not apples from New Zealand are less carbon or more carbon neutral than apples from the uk and they'll leave that one for another time. But the element I think is that there will be changes and there will be reaction to this sort of economic stimuli if you like. And I think that's a good thing from a marketer's perspective. It opens up the marketplace, it frees it, and we start to see opportunities as well as threats

Kiran Kapur (05:49):
As we usually end up saying. It's a question of keeping your eye out, your ears to the ground, your eyes on the news, please, reputable news source, not some obscure person on YouTube necessarily. Try and find reputable sources. But then just polishing everything up internally on the processes and products and everything else, and just being poised and ready as marketers always should be for the next big opportunities.

Charles Nixon (06:17):
The element that I would add, and I'm only hesitant here because I know most marketers don't like to get a calculator out, but it's actually to start to look at the financials. I can remember a time before the general agreement on gat, on Tars and trade, which is called gat, and then superseded by the World Trade Organisation where international trade was governed by multiple country arrangements. We're now looking at bilateral arrangements in many instances, which will put quotas and tariffs on most traded products, and this is going to be the future. As we moved out of the eu, we were no longer covered by that. We now have multiple arrangements with countries all over the world. Trump is trying to do similar thing with America, and America is pulling out of the World Trade Organisation, I believe certainly isn't necessarily taking it as seriously as it used to do. And the result of which is there will now be lots of multilateral situations where tariffs will be applied and it will be important to consider on a fairly regular basis what that does to your exports. It also will have effect on imports coming in and therefore their components, then the price of the product that you're going to sell. So looking at products, tariffs is an ongoing thing for the future.

Kiran Kapur (07:36):
Marketers and calculators are not always a match made in heaven, but it is as scary as it sounds.

Charles Nixon (07:42):
It's worse. [laughter]