Tariffs, Macro Headwinds, and 2025 Digital Ad Spending

Introduction

Advertising budgets are often a bellwether for economic confidence, and 2025 is shaping up to test that relationship in unprecedented ways. Already, industry forecasts pegged 2025 as a slower year for ad growth compared to the post-pandemic highs of 2024. Now, newly imposed tariffs and escalating global trade tensions threaten to turn a soft patch into a downturn. Institutional investors need to pay attention: marketing spend is a flexible cost that gets slashed quickly when CEOs and CFOs grow nervous. We’re hearing it directly from insiders like our Expert – president of a major NYC media agency overseeing $500M in annual ad spend – that clients are tightening their belts. The combination of weaker macroeconomic signals and trade policy shocks is creating a perfect storm for digital advertising budgets. In short, what was going to be a modest cooldown in ad spend is at risk of becoming a significant pullback, with ripple effects across tech and media stocks from Alphabet (GOOGL) to Meta (META) to the ad tech ecosystem. Investors in these names (and in major advertisers like Walmart (WMT) or Procter & Gamble (PG)) can’t afford to ignore these trends.

Earnings, Macro Uncertainty & Historical Parallels

Q4 2024 earnings from digital ad leaders showed solid growth, but management tones are now cautious. For instance, Meta’s ad revenue jumped over 20% year-on-year in Q4, yet its guidance for early 2025 pointed to a deceleration (~8–15% YoY growth expected in Q1 2025). Similarly, Alphabet (GOOGL) saw ad revenues rise about 10% in Q4, boosted by strong search demand. But looking ahead, analysts are warning of macro clouds: “Macro headwinds could dampen overall ad spend growth through the remainder of 2025,” TD Cowen’s John Blackledge noted. Indeed, industry forecasts are already coming down. Madison and Wall (led by former GroupM economist Brian Wieser) just cut its 2025 U.S. advertising growth forecast from 4.5% to 3.6%. This downgrade came in mid-March, as it became clear that “falling productivity associated with reduced international trade and uncertainty” – largely stemming from tariff disruptions – would weigh on the market.

Meanwhile, macroeconomic uncertainty is palpable. CFO optimism, which got a brief lift in late 2024, has slumped in 2025 amid trade war jitters. A Q1 2025 survey showed CFO confidence in the economy falling significantly, with almost one-third of CFOs citing trade policy or tariffs as a top concern – a sharp jump from late 2024. Consumer confidence is wavering as well, given tariffs’ effect on prices. Major advertisers in retail and CPG (think WMT, KO, PEP, UL) are cautious as they see consumers pulling back on discretionary spending. This is not a 2020-style sudden shock followed by rapid stimulus-fueled recovery; rather, the pattern resembles the 2008 downturn, where marketing budgets were broadly and preemptively slashed. Historically, ad spend is one of the first costs companies cut in a downturn. In the 2008–2009 financial crisis, U.S. advertising outlays plunged about 13% in a single year. By contrast, during the initial COVID-19 shock in 2020, overall ad spend dipped a more modest ~5% before rebounding. Today’s conditions – high inflation, rising interest rates, and now trade war headwinds – are prompting behavior closer to 2008’s belt-tightening than 2020’s brief pause. Drops of 5–10% in ad spend are typical in recessions, and current indicators suggest we could be toward the higher end of that range if conditions worsen. Citi Research, for example, predicts that companies heavily reliant on advertising could see revenue declines up to 4% due to the tariff-driven pullback, even if they’re not directly hit by import fees.

Expert Profile – President of a NYC Media Agency ($500M Ad Spend)

Our Expert is the President of a leading independent media agency based in New York City, managing approximately $500 million in annual advertising spend for clients across retail, consumer packaged goods, and tech. With over 20 years of industry experience, he has guided advertisers through the dot-com bust, the 2008 recession, and the rollercoaster of the pandemic era. He’s known for a data-driven approach to media strategy and candid advice to CMOs. In his current role, our Expert has a unique bird’s-eye view of marketing budgets at scale – from how Fortune 500 brands adjust quarterly spend, to which channels get cut first when there’s trouble on the horizon. He’s been on the front lines in Q1 2025, helping clients reforecast and reallocate dollars amid growing economic uncertainty. His core insight for this Deep Dive: “2025 was already going to be softer than 2024 for advertising – and now tariffs plus macro headwinds are compounding the slowdown.” His perspective is informed not just by sentiment, but by hard numbers: he’s in constant dialogue with CMOs and CFOs, and he’s seeing live campaign data across search, social, and programmatic channels. Below, we conduct a Q&A with our Expert to unpack these themes, backing up his viewpoints with market data, earnings commentary, and relevant public market implications.

Q&A – Tariffs, Trade and the Ad Spend Squeeze

Q: 2025 was expected to be a slower year for advertising anyway. What’s changed in the outlook recently?

Even before tariffs entered the picture, we were projecting a softer 2025 compared to 2024. A lot of brands had already front-loaded spend in 2024 when the economy was recovering and consumer demand was solid. By late ’24 we saw signs of fatigue – e.g. some social media ad prices leveling off and fewer “big splash” brand campaigns in the pipeline for 2025. The absence of major cyclical events (no Olympics or U.S. elections in 2025) also meant less incremental ad spend boost. Now add the tariffs and trade tensions, and the outlook has shifted from “soft growth” to “potential contraction.” Clients who were planning, say, a +5% increase in budgets are now flat or down for the year. Industry-wide, you see this in the forecasts: that Madison and Wall report cut US ad growth to just 3.6% for 2025, down from 4.5% – specifically because of global trade frictions and uncertainty. In other words, what was a modest growth year could very well turn into no growth at all if companies get more cautious. There’s a growing expectation that 2025 is about doing “more with less.”

On top of that, macroeconomic headwinds (rising interest rates, high energy costs, etc.) are pressuring consumers and therefore marketers. We shouldn’t overlook inflation either – costs are up across the board, so even maintaining ad spend in nominal terms might translate to fewer real advertising impressions or lower reach. In short, the downshift from 2024 to 2025 is becoming more pronounced. One telling sign: some of the biggest clients in retail and CPG who increased marketing spend in 2024 are now freezing or trimming budgets despite still aiming for revenue growth. They see storm clouds in the economy and they want to lock in margin protection early. This caution is something we haven’t really seen since 2008–09 – during COVID, the cuts were swift but then many brands quickly readied additional spend for the rebound; this time, no one is talking about ramping spend back up yet.

Q: How exactly are tariffs and global trade tensions putting pressure on ad budgets?

Tariffs act like a tax on the whole economy, and that has a cascading effect on advertising. Here’s the chain reaction: Tariffs on imports raise input costs for businesses and prices for consumers. That dents consumer confidence and spending power – people become more cautious buying non-essentials if everyday goods get pricier. In turn, companies, especially in consumer-facing sectors, get nervous about their sales outlooks. That’s when CFOs start telling CMOs, “We need to tighten our spend.” Marketing is often the first to feel the knife when cost pressures rise, because unlike fixed costs, ad budgets can be dialed down quickly.

We’re seeing this now because trade tensions are back in a big way in 2025. For example, the U.S. recently imposed tariffs on key imports (from Chinese electronics to European pharmaceuticals) and trading partners responded in kind. Whole categories like automotive and consumer electronics are bracing for slower sales – auto manufacturers, in fact, are huge advertisers (7–13% of global ad revenues for major ad agency holding companies come from auto companies), so if tariffs hit auto supply chains and sales, ad spend from that sector will fall.

Another angle is pure economic uncertainty. CFOs hate uncertainty. The mere threat of an escalating trade war is enough for many finance chiefs to impose precautionary budget freezes. In fact, according to Gartner data, 62% of CFOs are planning to cut overall SG&A costs as of Q2 2025, and marketing is often the first target. There is confirmation of this directly from client finance teams who’ve shared that “we need to find efficiencies this quarter” because they’re unsure how tariffs will inflate costs in the back half of the year.

There’s also a psychological factor: trade tensions create negative headlines and CEO anxiety. Advertising thrives on confidence – when businesses feel bullish, they invest in marketing; when the mood turns anxious, advertising feels discretionary. One tangible data point: a recent Interactive Advertising Bureau (IAB) survey found 94% of U.S. advertisers are concerned that tariffs will lead to cuts in ad spending, and nearly half (45%) said they planned to reduce ad spend because of tariffs. These cuts often manifest around planning cycles – e.g. many advertisers are revisiting their Q3/Q4 2025 plans right now and trimming the fat, citing “trade uncertainty” in their internal memos. In summary, tariffs squeeze consumer demand and corporate margins, and marketing budgets end up as the release valve to protect profitability.

Q: What pushback are CMOs getting from CFOs and CEOs, and how is that affecting marketing plans?

A: There’s definitely more CFO scrutiny on marketing spend in 2025 than we’ve seen in years. One CMO of a global consumer brand half-jokingly said, “My CFO is my new boss.” That captures the mood. CFOs are in cost-control mode and they view a lot of marketing spend as variable and negotiable. There are questions like, “If sales are slowing, why aren’t we cutting the ad budget proportionally?” or “Show me the ROI to justify every dollar this quarter.” This mindset is reinforced by top-down directives: Many CFOs (and CEOs) remember how in 2020 they slashed spend overnight when COVID hit, and the sky didn’t fall for the business – in some cases margins even improved short-term. So there’s a belief that they can do it again (albeit the situations are different).

The result: CMOs are being forced to defend their budgets line by line, and many are preemptively trimming to show alignment with the company’s cost discipline. Gartner’s recent polling backs this up – a majority of CFOs intend to cut SG&A and marketing is the most likely department to face cuts. About 3 in 5 of client companies have enacted some kind of marketing spending freeze or cut. Often it’s a modest cut (5-10%), but it’s happening broadly. The first place they cut is brand marketing (things like top-of-funnel campaigns, experimental media, big sponsorships). Those are easier to pause without an immediate hit to sales. One CFO literally told a client, “We’re going to trim the ‘nice-to-haves’ – big brand campaign can wait until next year.”

Another dimension is short-termism: CFOs are asking marketing to focus on this quarter’s targets. If the CMO comes with a plan that says “We need to keep investing in brand to ensure long-term equity,” the CFO’s likely response is, “That’s fine, but not on this quarter’s budget.” This translates to shifting resources to promotions or performance media that can drive immediate sales, and away from longer-term brand lifts. CFOs are delaying approving annual marketing commitments – for example, some clients postponed their upfront TV ad commitments because finance wanted to keep flexibility to cut later in the year if needed.

So the pushback is real: 62% of CFOs globally say they plan to cut expenses this year in areas like marketing. CMOs feel that pressure. Many are now frequently updating CFOs on campaign performance and contingency plans (“If revenue drops by X%, here’s the chunk of marketing spend we’ll pull”). In practical terms, this means marketers are biasing every decision toward efficiency and provable ROI. It’s a shift in mindset – from the offense of the past couple of years, back to a defensive posture.

Q: Which marketing channels or campaigns are getting cut first? How are brands shifting between brand-building and performance marketing?

A: We’re seeing a clear pattern: brand-building and upper-funnel campaigns are on the chopping block, while performance marketing and lower-funnel channels are being protected (relatively). In practice, that means big glossy brand awareness campaigns (TV, out-of-home, brand sponsorships, even some social media branding efforts) are being delayed or scaled down. For instance, a consumer goods client decided not to go forward with a planned TV blitz around a new product launch, opting to launch with a lean digital-only strategy instead. The rationale: TV is largely a broad reach, long-term play – hard to justify when every dollar is under scrutiny.

On the flip side, performance-based channels – think paid search, retargeting, and certain programmatic digital campaigns – are holding up better. These are the channels where a CMO can say to the CFO, “If we spend $1, we get $5 in sales – here’s the data.” Those are harder to cut, because turning them off risks immediate sales volume. A survey by the IAB reflected this pivot: 35% of advertisers said they plan to increase focus on performance-based campaigns as budgets tighten. It’s a reallocation game – money is flowing out of general branding and into things like search ads, e-commerce media, and other ROI-measured media.

As recent survey data shows, social media advertising and traditional media are getting hit hardest in these budget revisions. That aligns with what we’re hearing: a lot of social media spend is actually upper-funnel or mid-funnel for many brands (aside from direct-response social ads). So if a CMO has to cut $10 million, they might slash the Facebook/Instagram brand campaign first – which impacts players like Snap, Pinterest, and even Meta’s branding-focused ad products. In fact, one might assume social would be protected since it’s digital, but not all digital is performance. Much of social is considered less of a sure thing in terms of conversions, especially after Apple’s privacy changes; so it’s getting lumped in with “nice to have” spend at some firms.

CTV (Connected TV) and online video are more resilient – likely because many brands have shifted a lot of their TV dollars into streaming platforms which offer better targeting. CTV also can straddle brand and performance: you can run targeted, measurable video ads on Roku or Hulu and get data back, which appeases the ROI concerns. Indeed, companies like Roku or ad-tech firms enabling CTV (like The Trade Desk, Magnite) might fare relatively better if marketers keep CTV budgets intact or growing.

Paid search is arguably the least cuttable channel right now. It’s the workhorse for e-commerce and lead generation. Brands might complain about Google’s rising cost-per-click, but they’re not pulling out of search because it delivers last-click sales. Some clients have said “We’ll cut everything before we cut Google Ads.” Data backs this up: the IAB found search and digital audio were at the bottom of the cut list. So Google’s core search business (and Microsoft’s Bing Ads to a lesser extent) could remain relatively stable even if overall ad budgets shrink.

However, it’s not all rosy for performance media. We are seeing some belt-tightening even there – for example, pulling back on marginal keywords or pausing always-on campaigns that aren’t hitting ROI targets. And higher costs per click (CPCs) are a headwind: search CPCs have been climbing, and Microsoft’s search CPCs are also rising. So even if budgets stay, advertisers might be getting a bit less volume for the same spend.

In summary, brand-building initiatives are being deprioritized – you’ll see fewer big branding pushes this year – and dollars are shifting to direct, measurable channels. It’s a very performance-centric mindset: every campaign is expected to justify itself quickly.

Q: Do you expect any digital channels to hold up better than others (for example, will search advertising weather the storm better than social media)?

A: Yes, we anticipate search advertising to be relatively resilient, whereas some social media and display channels will bear the brunt of cuts. Search is usually the last to get cut for reasons already mentioned: it’s intent-driven, bottom-of-funnel, and often directly tied to revenue. Even if consumers buy less, advertisers want to capture the intent that is out there. Think of a retailer like Amazon – their sponsored product search ads business might actually keep growing because brands selling on Amazon will fight harder for each consumer search that happens, even in a slower economy. Amazon’s ad platform is very ROI-focused, so it might see continued inflows (though growth could slow if overall retail sales slow). Similarly, Google and Microsoft (through Bing and LinkedIn ads) should see search and certain targeted ads hold up. The numbers from late 2024 were encouraging: Google’s search ad spending was still growing ~10% YoY in Q4 despite all the AI noise.

On the other hand, social media platforms that rely on ad spend for revenue may face more pressure. We’ve already seen softer demand in some social ad auctions. Snapchat, for instance, issued cautious outlooks when Apple’s privacy changes hit, and now with macro headwinds, a platform like Snap that skews toward brand budgets or experimental buys could get disproportionately hit. Pinterest is another – a lot of its ad revenue is retail and CPG brands doing upper-funnel “inspiration” marketing. Those dollars can vanish if CFOs mandate cuts. Meta (Facebook/Instagram) is somewhat mixed: they have a huge direct-response advertiser base (small businesses etc. that will keep spending if ROI is there), but they also have big brand advertisers who might cut back on things like video ads on Facebook. The net effect could be slower growth for Meta – some forecasts expect Facebook’s ad revenue to rise only ~1–2% in 2025, essentially flat, which implies they’re bracing for a tough environment.

Programmatic display advertising on the open web is likely to feel pain too. That affects the ad tech intermediaries – companies like Criteo, PubMatic, Magnite, The Trade Desk, etc. When big advertisers cut budgets, a lot of that reduction shows up as fewer programmatic buys (fewer impressions bid on, or lower bid prices). Typically in downturns, the scatter market sees pricing deflate. Good news if you’re a buyer with cash, bad news if you’re a publisher or ad tech platform seeing lower volumes.

Within programmatic, retail media networks (ads on retailer sites) and other high-intent channels might buck the trend – they’re closer to the point of purchase, so brands are trying to maintain those.

Search also has some new variables: the rise of AI chatbots in search (like Bing’s AI chat or Google’s Bard/SGE features) has introduced questions about the future of search ad inventory. In the short term (2025), there isn’t expected to be a huge impact – Google is rolling out its AI search features slowly, and advertisers are still figuring out how it affects clicks. So while AI is disruptive, it’s not causing advertisers to leave search; they might adapt creative or keywords, but the budgets remain.

If anything, search ad demand is high enough that CPCs have been rising, as noted earlier. That indicates robust competition for search placement, even while other channels soften. So yes, search (including e-commerce search on Amazon) should hold up best, followed by certain targeted digital video/CTV. Social media and open web display are more at risk. Traditional media (linear TV, print, etc.) will likely see continued declines.

In terms of company impact: Alphabet (GOOGL) is expected to fare better than, say, Meta (META) in relative ad growth, because Alphabet is more weighted to search. Amazon (AMZN) might still post ad growth since its ads tie directly to shopping outcomes. Microsoft (MSFT) is interesting – its Bing search share is modest, but any resilience in search helps, plus LinkedIn’s ad business, which is mostly B2B and hiring-driven, could face macro pressure as hiring slows. Twitter (rebranded X) is a question mark – not publicly traded now, but from an industry perspective, a lot of big advertisers already cut spend on that platform due to other reasons; with budgets tight, they’re not rushing back.

The pecking order of resilience is clear: Search and retail media > CTV/online video > social > open web display > traditional.