Latest / Communication Breakdown / Of Course You Realize, This Means (trade) War!

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Of Course You Realize, This Means (trade) War! · Communication Breakdown

• 0:00
  Welcome back to Communication Breakdown, a new podcast from the Observatory on Corporate
• 0:07
  Reputation.
• 0:08
  Thanks for joining us.
• 0:09
  I'm Steve Dowling in Silicon Valley.
• 0:12
  And I'm Craig Carroll in New York City.
• 0:14
  Each week Steve and I take the look at the strategies companies are using to shape headlines
• 0:18
  and sometimes save their skins.
• 0:19
  It's a post game show for PR Proves.
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  This week, the trade war takes hold and companies dig in for economic uncertainty.
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  Those on-again, off-again tariffs against Canada and Mexico were on-again this week and
• 0:34
  then perhaps predictably off-again once the markets and critics weighed in.
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  Now it's not in my habit to agree with the Wall Street Journal, but Donald, they point
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  out that even though you're a very smart guy, this is a very dumb thing to do.
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  Canadian Prime Minister Justin Trudeau on Tuesday morning talking Trump's language and pushing
• 1:00
  his buttons once the tariffs kicked in, 25% on nearly all imports from Canada and Mexico
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  prompting both countries to retaliate.
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  Hours later, as markets suffer to second day if Steve declines, the Trump administration
• 1:13
  appeared to be looking for an off-ramp.
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  With Commerce Secretary Howard Lutnik already talking about ways the U.S. might grant
• 1:20
  some temporary relief for certain products.
• 1:24
  Trump and Kim have been talking with American car makers in the run-up to the tariff deadline.
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  On the day the tariffs went into effect, the CEO is a four general motors and Stanlantis
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  got on a phone call with the president to make the repeal directly.
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  That night, in his address to Congress, Trump vowed that more tariffs on more countries,
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  including China, would begin in April 2nd.
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  Tariffs are about making America rich again and making America great again and it's happening
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  and it will happen rather quickly.
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  There'll be a little disturbance, but we're okay with that.
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  It won't be much.
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  No, you're not all.
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  But by Wednesday, the tariffs were on pause, at least for automakers, at least for a month,
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  and Trump seemed to invite other industries to let them know if they should be exempt
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  as well.
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  On Thursday, Trump delayed the broader Mexico tariffs as well.
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  That climbed down came after a call with Mexican president Claudius Shinebop.
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  So over the past month, Trump has twice threatened and twice delayed tariffs, allowing them to
• 2:29
  go into effect once, while signaling more delays and exemptions may be there for the asking.
• 2:35
  Greg, we've made much out of Ford CEO's Jim Farley's comments in February that Trump's
• 2:39
  trade policy is sowing what he called costs and chaos.
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  For shadowing that little disturbance, Trump says he's okay with, though his actions
• 2:47
  may say otherwise.
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  We don't know what Farley said on their call or what Mary Barra or Stellantis chairman John
• 2:53
  El-Con said for that matter.
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  But the outcome on Wednesday seems to reinforce the conventional wisdom about this White House,
• 3:00
  that private appeals from business leaders are more effective than public ones.
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  Now that we have a few weeks to reprieve, how are you thinking about the ways big business
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  is talking about this trade war?
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  Well, Steve, what we're seeing isn't just a trade war.
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  It's a chaos management war.
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  For CCO's, this isn't just about messaging, it's about critical business decisions that
• 3:21
  will shape their companies for years.
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  Right now, companies aren't just asking, you know, how do we talk about this?
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  They're asking, how do we survive this?
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  And so far, as of this morning, I've counted up to like several different strategies they
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  are in play.
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  Number one, supply chain diversification is, you know, the question, can we stay the course?
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  Are we going to shift suppliers to avoid future risk?
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  You've got, you know, lobbying and corporate diplomacy, you know, the question of whether
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  we're going to fight this publicly or privately.
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  The third is pricing and consumer strategy.
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  Do we pass the cost of consumers or eat the hit to stay competitive?
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  Others are talking about how they're engaging in strategic stockpiling, such as, you know,
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  do we buy inventory now before things get worse?
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  The fifth is the trade route optimization.
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  The question of whether they rejoulder logistics maps to avoid any tariff heavy zones.
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  Investing in automation technology, obviously that's not surprising, you know, the question
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  of whether we double down on automation, does that labor costs?
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  And then also not surprising given that, you know, this is CCOs, how are we thinking about
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  communication, reputation management?
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  How do we control the story before it controls us?
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  So, yeah, they're communicating, but I think the, the big thing is they're also making
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  high-stakes bets about where this is all going ahead.
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  And the company to get it wrong, I think it's just not just that they're losing the messaging
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  or they're going to lose market share.
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  Interesting list of strategies there.
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  I think some of them, the pricing strategy, at least I think, is kind of a no brainer, though.
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  I don't think there's a lot of taking a hit to profits on this one.
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  Everything I've heard is that these costs are going to be passed along to consumers one
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  way or another.
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  That's how it works.
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  And that strategic stockpiling sounds like some of that has already been going on and that
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  may be exacerbating the trade deficit in places.
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  Yeah, I think what's different about it here is that some companies I've talked to,
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  their traditional approach, is just in time management, right?
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  And this is saying just in time is not going to work in this case.
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  Right.
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  And they're trying to get ahead of that, the tariffs taking effect.
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  I found it interesting.
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  The companies do seem to just be finding their voices on this one like this week.
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  You saw a target, best buy, hasbro and others, and it's earning season.
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  So some of that is just because the topic has become unavoidable.
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  But to your point about lobbying and corporate diplomacy, you know, private versus public,
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  it's something that we've talked about on this podcast.
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  My question is where was the anti-tariff campaign before this took effect?
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  Think about all the regulatory and legislative issues we see ads for in newsletters like
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  Politico and Axios stuff that's important to one industry sure but completely irrelevant
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  to a lot of other readers.
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  But things like who's creating jobs, who's protecting teens, where were the explainers
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  on tariffs for as broad a swath of the US economy that knew it would be in the path
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  of the tariffs if they became real.
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  Even if you were banking on it just being a bluff, I'm surprised no one bothered to at
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  least try to rally the public.
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  I've got a great answer from that just actually coming out one of one of my calls this morning
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  with one of the senior leaders who was actually spent the past couple of days on the hill talking
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  about this.
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  And the issue was that look, there's a lot of smart people out there in this role of corporate
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  affairs, both on the side of companies and both on the side of legislators.
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  So many people thought that of the tariffs was just figurative language that Trump was
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  not serious, that it was just a metaphor and maybe his typical path of exaggerating.
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  So there's surprisingly a few people who thought, "Ah, we'll just kind of wait it out, maybe
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  it's a matter of which is going to happen first."
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  tariffs or, "Ooo, donut."
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  Well, I can totally see there's so many reasons not to take it seriously, right?
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  First, and we're seeing this play out again this week.
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  We may see it play out again in a month.
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  Trump always seems to find a way to back down.
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  So why worry?
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  The second thing I think is big companies seem to be getting exemptions when they ask for
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  them and Trump has now signaled that they will continue to.
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  So why worry?
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  Third, if you endure this and you get an extension, let's say on the corporate tax cuts that
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  a lot of business want, why worry?
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  From my point of view, the reputation concern is not necessarily on the government side here.
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  I think it's on the consumer side because prices will go up.
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  In categories, people don't expect, as you offset, other cost increases because of the tariffs.
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  But I think the reputation risks on the consumer side, the potential risks are longer reaching,
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  because it's going to be hard to bring consumers back if they feel like your prices are too
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  high.
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  And as we'll talk about later, in countries whose consumers are becoming more loyal to local
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  brands as a result of this trade war, they may find alternatives locally that they like
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  better and stick with them.
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  So I think in the meantime, I would rather be known for fighting for lower prices.
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  That's one way, but humanize the tariffs.
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  I was really disappointed to see there wasn't much of an effort to do that.
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  They were just so abstract for so long and now here they are.
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  Yeah, yeah, yeah.
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  You know, look, tariffs, they don't just tax goods, they're testing companies.
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  And the best ones aren't panicking when resources become constrained.
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  They pivot and that's where good leadership comes into play.
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  The expression I use is when you lack resources, you've got to lean in on your capacity and
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  that is your capacity to adapt, your capacity to innovate and you've got to be able to outthink
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  the challenge and to be able to respond.
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  The companies right now that are thriving in a tariff heavy world aren't just the ones that
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  are the biggest, they're the ones that are the most adaptive.
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  And when supply chains get hit, what costs are spiking and the market shifting, resilience
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  isn't just about having more, it's also about using what you have better.
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  Yeah, understanding how to make the pivot, understanding how to bounce back as you put it.
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  I think the thing is though, at least most of the companies that we've been talking about
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  in this, they're not lacking for resources, but it is certainly, it's testing their resilience.
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  Hold on, I want to hit on that really quick because yeah, you're right.
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  A lot of them do have resources and this is just beyond the sideline.
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  But what I think about some of the conversations I have is like, oh yeah, we've got budget
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  for that or we've got an answer for that, right?
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  The thing I see about resources is it doesn't give you the opportunity to look at your resourcefulness
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  and understand your capacity.
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  If you could just store resources at it, right?
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  You still have to have imagination in ingenuity.
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  Yeah, those resources, they're not self-directing.
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  So no, I think to that point about whether this should play out behind the scenes or whether
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  it's played out in public, I really feel that transparency should be business's friend in
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  this moment, especially in this moment because those sweeping tariffs seem like a really
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  bad idea for pretty much everyone.
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  I know that the behind the scenes approach is effective.
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  We've seen that.
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  We continue to see it play out both between governments and especially between industries
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  and the Trump administration.
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  But managing this behind the scenes alone also gives the administration an advantage in a
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  moment when their working theory is not in the interest of business.
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  They don't want this discussion taking place out in the open because when it does, you end
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  up with interviews with car dealers in Pennsylvania saying people aren't going to buy that ram
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  truck when it's 25% more expensive.
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  And if you're not making your case in public or at least making clear to the public where
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  you stand, I think you're letting the White House not only frame the debate, but redefine
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  your position in some cases.
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  Look at what Trump said in front of Congress.
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  He said, "Car makers are so excited."
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  Well, clearly they're not because they pushed for an exemption faster than you could say,
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  sign and drive.
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  I think this idea of resources is pretty important, right?
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  I mean, because that right there gives companies a lot of opportunity for responding in particular
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  ways.
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  What are the talks that gave with the conference board we were looking at?
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  All the different ways that we're talking about reputation.
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  And I realized, really, what we need here is a checklist of all the things that from a reputation
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  management perspective so that you can start thinking ahead and getting ahead of things.
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  I came up with the idea of these contracts and one of the contracts is capital versus
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  capacity, right?
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  If you can think about financial capital, cash investments, political capital, the ability
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  to influence, engage in policy or navigate regulations, reputation capital, operational
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  capital is one that's certainly playing out a lot here, but we could also think about,
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  human capital and social relationship capital as well, which is your trust with suppliers,
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  partners, customers, governments and so on.
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  But here's the thing, right?
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  At some point, when capital runs low, capacity is going to have to take over.
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  These are burning through capital to survive the tariff storm, but capital is finite.
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  Capacity, I think, is going to be one of the things that keeps companies in the game to
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  start going back.
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  When you like capital, you got to lean in on capacity.
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  Change gears here for a second.
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  In a trade war, how are companies going to navigate this new, quite nationalism that's
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  currently driving consumers?
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  Yeah, I think this is the most remarkable short term result of the tariffs, at least
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  so far, and it's playing out, we see it in Canada.
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  The Canadians are ticked off, and they are not quiet about it at all.
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  Yeah, yeah.
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  I watched a Vancouver conucks hockey game last night, and the Vancouver fans, as Canadian fans
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  have been doing for the past month, they booed the US national anthem loudly and throughout
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  the anthem, and they were cheering and singing along loudly with O Canada.
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  It's still, by the way, unsettling to hear the star-spangled banner get spontaneously booed,
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  it's jarring.
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  But so is this flexing of the economic muscle that's going on in Canada.
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  The premiere of Ontario canceled a $100 million contract with SpaceX for Starlink terminals,
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  sort of a two-fer against Trump and Elon, whose CEO of Starlink, let's be forget.
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  But I think the biggest PR challenge for American companies, I would say, as you're getting
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  out here is this galvanization of Canadian consumers against American goods.
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  This new buy Canadian movement that's taking hold.
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  This market research firm La Jair, they said 70% of Canadians report increasing their purchases
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  of locally made Canadian goods, and almost as many, they say, have actively reduced their
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  purchases of American made products.
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  And Craig, I know you don't spend as much time on TikTok, I think, as I do, but there
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  are Canadian influencers out there giving advice on where to find Canadian alternatives.
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  Starting in the grocery store.
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  You supporting Canada?
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  Here's a way to do it.
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  Instead of getting Fuji apples from the United States, you can get galvan apples from Ontario.
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  Instead of blue water fish burgers made in the US, you can get highlander fish burgers, which
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  are very Canadian.
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  The battle for the produce and the frozen sections looks quaint in comparison to the battle
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  for the liquor store.
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  The liquor control board of Ontario has pulled American liquor off the shelves.
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  It's really something to see.
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  Yeah, I think the question isn't just, do we acknowledge nationalism?
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  How do we acknowledge it without boxing ourselves in?
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  Since the salt started, I've heard a few themes, and then I've seen a few from news coverage.
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  I picked up on five different ways that companies are responding right now.
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  One is the localized branding.
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  We're one with you strategy.
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  We're companies are repositioning themselves as deeply embedded to the local economy, even
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  if they are global.
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  Some are highlighting heritage and domestic job creation or committee investments.
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  You could think, for example, Black McDonald's in different markets.
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  I'm not saying that this is the one that they're using, but this phrasing of 100% locally
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  sourced beef or proudly Canadian and Canada are examples there of that category.
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  Yeah, this is the playbook.
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  Second is reframing globalization to be the good corporate citizen approach.
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  It's one that I've seen a few companies set.
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  That's where companies are embracing their global footprint strategically and trying to
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  show how their presence benefits the local economy, right?
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  So you could think about maybe some of the foreign automakers here in the US right now,
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  like BMW where they're emphasizing their American workforce, but not their country of origin.
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  So there that would be something like we're international and we're invested in you.
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  A third is just simply trying to neutralize the narrative, right?
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  Just playing into the whole idea of price and value positioning, offering a superior price
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  or quality and trying to make loyalty about value rather than origin.
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  I don't think that one's going to work.
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  You don't think so?
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  I think that a lot of companies, there's a playbook for this laid out and it's made in America
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  because American companies are multi-nationals have been running this playbook in America.
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  For years, a lot of them stepped up in the first Trump administration, a lot of them dusted
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  it off more recently.
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  And this is to the earlier point about ads you see in Politico or Axios or wherever.
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  This is where a lot of companies make these points and now they may have to do it locally
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  in another country.
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  Like you say, when you're sourcing an item locally, whether it's, I think your McDonald's example
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  is the most convenient and direct because it's something that gets done by restaurants and
• 17:12
  restaurant chains in other countries, you source an ingredient locally and you want people
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  to know about it.
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  I'm just thinking about, okay, there might not be very many companies playing this strategy,
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  but I'm going to say if tariffs hit a particular company eventuous that we have both have discussed
• 17:28
  before, I'm still going to buy my phone from that company, right?
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  No matter.
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  So does everyone else is going to buy their phone from that particular company too?
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  Just recently, there are customers who are priced sensitive, unless we forget.
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  Yeah, yeah.
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  So that's what I mean.
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  I mean, there's a few companies that I would say are able to lean in on the value positioning
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  and the premium.
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  Okay, so that's the third.
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  And then I think the last two, one is supply chain transparency, which is showing the domestic
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  contribution.
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  And then, you know, I would say, I don't know what a good word for it is, but playing
• 18:01
  both sides without taking a side, maybe silent adaptation, possibly.
• 18:06
  Does you mean just sort of like standing still and hoping nobody notices that you're an
• 18:10
  American brand?
• 18:11
  Yeah, that could be it, right?
• 18:12
  You know, kind of adjusting their strategy quietly without making any public statements or
• 18:17
  tweaking the marketing language and trying to avoid it.
• 18:21
  It's just really interesting to watch it play out in Canada because it does seem authentically
• 18:27
  organic and it does seem to really have momentum.
• 18:29
  Tick-tock is just the most convenient window that we have into it, at least from my vantage
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  point.
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  But I do think that some of this consumer behavior might stick, you know, maybe you end
• 18:40
  up as a Canadian consumer, really liking high-liner fishburgers.
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  And that's a problem for blue water fishburgers, if in fact, that is a US brand.
• 18:48
  So I think companies are going to do what they can to emphasize their support for the local
• 18:52
  market, whether it's one of the ways that you outlined.
• 18:55
  I think that job creation is a tried and true one.
• 18:58
  And localizing and calling attention to your local sourcing, but it's just really interesting
• 19:03
  to watch how quickly this has taken hold and that by Canadian movement does feel real.
• 19:08
  Yeah.
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  And made in Canada is becoming a popular slogan so much so I saw that was really interesting
• 19:15
  that Canadian advertising industry, their self-regulatory organization.
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  They issued new guidance because then they say if you're not Canadian owned, you shouldn't
• 19:25
  say truly Canadian or proudly Canadian was one of the slogans that they called out, but
• 19:31
  made in Canada apparently only requires 51% Canadian content.
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  And we're paying attention to that now.
• 19:37
  But to your point earlier, you might expect to see supply chain adjustments like you described
• 19:41
  where it's strategic or maybe just convenient.
• 19:44
  You get those fishburgers from Nova Scotia instead of Alaska, maybe you can be proudly
• 19:48
  Canadian or made in Canada.
• 19:50
  I don't know, I buy fresh fish from Alaska, but last time I checked Alaska, it was a part
• 19:54
  of the US, not Canada.
• 19:55
  Well, that's the thing.
• 19:56
  I think this is the issue about this new nationalism.
• 19:59
  Yes, some of it may play out here, I guess, but I think we're mostly going to see this phenomenon
• 20:04
  in countries where the administration is target our administration is targeting their country
• 20:09
  with tariffs.
• 20:10
  So right now we're looking at Canada, Mexico, Canada, I think the phenomenon is the most
• 20:15
  pronounced probably because of the interdependency of the two economies, but we could also see
• 20:20
  China certainly would not be surprising to see something like this play out in China given
• 20:26
  episodes in the past.
• 20:27
  And now according to Trump, we may have tariffs on Korea, maybe the EU.
• 20:32
  It's going to be really interesting to see this dynamic if the trade war continues the
• 20:38
  way the president says it's going to.
• 20:40
  Yeah, so we've got Bukka, right, which is so important right now during chaos management.
• 20:46
  You're talking about VUCA is the acronym.
• 20:50
  Yeah, VUCA, right, volatility uncertainty, complexity and ambiguity.
• 20:54
  The one I came up with was a vision understanding clarity and agility.
• 20:58
  And I thought, okay, that kind of fits here, right?
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  So the vision is companies are going to need long term strategies that are going to go
• 21:04
  beyond the reacting to tariffs.
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  You're going to need understanding, deep consumer research to track customer sentiment
• 21:12
  before it starts showing up in sales data.
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  You're going to need clarity, clear messaging about brand identity across markets and they're
• 21:20
  going to need agility, right?
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  Localized marketing and supply chain flexibility to adjust without alienating anyone group.
• 21:28
  That's in case anyone has a drinking game of that Craig's framework of the week.
• 21:31
  I don't know.
• 21:32
  Yeah, they'll, hey, those sound like capacities to me.
• 21:34
  Those sound like the type capacities versus capital you were making the point earlier.
• 21:39
  Oh, yeah, yeah, yeah.
• 21:40
  Yeah, I think these four items that you've outlined, I think those are good for any
• 21:45
  sort of local team of a multinational to be aware of whether you're in Toronto or Tokyo.
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  These are things you want to understand.
• 21:53
  Your company's connection to the local market, even if you're not using it as part of your
• 21:58
  strategy most of the time, it cannot hurt to have that kind of insight.
• 22:04
  So even when the product is what you're focused on, when things go sideways like this, if you
• 22:11
  have a local backlash on something, whether it's specific to a company or as we're experiencing
• 22:15
  now, the result of a trade policy, you've got that in your back pocket, you can understand
• 22:20
  your connection to the local market.
• 22:22
  I'd say the strongest brands are realizing that they can't let politics define them.
• 22:26
  They have to know how to navigate when politics define the market.
• 22:30
  So look, you know, some companies are actively defending their global presence.
• 22:34
  They're lobbying against protectionist policies.
• 22:36
  Others are working behind the scenes to influence policy.
• 22:39
  But big question is, you know, does engaging nationalism help or hurt or won't you reputation?
• 22:44
  Well, we think about nationalism.
• 22:46
  I think that's as a term, it implies competition or conflict like in this trade war.
• 22:52
  So I don't engage with nationalism, I think, is risky business.
• 22:57
  It's not what you want to aim for.
• 22:58
  There are times when patriotism makes sense.
• 23:01
  And if you're a multinational, talking about your connection to a market in times of patriotism,
• 23:06
  I think it can be good.
• 23:07
  But I think generally you want transparency here.
• 23:10
  You want people to understand, you don't want to put up some sort of facade.
• 23:13
  You're a global company.
• 23:14
  You probably source globally.
• 23:16
  And right now the messaging around that is being tested because of these nationalist tendencies
• 23:21
  that are stemming from the trade war.
• 23:23
  But hopefully those will pass and we'll get back to recognizing that live in an integrated
• 23:28
  global economy.
• 23:29
  There's no changing that and the reality of that will hopefully be okay with everybody.
• 23:33
  Generally, it's very clearly, this is less about waving flags and more about consumer comfort.
• 23:39
  People are just gravitating towards brands that feel locally even if they're not explicitly
• 23:43
  marketed that way.
• 23:45
  Right?
• 23:46
  Here's the risk.
• 23:47
  But if consumers get comfortable with local alternatives, the shift might be permanent.
• 23:54
  A tariff can be reversed, but brand loyalty, I think that's a little tougher to win back.
• 23:59
  That's the point I was getting at earlier where when it starts to reach the consumer and
• 24:03
  the reputational risk can be longer reaching.
• 24:06
  And people may find a new brand loyalty that started with some sort of a nationalist inclination.
• 24:12
  But now it's just the brand that you like and that's to your point going to be harder to
• 24:17
  reverse.
• 24:18
  Yeah.
• 24:19
  This is for me another way in which this idea of capacity versus capital comes into play.
• 24:25
  Some companies have the ability to throw money at a problem.
• 24:28
  They can offer discounts or ad campaigns or whatever it takes.
• 24:32
  But the companies that are really going to win here are the ones that have long term strategies
• 24:36
  that are building deep authentic relationships with consumers so that loyalty isn't transactional.
• 24:42
  It's emotional, it's deeply invested.
• 24:44
  Yeah, nothing beats authenticity.
• 24:46
  And when you have authenticity, then transparency doesn't feel very risky at all.
• 24:51
  I thought you were going to go the direction of the George Burns quote, right?
• 24:54
  If you have authenticity, if you can fake that, you can fake anything.
• 25:00
  Well, that too.
• 25:01
  Okay, just to wrap up Craig, final thoughts here from the professor on where we are and
• 25:06
  how companies are navigating this.
• 25:08
  You know, I didn't think we're going to land here, but I'll circle back on this VUCA2 framework,
• 25:13
  right?
• 25:14
  So we've all heard about VUCA volatility and certainly complexity and ambiguity.
• 25:19
  It's sort of the corporate world's favorite way of saying things are mess and we don't know
• 25:23
  what to do next, but just describing the chaos is certainly can make us feel better, but
• 25:29
  that's not going to solve it.
• 25:31
  And I honestly look, we're not going to be able to solve chaos.
• 25:35
  That is the world that we're living in.
• 25:37
  But I would say this idea of VUCA2 isn't just a response.
• 25:41
  It's a countervailing force.
• 25:43
  It's how companies can fight back against uncertainty with strategy.
• 25:47
  You know, so just thinking about vision, understanding, clarity, and certainly right now we need
• 25:53
  agility more than anything else.
• 25:56
  Well put.
• 25:57
  We certainly nailed the clarity on that last point.
• 26:01
  And on that note, that's our show for this week.
• 26:03
  We want to thank Shawn P Neal and the PeopleForward Network for making our podcast possible.
• 26:08
  If you'd like to tell us what you think, have a topic you'd like to suggest for the show,
• 26:12
  we'd love to hear from you.
• 26:13
  Our email address is podcast@ocrnetwork.com.
• 26:18
  Communication breakdown is a production of the observatory on corporate reputation.
• 26:22
  I'm Steve Dowling.
• 26:23
  And I'm Greg Carroll.
• 26:24
  Thanks for listening.
• 26:25
  We'll be back next week.
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• 26:46
  #tradewar #corporatecommunication #economicuncertainty #nationalism #brandloyalty #tariffs #consumersentiment #businessstrategy #VUCA #Ford #GeneralMotors #Stellantis #SpaceX #Target #BestBuy #Hasbro #McDonalds #Toyota #BMW