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The Trouble with Tariffs · Communication Breakdown

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Welcome back to Communication Breakdown, a weekly podcast from the Observatory on Corporate
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Reputation.
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Thanks for joining us.
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I'm Steve Dowling in Silicon Valley.
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And I'm Craig Carroll in Los Angeles.
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Each week Steve and I take a look at strategies companies are using to shape headlines and
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sometimes save their skins.
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It's a post game show for PR pros.
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This week the White House sends Wall Street on a wild ride.
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"President Trump has a spine of steel and he will not break."
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Break?
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No.
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Blink?
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Yes.
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Way back on Tuesday, Press Secretary Caroline Levit, brushed aside suggestions that Trump might
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back down from his tariff threats.
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34%, 104%, 145% on China, 20% on the EU for a while I think who can keep track, and a stubborn
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10% on the penguins of McDonald Island.
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Seemingly unmoved by the whipsawed, punch-drunk stock markets.
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Trump had spent days posting things like my policies will never change.
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Spine of steel, remember?
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That was Tuesday.
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Wednesday was another story.
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Market skyrocketed as Trump pulled a U-turn declaring a 90-day pause and a so-called
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"reciprocal tariffs".
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You know, the ones of the funny formula and all the Greek letters?
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That for China. And the rest of the world is
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apparently stuck at 10% far higher than when this whole process began and that sent the
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markets into another nose dive on Thursday.
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According to some reports, ultimately it was a bond market sell-off that stiffened the
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resolve of Trump's top advisors.
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Bloomberg says CEOs are crediting a TV appearance by JP Morgan Chief, Jamie Dimon, and other
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statements by business leaders calling for a different approach.
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But Treasury Secretary Scott Bessent tells it differently.
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This was driven by the President's strategy.
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He and I had a long talk on Sunday and this was his strategy all along.
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Okay, good to know.
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This week we thought we'd share what we learned during that chaotic period, proceeding Trump's
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climb down as executives watched their stock prices tumble.
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According Gary Friedman, CEO of furniture retailer RH, formerly known as Restoration Hardware,
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they source almost three quarters of their products from Vietnam, China, Indonesia, and
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India.
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Friedman was on his earnings call as the tariff news hit.
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"And I don't know, like, I don't know how sports are stock, man.
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I mean, I guess, I guess, you know, the stock went down, you know, based on some of the
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numbers he reported and then it got killed because of, uh, uh, really?
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Oh, shit.
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Okay.
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I just looked at the screen.
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I hadn't looked at it."
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While everything else on that freewheeling 90-minute call will surely be forgotten, it's worth
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noting that Friedman had earlier praised the administration as smart, even mentioning
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Trump's book, The Art of the Deal.
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But he was walking that fine line of expressing concern about the short term impact of tariffs
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while acknowledging the administration's apparent long term goal.
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And I think, Craig, over the past week, we've seen companies being tested in this new necessity
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of avoiding criticism at all costs, some spoke up, but companies literally lost trillions
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of dollars in valuation over a policy they all knew made no sense.
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And even then the silence from most was deafening.
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Yes.
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Steve, this is one of those moments that exposes exactly how limited corporate communications
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playbooks become when policy turns into performance art.
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And like every Chief Comms Officer knows out there, what this past week reminded us, it's
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not just what you say, it's when you say it, and who says it first and whether you get
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punished for saying it at all.
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Terafs like these put companies into what I'd call a "communications choke point".
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They know policy is bad.
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They know that staying quiet looks weak, but they also know that speaking out too soon or
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alone can turn a bad week into a bad quarter.
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So what do we see?
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CEO's waiting.
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Trade groups warming up the bullpen.
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Companies whispering in the background.
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Somebody else go first.
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And that's just not cowardice that is calculus because what's happening here isn'y just about
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tariffs.
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It's also about companies navigating these moments where the business risk is huge, the political
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risk is personal and the communications would just keeps getting smaller and smaller before
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markets, or the White House, forces their hand.
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So I don't know.
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I'd say if you're leading comms at a major company right now, this would be a masterclass
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in what it looks like when clarity, courage and calculation all gets in the same room...
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and nobody wants to get first.
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Yeah.
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Yeah.
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It was a really, really interesting story over the past week.
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One of them was in Politico and this got passed around online a lot over the last weekend.
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It said the headline quote was, "Everyone is terrified, but no one in the public or the
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private sector wanted to tell Trump that he's wrong."
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And then on Wednesday, after the markets had experienced all that turmoil over the past
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week and were bumping along Monday, Tuesday.
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On Wednesday, the journal published, I think coincidentally, just as Trump was reversing
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course, but their Wall Street Journal headline was 'CEOs Break Their Silence', which we had been
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seeing to various degrees earlier in the week.
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But the interesting part of that story for our audience, I think, was that CEOs were reportedly
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saying privately that trade groups should get more forceful in their opposition or start
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pulling together statements that a group of companies could sign on to, standard trade
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group stuff that they were looking for for more backup on that or maybe a tip of the spear
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or to your point that nobody wants to be the first one to speak up.
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And no disrespect to trade groups, they serve a really important purpose.
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And we've seen them make some effort on tariffs and also on the legal issues we talked about
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last week and other topics.
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They're speaking up all the time, but it's just not the same as a name you know, a company
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you know.
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And trade groups help, but they speak generically.
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And companies need to be telling their individual stories because those have more impact, the
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more relatable, they're more personal in a way, I think, and they have all the ingredients
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that you need for media attention.
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And I suspect probably for attention from the White House.
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Yeah, I think it's probably true a lot of the time. You know, companies speak directly
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breakthrough in a way that trade groups can't, but also say there is a reason why trade
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groups exist, you know, they're built for protection.
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They let companies get their message out without being individually exposed.
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So it's not always about impact.
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I think it's also about insulation. And coalitions also show alignment.
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But I wonder how much actually move public perception, you know, it's a signal, but it's
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not necessarily the story that sticks, you know, most people are not going to remember who
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signed the letter, but they are going to remember who spoke first and who spoke clearly.
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Yeah, what trade groups can do is they can help demonstrate momentum, right?
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That it's not just, you know, one company singularly making a point that it is an industry, but
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to your point, an individual company can do a better job of kicking open the door and
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getting attention.
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Yeah.
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And that you'd like the trade group to sort of be back up.
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And we, and we were starting to see companies speak up, but it was only when the markets
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really forced their hand.
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And we all know why, as Politico and others have observed.
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And we've made the same observation on this podcast.
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Like you said, no one wants to be the first one to speak up against this White House
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because dissent is disloyalty and therefore it's right for punishment.
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So the fear of the blowback is completely understandable.
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I just think you have to weigh that against the cost of staying silent.
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And I tend to believe that silence can cost you more.
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We're seeing companies use this new playbook, speak on policy rather than anything that
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could sound personal, you know, other than praise.
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Yeah.
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They stick to the facts, the what and the why without suggesting anyone's to blame.
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And that seems to be getting a little traction.
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Yeah.
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Yeah.
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You know, this is what I'm watching right now-
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How many companies have actually built a muscle to speak when the window opens?
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Yeah.
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Versus how many have gotten so used to staying quiet that they missed the moment altogether.
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You know, for me, that's kind of a pattern to call out.
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Now, some companies have simply forgotten how to show up.
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You know, they've built entire systems around risk avoidance, not voice readiness.
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And you know, silence just isn't it free.
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You know, I think at some point we're going to have to acknowledge that silence isn't always
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cowardice.
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Sometimes it's discipline.
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Sometimes it's wait and see, but the danger is when silence goes on too long and it starts
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to look like indifference.
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Yeah.
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And I think one of the problems this week was that there was a period there in the middle
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of the week where that seemed to reward the strategy of staying silent because the market
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rallied like, as Trump likes to say, "as nobody has ever seen before" on Wednesday.
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And some people probably felt that they had made the right call and to that point maybe they
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did.
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But there's so much turmoil, so much chaos to borrow your phrase, this Chaos Communication.
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The best approach I think here is to be steady, stick to the facts, talk about what company's
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goals and values are.
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And I think the other downside about silence that we saw this week was before the market
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rallied a bit,
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How are we doing on reputation?
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There was Monday, Tuesday, there was a lot of chatter about who had enabled this kind of
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behavior and why weren't people speaking up?
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Folks were starting to look around and go, like, are you okay with this?
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And I just wonder if people will be as patient as this process rolls on.
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Yes, Steve, what I see going on in the environment is a shift.
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You know, it's shift from episodic crisis response to permanent volatility management.
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I still like chaos management.
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I think this idea of playing into the permanent volatility is something that's key here.
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It's not like the old days where you manage your crisis, you clean it up and you move on.
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This is something entirely different, right?
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This is companies having to operate in chaos all the time where every signal you send out
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runs through a filter that you can't control.
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And chaos management, like every signal is a gamble.
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If you speak too early, you look alarmist.
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If you wait too long, you look irrelevant.
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If you say too much, you look political.
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And if you say too little, you look complicit.
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So I think that's kind of the box companies are in right now.
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That's why so many of them, especially right now during this tariff environment, are waiting
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for somebody else to go first.
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Yeah, I think as this volatility rolls on and because Trump did, whatever the reasons,
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pressure, all part of the plan, whatever, because he did pull that U-turn, I think, and
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this is, I think, the most important thing that I would leave people with from this podcast.
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There is a window right now for companies to take a different approach between now and July
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when the supposed pause is scheduled to expire.
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Who knows if that's real, but in the meantime, we're in a trade war with China, which is not
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good for a huge swath of corporate America.
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And the rest of the world is being tariffed at 10%.
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It's hard to tell day to day what Canada and Mexico are under- whatever.
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But with Trump's policy reversal, nobody cares really how many people in Washington call
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it a negotiating masterstroke, art of the deal, whatever.
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Everybody knows that he blinked.
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And everyone saw the immediate damage that the tariff policy was causing.
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But that started a conversation, I think, that will hopefully empower companies and they
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can use it to their advantage with a little less fear of retribution, maybe, or at least knowing
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that they've got the facts on their side.
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Corporate America kind of needs Trump to blink again on this 10% level of tariff, so I don't
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know that he will.
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But they've got to know that the audience is primed to hear criticism of tariffs.
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They've seen it.
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They've seen the damage that it does.
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And that gives them an opening to talk more about why it's bad policy.
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That the case is a lot stronger today and there's no doubt that it's rooted in facts.
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Yeah.
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Yeah.
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I think that's right.
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There's a window here, you know, but I'd say it's a narrow window and it comes with all
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the same risks that were there before.
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You know, it's just now that they're rearranged.
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Policy reversals don't just erase reputational damage, but they do create narrative permission.
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Just because Trump blinked doesn't mean reputational damage disappears, but what it does do is it
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gives companies narrative permission to speak without it sounding like partisan descent.
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You know, now it's about business consequences.
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Now it's about real world impact.
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And you know, it's not about picking a fight.
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It's about telling the truth about impact.
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The lessons for companies isn't just that he blinked.
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The lesson is why he blinked.
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It wasn't because of pressure from CEOs.
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It was because the market cracked, you know, the bond market screaming at them and Wall Street
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moved.
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Yeah.
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No, I think that was a remarkable thing about this week that even the few voices that had
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started to speak up and, you know, maybe Bloomberg is right, maybe watching Jamie Dimon
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on TV on that Wednesday morning, factored into, I'm sure it did.
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Yeah.
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Yes.
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Knowing what we know about what influences Trump's decisions.
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But yes, it was really remarkable that the stock market could fall as far as it did, but it
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was when the bond market started to wobble that they really took notice.
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Just shifting gears here a little bit.
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I thought that the furniture makers made a really interesting case study because again, they
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were, you know, really starting to feel it given how much of their business is sourced
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from the companies that were under the tariff threat.
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Yeah.
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And you know, like we can laugh at Gary Friedman's little outburst on his conference call,
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although like who can blame the guy on a day like that?
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Anybody looking at their portfolio, you know, had some sort of similar reaction, but he was
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walking that messaging tightrope, as we said, for like 90 minutes.
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Not familiar with many earnings calls that go on for 90 minutes.
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But in that journal article that we mentioned earlier, the CEO of Ethan Allen Furniture was
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quoted and he took a similar tack, urging the President to retreat because tariffs hurt
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customers, but also praising the effort to bring back manufacturing, acknowledging the
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goal, just saying that the tariff escalation went too far.
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Yeah.
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Yeah.
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The furniture CEOs are certainly fascinating here because, you know, what we're seeing is
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the classic corporate tightrope in public.
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It's not just that they're trying to have it both ways.
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It's that they have to have it both ways, right?
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You know, they're trying to stay aligned with the broader goal of reshoring of American
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manufacturing, but they're also staring down a business reality where tariffs directly
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hurt their customers and their margins.
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And that's not theory.
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That's fact.
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What do you hear from them?
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You hear a little praise for the principal and then a very clear signal about the pain and
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practice.
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Support the goal, push back on the method.
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That's the formula.
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And what I think is important here, you know, for anyone watching how companies communicate
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in this environment is that it isn't just a furniture story.
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This is going to be a template for a lot of industries going forward.
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You know, praise the goal, acknowledge the attempt, but get really specific and really
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local about what the costs are.
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You know, it's not message discipline for its own sake, it's message discipline for survival.
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Yeah.
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And so far as we've seen, I think it can be effective.
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You know, I thought about this as the market was, you know, going through its gyrations and
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tumbles over the past week.
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And I think it's supporting evidence for a data point that we've talked about on the
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podcast in the past.
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Think back to, there was about a month ago when the Yale School of Management held that
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conference for CEOs in Washington.
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And the Wall Street Journal spotted that slide with the results of a straw poll that had
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asked how much more to stock markets need to collapse before CEOs need to speak out collectively.
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Right.
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And it was a plurality of executives.
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44% said it would take a 20% decline.
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That would be the trigger for them.
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And at that point, the S&P was down, I think 7% since Trump had returned to office. This
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week, we came perilously close to that 20% down marker and low and behold, we started to
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see CEOs - pardon the pun for furniture makers - coming out of the woodwork and speaking up just
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a little bit.
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So it was an interesting catalyst, surprising to some of us that it would take that much.
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But hey, I think that with the opening that we described, the opportunity now that there's
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some cracks in the front of the facade that the White House has put up about tariffs and
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this playbook that you've articulated that there's a way to make the point maybe without,
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you know, poking the bear.
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Yeah.
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Could be really interesting as we look at the upcoming earnings season and then again,
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this supposed July deadline that that Trump has reset.
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What I keep noticing in moments like this is just how predictable some of the communication
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patterns are when the stakes get this high.
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Companies aren't rushing out to take bold stands or not.
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They're not eager to jump in front of the microphones.
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What I'm seeing is that companies doing what they've always done with business risk and
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communication risks start closing in on each other.
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They spread the risk out.
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You know, in Washington, that means letting the trade association say it first. Overseas
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it means letting the local team adjust the message or in some cases might mean just
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saying completely quiet and living in just hoping somebody else goes first.
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Yeah. I think the thing for me is that you also, I think your instinct as a comms leader
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should be that you want control in every area that you can.
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And so saying nothing or letting somebody else sort of drive the narrative about your company,
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your industry, that doesn't feel very good to me.
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And we talk about companies whose reputation may suffer or perceptions about their positions,
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could be being shaped by an outside forest like the White House.
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I would much rather be saying something and seeing the results of that in my reputation
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or in other reactions rather than staying silent and seeing somebody else drive the
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drive the story.
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And yeah, there's so much unpredictability now.
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There's so much chaos.
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It really becomes a challenge, I think, to motivate people to go, "Well, you ought to
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just, you know, dive in."
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But you want control.
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And you can chart your own course with your communications.
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And so I think when the whole world is going crazy around you, it's important, as important
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as ever, to be consistent about your policies, your values, what's important to you, what's
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critical to your company.
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And again, chart your own course.
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Companies have the ability to do that.
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And they don't necessarily need to do it with sharp elbows to offend anybody else.
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But do it like your powering a boat through choppy waters.
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For me, with this whole episode reminds me of is just how much corporate communications
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has changed over the past few years.
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You know, it used to be (that) company's spoke up when that something to say.
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Now, you know, they speak when the environment gives them permission.
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And that permission doesn't come from the White House.
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It comes from the market.
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And it comes from the facts on the ground.
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It comes from the consequences that people can see for themselves.
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And you know, this week just didn't test companies' message discipline.
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It tested their timing, their nerve, their ability to sit and discomfort and wait for the
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right moment to speak.
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And then to have something worth saying.
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You know, in this environment, it's not just about who speaks first, it's about the credibility
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and whether anyone believes you when you finally do.
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Yeah, I think that point about people waiting for permission is a really strong one.
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Because you know that old saying, "You'd rather ask forgiveness than have to ask permission."
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I think that's sort of similarly applies here.
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Like, I don't think companies should wait around for permission to talk about something
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that is critical to their business, to their industry, to the US economy.
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And hopefully, as I said, hopefully people will recognize that there is a window now where
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it should be easier to talk about tariffs not being good, to talk about why, at least
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the approach to economic policy needs to change so that companies have more certainty about
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the markets they're going to be, and the conditions they're going to be operating in
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these markets.
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I think what I'll be watching is how companies are using this one at a reset, not just their
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talking points, but their posture.
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You know, can they shift from reactive messaging to proactive framing?
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Can they move from defending their interest, to defending their relevance?
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When policy reverses this fast, what companies say next doesn't just reveal their strategy,
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it reveals their nerve.
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Good point.
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And that's a great way to end the show for this week.
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We want to thank Shawn P Neak and the team at AdvoCast, as well as the People Forward Network
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for making our podcast possible.
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If you have comments or suggestions for the podcast, we'd love to hear from you.
20:52
Our email address is podcast@ocarnetwork.com.
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Communication breakdown is a production of the Observatory on Corporate Reputation.
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I'm Steve Dowling.
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And I'm Craig Carroll.
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Thanks for listening.
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We'll be off next week and back with a new episode April 25th.
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