CloserStill Media and Nineteen Group chairman Phil Soar turns his attention to the US and analyses whether Trump’s tariff madness will result in recession.
It’s a fast-moving situation. One minute, US President Donald Trump is imposing sweeping ‘reciprocal’ tariffs on dozens of countries. The next, he’s suspended the total disruption of the global economic order for 90-days while he ‘negotiates’ with nations and focuses on his trade war with China, which has (at time of writing), seen its tariffs peak at 125%.
There is little point in pretending that we can predict the medium-term consequences of the current madness, but let me consider some of the possible results for our own businesses.
Markets and investors dislike uncertainty more than anything. They will invest in downturns, in difficult times and recessions, as long as the landscape and politics are broadly predictable. But what we have now is complete and absolute uncertainty.
American teenagers want to buy Nike trainers, they don’t want to make them
You might ask for example “Why wouldn’t Nike or FoxComm or others decide to build new plants in the US?”
It takes billions of dollars and several years. By the time the factories are open the world may have changed again and a new US administration could reverse whatever tariffs the world ends up with (as Roosevelt did on the Smoot Hawley tariffs in the 1930s).
Also, American teenagers want to buy Nike trainers, they don’t want to make them. Where would Nike or FoxComm get the thousands of workers required to manufacture iPhones or stitch shoes? FoxComm employ 200,000 people to make iPhones in Hunan, China.
The likely result for most businesses is just to sit tight for a couple of years to see how the whole things plays out.
For trade show organisers, this may result in planned acquisitions being pulled or postponed. It doesn’t mean that their shows are “worth” any less, but uncertainty breeds caution and caution breeds lower offers for assets.
With the focus on manufacturing, Germany with its massive shows and any show with a focus on exporting out of China will be put at risk.
Higher tariffs on Asia may be good for the UK
The UK, by comparison is a provincial market with very few shows that have a large international element. DSEi and World Travel Market are exceptions, but there is little to worry about in the defence sector, and very few reasons why global destinations would want to scale back their promotions to UK tourists.
Higher tariffs on Asian countries may even be good for the UK. China, Vietnamn, Japan and Indonesia are not going to stop producing things so it’s fair to assume that they’ll switch their trade marketing away from the US and spend in other regions. Greater trade marketing spend in the UK will likely be a huge benefit to a number of exhibitions.
Obvious areas are clothing, dominated by (largely) Vietnam, Indonesia and Bangladesh, security, where China is strong, and solar, which China dominates. It seems to me we are likely to see more expenditure at UK and European shows in these sectors by the dominant countries and their distributors as they switch the focus of their sales effort.
This is such an abnormal situation that everything must be speculation and there are bound to be some unexpected consequences.
Automotive is always mentioned first, because so many US cars come from Canada and Mexico, because the supply chains are so complex that they cannot be disentangled before 2028, and because there is a set 25% tariff on all vehicles.
Anderson thinks that tariffs will raise average prices for the US consumer by at least $6,000 for basic models (steel and aluminium also face high tariffs) and by $20,000 for many imported models (like the UK’s Jaguars and Range Rovers). The economic deceit (OK, call it what it is – a lie) that this will help American consumers is as obvious here as anywhere: if imported models rise in price by $20,000, then comparable American cars will not remain at their old prices.
Manufacturers and dealers will obviously raise their prices as well to gain extra profits – maybe not by $20,000, but perhaps by $15,000 (what would you do?) The EU is so worried about Chinese manufacturers like BYD switching focus to Europe that they already have a 45% tariff on Chinese cars.
But let’s be realistic about the UK. Last year Slovakia, a country of six million people, produced 1.1 million cars. The UK produced 800,000. In trade and trade show terms, automotive is a not a core sector for us anymore.
Clothing and retail tend to be mentioned next. Manufacture is dominated by South East Asia and Nike, Adidas etc don’t have any obvious alternatives as the manufacturing skills and infrastructure no longer exist in the US. So, it seems fair to argue that large US retail events will suffer but, again, assuming the UK does not introduce tariffs on countries other than the US, then there should be more interest in exhibiting here.
Aviation is a potential nightmare. Half the new passenger planes sold in the US are built by Airbus – is that a 20% automatic tariff? The only other supplier is Boeing, and it cannot increase deliveries even if it wanted to, and even if it ever got over its 737 MAX problems.
The supply chains to Boeing are also international and complex and the only conclusion must be that all planes will be more expensive, tickets everywhere will be more expensive, and business travel is hit. That is, of course, probably a negative for the trade show industry everywhere.
The biggest share price falls in the past week by far were in the giant IT companies such as Apple and Amazon. Given that Apple ships 50 million iPhones a year from China to the US, and that early estimates in the financial press suggested that iPhones could cost 43% more from June 2025, that is hardly surprising. The effect on the UK is debatable. There is no reason to suppose that electronic equipment will be more expensive and no reason why the big IT companies should pull back from this market. (But as iPhones will stay the same price in Canada, look for a cross-border black market in iPhones).
The real threat is recession
These are early days, but projections from many sources suggest that the US economy will be at least 1% weaker in 2025 and 2026 and that UK and European growth is going to be closer to 1% (and probably less) than 2%. These figures can only be guesses, but no authority thinks that the result of tariffs is going to be positive.
Inflation in the US must be higher – estimates move it from 3% to perhaps 4/5%. This probably means interest rates stay higher for longer, which of course means that mortgages will be more expensive and US households will spend less. Some 60% of US adults have $401,000 or IRA pension plans invested in shares. As they look at their pensions falling 15% this month they will inevitably reign in their spending.
The rest of the world tends to look to the US for interest rates – if UK interest rates are much lower than the US then investors sell UK gilts and buy US treasury bonds. This puts pressure on government finances, which hardly need any more bad news.
Caveating that no-one knows anything, a recession in late 2025/early 2026 now looks likely – J P Morgan puts the chances in the US in 2025 as 60%.
Recessions don’t necessarily lead to major headaches for trade shows, but looking at what has happened on previous occasions might be a guide (as financial advisers say, note that the past does not necessarily foretell the future).
Recessions tend to occur because of the expectation of recession – in other words companies and individuals cut back on spending because they believe a recession is over the horizon.
The graph below shows the total number of square metres sold at UK exhibitions every year since 1985 (sources EVA/AEO/AEV/SASiE/Melville/GES). There were three recessions in the period, plus Brexit.
We saw a major retail recession in 1991/92 – and this was matched by a fall in square metres sold in these years. There was the Tech Bust in 2001/2002 though there is a strong argument that 2000 was an anomaly. And the clearest example is obviously 2009/10 after the financial crash.
We also have 2017/2018 when our industry suffered from the Brexit madness, though there was not a technical recession. The Covid years are only partly included for obvious reasons.
But look at the bouncebacks
The recession years are in RED but look at the years in BLUE. Our exhibitions bounced back remarkably quickly – the exception being after 2000 when the slow decline through to 2008 needs a very different explanation. The bounceback since Covid has been nothing short of spectacular. So there really is no need to despair.
Who will be hardest hit?
It seems to me that the greatest danger to our industry in the UK is not any immediate problem with tariffs, but that their effect on the whole world economy will be to bring forth recession – one of indeterminate depth and duration.
Economies like Vietnam’s and Bangladesh’s will be the worst affected because of the potential loss of the US export market. But more insidious will be the reluctance of major firms to invest there in the future (because of the febrile politics of America, not those of the producer) – and thus reducing the potential economic growth of such countries.
In “first” world terms the main sufferers are likely to be the American “middle classes” – who, of course, form the core of the Trump vote. I have commented only on cars, iPhones, T-shirts and air fares – but a vast range of goods in the local Walmart or Target can only become more expensive. And it won’t help much if they might be made locally – American firms will simply put up their prices to match what the importers are forced to pay.
Recession is historically good news for exhibition organisers
This may sound counter intuitive, but many of our most successful companies expanded most aggressively in recessions. This is because in hard times so many companies pull back, don’t launch and don’t invest – despite the fact it is possible to do far better deals with suppliers.
Blenheim was a smallish company – £8m annual profit – before the 1990-92 recession. It expanded dramatically, being able to buy great products for 4X and 5X profits. More importantly, it was able to launch events like Premier Collections and The Furniture Show at the NEC with no competition and build them overnight (at no real cost) into two of the 10 largest shows there. By 1993, Blenheim was making £50m a year profit.
CloserStill launched in 2009 into the teeth of the financial crisis. But, again, everyone was running scared, not investing, waiting out the crisis.
With less than £3m in capital, CloserStill launched its first run of events and bought a couple of small embryonic businesses. Vet, Dentistry, Pharmacy, Learning Technologies, Cloud all stemmed from these tiny beginnings. Fifteen years later they dominate their sectors – turnover in just these five UK shows this year – north of £30m.
Take this as you will – but the best time to launch businesses in our sector has always been in the midst of a recession. If the window of opportunity appears, don’t pull down the curtains.
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