Tariff Plan Could Influence Sponsorship Spending, But How?

The incoming U.S. presidential administration has said that import tariffs will be a top priority beginning in January. According to the AP, president-elect Donald Trump has “proposed at least a 10 percent across-the-board tariff on imported goods, a 60 percent import tax on goods from China and a 25 percent tariff on all goods from Mexico—if not more.”

If those plans come to fruition, how will marketers from outside the U.S.—who have steadily increased spending on sports and entertainment partnerships in recent years—respond in terms of their sponsorship investments?

As in many circumstances the answer is: It depends. Below are the three options available to foreign businesses and the reasons they may pursue them.

Curtail spending. For some manufacturers, tariffs could be a roadblock to entering or staying in the U.S. market. Case in point, the already high tariff on Chinese electric vehicles has kept companies such as BYD, Geely and SAIC out of the U.S. at the same time they are expanding operations and growing sales of their EVs in other markets around the world.

If other companies exit or reconsider entering the U.S. because of new tariffs, their need to sponsor or otherwise market their products evaporates.

Maintain spending. This is the probable choice for companies that are partnering with U.S. rights holders with their eye on reaching non-U.S. audiences. Their U.S. market presence—if they even have one—is not the determining factor in their sponsorship spending.

The situation would apply to the marketers who have signed deals with teams that employ athletes from the company’s native country in order to attract eyeballs back home, such as the ten Japanese brands that have agreements with the Los Angeles Dodgers to capitalize on Shohei Ohtani’s vast popularity.

Another example would be China-based EV manufacturer BYD, which was a regional sponsor of the quadrennial CONMEBOL Copa America international soccer tournament this summer. As a previous blog post noted, the “event’s unique structure—a tournament primarily played among South American countries but taking place at 14 U.S. venues—means BYD can target potential buyers for its vehicles across its export markets in Latin America.”

Increase spending. While one of the goals of tariffs is to make market conditions more difficult for foreign companies and thus protect and boost the fortunes of domestic ones, many non-U.S. marketers will likely stay and fight based on the value of the market.

Those that do face an increased need to give U.S. consumers reasons to consider and purchase their products, especially if their prices rise to cover some or all of the tariff costs. These brands could view increased sponsorship activity as a way to build or maintain product interest and loyalty at a time it would be expected to drop.

The takeaway for rights holders is to keep up with developments post Inauguration Day and determine how their current foreign partners and prospects will react to any changes in import regulations.