The business of uncertainty: Impact of trump policies across industries

Interactive Transcript

spk_0 This is Jessica from Year of Monitor. We are glad you found our podcasts. Since

spk_0 you're here, we already know that you're looking for insights to identify

spk_0 opportunities in a complex market landscape. We're thrilled to announce our

spk_0 series Opportunity Minded that will help you do just that. Brought to you by the

spk_0 experts at Year of Monitor, each episode dives into a distinct strategic approach

spk_0 to identify and capitalize on opportunities with actionable insights. To get

spk_0 all the details, check out the show description. Back to the episode.

spk_0 Hello everyone, I'm Zora Milenkovich and I'm a research director here at

spk_0 Year of Monitor International. We have an exciting webinar for you today on the

spk_0 business of uncertainty. The impact of Trump policies across the number of

spk_0 industries. The aim is to help you understand what the challenges and opportunities

spk_0 are of a number of Trump administration policies. We'll be looking at it through

spk_0 the lens of a selection of industries that most in the firing line one way or

spk_0 another. Trying to understand how to supply chains are changing,

spk_0 manufacture strategies and of course the attendant consumer behavior changes.

spk_0 Short term and long term and not just China but in the US but also beyond. But

spk_0 before we get started, let me share a little bit about us and some housekeeping

spk_0 details. So for everyone new to Year of Monitor, we lead the world in data

spk_0 analytics and research into markets industries, economies and consumers.

spk_0 We provide global insight and data on literally thousands of products and

spk_0 services in order to empower executives like you to make confident decisions

spk_0 and to explore new opportunities just as we aim to do for you in this webinar.

spk_0 And now for some quick housekeeping notes, please don't forget to check out

spk_0 the resources section after this session for any additional links to reports

spk_0 or tools that you can use. And finally thank you to all of those who

spk_0 provided questions. We will cover as many as we can and we will do our best to

spk_0 follow up for any that we can't. Today you'll hear from some of our brilliant

spk_0 research experts who cover several topics in this session. So to begin with we

spk_0 want to give you a global overview of the macroeconomic environment. We want to

spk_0 follow that up with a conversation on tariffs, migration, deregulation and

spk_0 then consumer purchasing habits and how those are changing. So to kick us off

spk_0 land, let's know what the global picture looks like. Yeah thank you Zora for

spk_0 the introduction. So we have been tracking the impacts of changes in US

spk_0 policies on the global economies and using our macro models to simulate

spk_0 different policies and our views and the implications. So what the global

spk_0 economy is now experiencing is a policy induced or shock coming from

spk_0 sharp pivot and trade and other policies from the US, a country that

spk_0 trees by far the world largest economies. Particularly the shift in US trade

spk_0 policy is substantial for the global economy in terms of implication. Given the

spk_0 fact that the US is also the world largest in portal. In 2024 it imported

spk_0 $3.2 trillion US dollars, worth of goods and that's equivalent to the GDPF

spk_0 funds, just to both things into perspective. So in our latest macroeconomic

spk_0 baseline forecast it due to 2025 more than 10 major economies including the US

spk_0 and the Eurozone saw Dalgray revisions to grow projections for this year next

spk_0 year and this is because higher US tariffs and persisting trade tensions are

spk_0 disrupting global trade and affecting both consumption and production and

spk_0 investment activities. We have seen this trend particularly in in soft data with

spk_0 consumer and business confidence having weakened across key markets. So global

spk_0 GDP growth is now forecast to slow down from 0 3.2% last year to 2.9 this year

spk_0 and next year and global inflation is expected to continue its downward trend and

spk_0 rich 4.1 this year thanks to lower energy prices and slowing economic

spk_0 activities but inflationary pressures have risen in some countries where

spk_0 growing import costs, risk supply shortages and higher prices. And besides this

spk_0 baseline forecast to capture the high level of uncertainty and risk, two new

spk_0 scenarios from our macro model have been introduced to assess the potential

spk_0 impact of either an escalation or rollback of US policy. So under pessimistic

spk_0 Trump total agenda scenarios where the US proposed a VC-procure tariff,

spk_0 massive tech cuts and immigration controls are assumed to materialize. We see

spk_0 the global economy would be at risk of a recession why prices would surge

spk_0 significantly. Meanwhile, a tariff, a Trump tariff easing scenario,

spk_0 would on the other hand boost the global economies because trade efficiency and

spk_0 business and consumer confidence rebound. Under these scenarios,

spk_0 the RHDP growth would return to last year's level why inflation would moderate

spk_0 on a faster pace compared to the baseline. Now as economic uncertainties

spk_0 continues and inflation feel increase, consumer will become more cautious and

spk_0 my full of the expenses. And therefore we expect global consumer spending to

spk_0 record weak growth rates this year and next year why an escalation of US

spk_0 policy and global trade war could lead to a contraction of global consumer

spk_0 spending. And changes in US policies will affect a range of countries and

spk_0 industries. Being the top exporter to the US, the European Union, Mexico, China

spk_0 and Canada are vulnerable to US tariff risk. Trade dependent economies are

spk_0 also affected in case of higher global trade barriers and increasing

spk_0 protectionism. In terms of industries, machinery, electronics, transport, vehicle,

spk_0 raw material and textiles are among the sectors that would be most affected

spk_0 because the US is heavily reliant on imports of those goods. And given the

spk_0 significant risks of changing trade policies and geopolitical tension on the

spk_0 global supply chain, we continue to involve and adapt. What we have seen is that

spk_0 some global companies have announced plans to reinvest or expand the

spk_0 operation in the US to avoid aviabes. Why this reshorving trend may increase in

spk_0 the coming year. The high labor costs in the US as well as its reliance on

spk_0 imported raw materials can hinder the effectiveness of President Trump's

spk_0 plan to revive the US manufacturing sectors. The second trend in the global

spk_0 supply chain we have been seeing is that we are rooting for Chinese goods because

spk_0 the country we reinforce is the risking strategy with the US and further enhance its

spk_0 export to other markets across Asia and Europe. And finally facing

spk_0 reciprocal tariff from the US. Countries like India or the ASEAN, the Association

spk_0 of Southeast Asian Nations, we now seek to strengthen their trade relationship

spk_0 with the European Union, with China and other regions. Why continuing to

spk_0 position themselves as alternative production location for global companies

spk_0 that are seeking to diversify their supply chain. So overall going forward, we

spk_0 think that regional and bilateral trade ties we gain importance in this new

spk_0 global trade regime and this we offer good opportunities for business that

spk_0 look into alternative markets. Some of you might have tariff fatigue, we don't

spk_0 just yet. They're still plenty to say, not least as we're already starting to

spk_0 see things happen on the ground. It's not so theoretical anymore and we are

spk_0 going to be looking through the lens of three industries, the parallel automotive

spk_0 and appliances, hand at least three A's, and have been chosen simply for the

spk_0 reason that the imports from China make up the bulk of US sales and these

spk_0 industries as LAN has explained. And so they're particularly vulnerable and we

spk_0 have our three experts to talk about these industries and the impact of tariffs

spk_0 on them. US trade tariffs are going to impact a broad range of goods, everything

spk_0 from various B2B components to consumer items. For example, imports

spk_0 represented around 1-3rd of total US automotive consumption back in 2024,

spk_0 around 75% of apparel consumption and more than 70% of electronics consumption.

spk_0 So in this section I'm going to overview how automotive industry is dealing

spk_0 with these challenges and I'm also joined by Tim and Margaret. They will

spk_0 review how appliances and fashion industries are also coping with uncertainty.

spk_0 The automotive industry will be one of the first ones to feel the immediate

spk_0 effects of the trade tariffs and it will be quite significantly disrupted by it.

spk_0 For example, as of 2024, United States imported around 50% of passenger cars

spk_0 and 30% of pickup trucks. So what it means for companies that at least in the

spk_0 short term it will be very difficult for them to change their production

spk_0 networks. So car companies will have to deal with a higher prices of imported

spk_0 goods and this could lead to increased price pressures for the end consumer.

spk_0 For instance, average price of the pickup truck could increase by up to

spk_0 $6,000 US dollars and average price for passenger car by up to $4,000 US dollars

spk_0 because of these additional trade tariffs. Of course, automotive companies are

spk_0 doing all they can to minimize the impact on the end consumer. For example,

spk_0 car companies have stockpiled more cars before the tariffs hit them. They are

spk_0 also leaning on their extensive production networks to minimize the

spk_0 cost increases and for example, general motor claims that it can absorb from

spk_0 30 to 50% of tariff impact by simply adjusting its own supply chain. But of

spk_0 course, car companies cannot do this forever. So price pressures and price pressures

spk_0 on the automotive industry supply chain are going to remain quite significant

spk_0 over the long term. What is also interesting that the situation that car

spk_0 companies are dealing with is not completely unique and there could be some

spk_0 lessons learned from the appliances industry. So Tim, could you share some

spk_0 examples how appliances industry was coping with trade tariffs in the past and

spk_0 how it is dealing with the current situation? For appliances, this is not the

spk_0 first time that the appliances industry in the US has seen tariffs and it's

spk_0 interesting because we now have a study from the Federal Reserve Board and

spk_0 the United States University of Chicago that looks at the impact on

spk_0 tariffs on washing machines and dryers and there are few interesting facts

spk_0 that we can talk about. In 2018, the US imposed a 20% tariff on the first 1.2

spk_0 million imported washing machines and it resulted in a 12% price increase of

spk_0 washing machines and more interestingly, dryers, though it was untariffed,

spk_0 rose by drop percent as they will often purchase together which resulted in

spk_0 consumers having to pay a lot more at the retail store. This is because domestic

spk_0 brands in the US also do this opportunity to raise prices and this has caused

spk_0 US consumers in total about 1.5 billion more annually in terms of price

spk_0 hikes. The study concluded that tariffs cost a significant higher cost and

spk_0 it largely outweigh the benefits of increased domestic production. Bringing

spk_0 back to today, we've seen that demand has not collapsed due to the tariffs but

spk_0 remains slow and this is particularly compared to pre-2023 levels. In

spk_0 bang of tariffs on Chinese products, I expected to raise retail prices,

spk_0 pressure margins for import rely firms and will continue to benefit domestic

spk_0 manufacturers as well as companies that are producing in Mexico. We expect many

spk_0 different product categories to be affected, some more than the others. At

spk_0 condition, the numbers are particularly vulnerable due to it being highly

spk_0 seasonal and more importantly, most of the air conditioners are being imported

spk_0 largely from China as well and this makes a very vulnerable to tariffs. A less

spk_0 seen as a whole but more stable demand category of fridges, washes and dish

spk_0 can't decrease where we expect prices to increase but consumers will have to

spk_0 continue to buy rather than repair. Small appliances in our opinion is the most

spk_0 vulnerable just because most of it are being bought, the very little being

spk_0 manufactured in the US and the prices of these products that expected the

spk_0 increase as well. In terms of industry, why we expect

spk_0 unit sales to continue declining but just because of tariffs, just because of

spk_0 inflation, we expect the dollar sales to remain steady. Over to you, Margaret, to talk

spk_0 about fashion. Thank you, Tim and Justina for the introduction. A lot of what

spk_0 you've mentioned, we expect to see it as well in the fashion sector. I think

spk_0 after weeks of fluctuations around the US tariff policies, even if these could

spk_0 change again and not all tariffs and ends are going to be fully implemented,

spk_0 a huge uncertainty has been created and consumers and companies are already

spk_0 reacting to that. In the short term, we've already seen in the US the cost of

spk_0 good-sold increase for fashion companies and we do expect these to mean

spk_0 rising unit prices for consumers in the month to come. According to our research, we do expect,

spk_0 for example, the pair of sneakers that retail at a hundred dollar in March 2025 to sell maybe

spk_0 around a hundred and twenty dollars by September 25 if the tariff were to be implemented fully

spk_0 with Vietnam and China where a lot of these production takes place. Another consequence of that

spk_0 from the US consumer's perspective is probably there going to be a surging demand for resale

spk_0 and secondhand items because this is a way to avoid increased unit prices. In terms of another

spk_0 short term impact of the tariff policies, what we have seen is the Chinese manufacturers looking

spk_0 to diversify their export strategy. In fact, 25% of the textile goods produced in China

spk_0 are exported to the US. So should these exports be more limited in future, Chinese manufacturers

spk_0 will need to sell these goods elsewhere. We've seen a growing interest by Chinese players

spk_0 in large emerging economies like India, Brazil, Indonesia. For example, Xi'in, the fast-fashioned

spk_0 player from China, has re-entered the Indian market last February after a five-year ban.

spk_0 Increasingly, we hear as well of new trade deals, new trade agreements and different

spk_0 export strategies in different parts of the world. We've also seen the EU already putting

spk_0 measures in place to limit the penetration of Chinese-made fashion items in the near future

spk_0 as they want to safeguard their economy. One last impact that will be significant, caused by the

spk_0 uncertainty, is the shift in supply chain. There's already been a lot of written and told about

spk_0 the supply chain shifts in the textile industry. The reality is it's today largely reliant on Asia's

spk_0 centric supply chains and more particularly on Vietnam and China. In the short term, because of

spk_0 the very significant investments required by both the private and public sectors to develop

spk_0 a production cluster to bring incentives for companies to relocate, to upskill the population

spk_0 and so on, I do believe we will see movements within the Southeast Asian region,

spk_0 I have already mentioned India being an increasingly targeted market for production and retail,

spk_0 but I also think we are going to see near-shoring movements. Brazil, Mexico, some companies in the US

spk_0 have already announced a shift in some of their production there, or have plans to shift more

spk_0 of their production there to better serve Latin America and the US from these new production hubs.

spk_0 However, I think this is going to be a longer term development compared to the rising unit prices

spk_0 or the new export strategy by Chinese players which we already seen. So in terms of supply chains,

spk_0 I think that's something we're going to observe across the board just in our season, isn't it?

spk_0 Yeah indeed. And we anticipate long-term changes across the supply chains and it's not going to

spk_0 only affect fashion or automotive industries, it's going to affect the broader manufacturing sector

spk_0 as a whole. So some of the key trends we are seeing is that the companies are investing into

spk_0 production near-shoring so it simply means they want to be closer to the end consumer. We're also

spk_0 seeing that companies are investing more into more efficient production methods and to production

spk_0 automation just to better cheer than manage all the cost pressures. And lastly, one of the long-term

spk_0 trends that we are observing is that companies are investing more into vertical supply chain

spk_0 integrations so they want to control more stages of their supply chains and we are seeing some

spk_0 examples of it happening already in the automotive industry. So for companies this period of uncertainty

spk_0 means that they will have to pay more attention towards these trends. It will probably require more

spk_0 financial investments to adjust supply chains but basically adjusting supply chains is the only way

spk_0 how the companies could shield from similar disruptions in the future. So this is the summary

spk_0 from our sites and we will move on with the overview how migration policy is changing.

spk_0 This is Jessica from MiroMonitor where you're glad you found our podcasts.

spk_0 Since you're here we already know you're looking for insights to identify opportunities in a

spk_0 complex market landscape. This is Jessica from MiroMonitor we are glad you found our podcasts.

spk_0 Since you're here we already know that you're looking for insights to identify opportunities

spk_0 in a complex market landscape. We're thrilled to announce our series Opportunity Minded that will

spk_0 help you do just that. Brought to you by the experts at your own monitor each episode dives into

spk_0 a distinct strategic approach. Brought to you by the experts at your own monitor each episode dives

spk_0 into a distinct strategic approach to identify and capitalize on opportunities with actionable insights.

spk_0 To get all the details check out the show description. Back to the episode.

spk_0 So migration policies to limit U.S. immigration or to be expelled existing migrants has a knock on

spk_0 effect on travel destination flows as we've already seen as well as on the construction industry

spk_0 any new build and then of course any purchases that we make in the home and garden sector to fill in

spk_0 homes and we have two experts to speak to that on travel and on home and garden. Caroline and I come

spk_0 at migration policy from the lens of travel and home impact as the sectors that are most

spk_0 directly impacted by this change in policy in a nutshell these changes are affecting where people

spk_0 physically want to be and that's having a number of side effects in demand. This gets into transport

spk_0 and destination choices and the demand impacts that are being felt now today in travel from them

spk_0 but it's also about the labour market and there are job locations within the U.S where migrants now

spk_0 face higher risks from physically attending their workplace. This has ripple effects into both of our

spk_0 industries so Caroline can you get us started in how the policy shifts are affecting travel so far please?

spk_0 Hi everyone yes thank you Nick. Definitely what we're seeing from the travel and tourism

spk_0 perspective is a softening of demand particularly to the U.S. The recent international trade

spk_0 administration data from March 2025 shows a decline of 8.1%. Our travel forecast model for Q1 versus Q2

spk_0 looking at the annualized yearly data for 2025 expects a drop of 7% in terms of trips and 9%

spk_0 in terms of value so we are definitely seeing that the migration policies the fact that there are

spk_0 ports of people being stopped at the borders the much stricter deportations much more difficult

spk_0 to get into the U.S. is having a negative impact and rightly you say that it's impacting as well

spk_0 the hospitality market in terms of labour demand we can see that in the U.S. already a third of the

spk_0 migrant a third of the labour supply is made up of migrants and so you're talking you know of that

spk_0 10 million a third of that are migrants and so of course with challenges and bottle necks in terms

spk_0 of labour that's having a knock on impact on travel and tourism demand and spending and of course

spk_0 it's not just in terms of migration it's not just in terms of labour it's also in terms of construction

spk_0 we're seeing that for example hotel companies that really need to gain scale very quickly

spk_0 they're really struggling in terms of finding you know getting those new construction and new

spk_0 builds built so in terms of you know pipeline development instead they're looking at conversions

spk_0 so you must be seeing something similar from the home and tax side Nick.

spk_0 Absolutely I am you're talking about the construction giving way to alternatives the seeking ways

spk_0 around it I've got exactly the same dynamic going on within house building and that's affecting

spk_0 new build and from a consumer products perspective we know that there are pipes of demand vulnerable

spk_0 if something goes wrong in the housing market so most of the direct links are to products like

spk_0 homewares and furniture it's an obvious causality but this is also about renovations its

spk_0 supplyances its electronics it can even be food and drink to an extent it's any sector where

spk_0 shopping journeys get triggered and need cases are created by the act of moving home and creating

spk_0 a new household. New build homes are around 15% of all home transactions each month in the US

spk_0 and each new build is linked to about four other home transactions of existing properties due to

spk_0 the chain and the new build is generally at the top of the chain and any impact that goes wrong

spk_0 within the new build is going to cascade down through the chain so if something happens in there

spk_0 the actual impact of it's a lot bigger than people might expect and building constructions the most

spk_0 vulnerable sector in the US to migration policy. 29% of construction workers are migrants overall

spk_0 and that gets up to 40% in some of the largest areas of the country for house building

spk_0 and there's a particularly large mix of undocumented inside of that so the national association

spk_0 of home builders started warning around January that the immigration and customs enforcement agents

spk_0 having quotas which is one of the new things inside of policy this year for deportation is going to

spk_0 construction particularly and it's because a building site becomes a very tempting environment

spk_0 for auditing purely for the numbers game and there are multiple reports this year in a rising

spk_0 nice raids two building sites two and the NAHB is now reporting a related rise in absenteeism

spk_0 because of course people don't want to be there they don't want to take the risk of being there

spk_0 that means delays it means properties not starting on time it means disruption it could

spk_0 mean house price rises in the future US census data in March in April this year have started to

spk_0 make that warning a little bit more solid in terms of some numbers and we can see it's starting

spk_0 to reflect inside of a new house build so homes for sale that are not started yet but are offered

spk_0 for sale that they're rising in number homes under construction are dropping so all in we can see

spk_0 about 11% of the new home constructions have been impacted so far that was in March and we saw a

spk_0 slight rise in April for the households affected by that last minute delay to our house move

spk_0 their immediate needs are going to be into things like temporary storage solutions that's containers

spk_0 but they're also potentially in rental services and if they're going to be staying longer than they

spk_0 intended to in their own home they're also going to need some products and it's getting into

spk_0 cleaning maintenance and also just general replacement for all the FMCG and consumable products

spk_0 that may have actually been disposed when they were thought they were moving home the other side

spk_0 of that is of course there's demand triggered by that house move which is no longer going to be

spk_0 and calculating that through the new build and the cascade into existing transactions it's looking

spk_0 like any demand directly triggered by a house move is facing a negative 7% volume pressure

spk_0 and that's going to either be lost or it will be delayed until later in the year some of it

spk_0 we're feeling already I mean that the impulse purchases that are attached to it are happening

spk_0 right now but if we think about something like a kitchen or a bathroom renovation that

spk_0 impact tends to land about six to 12 months downstream or they had delayed house move

spk_0 so just like you Caroline I think there are aspects of this topic that we're feeling and we're

spk_0 living right now but there are also aspects that we're only going to really start to feel from

spk_0 in 2026 and that's coming from what we can already see happening today in Q2.

spk_0 I mean one of the positives that we're seeing in travel is the interest in stay-cations just as we

spk_0 saw during the pandemic and that really was a buffer from some of the volatility that we saw at

spk_0 the time during COVID and it's very interesting I was looking at the numbers for domestic tourism

spk_0 spending and it's around 1.3 trillion so it's 86% of total tourism spending so when we see

spk_0 international tourism demand so key markets such as China, Canada, UK, Mexico, shifting to alternative

spk_0 destinations if anything you know that staycation effect is going to keep travel businesses reassured

spk_0 for the moment. Do you see staycations as an opportunity as well for Homentek?

spk_0 So inside of the pandemic time period we saw a very strong causal link from staycations towards

spk_0 spend within the garden and it was the social aspect and having more need for hanging out within

spk_0 the garden so storage it was furniture it was decorative aspects as well there was a lot of extra

spk_0 spend that kicked in due to staycation so if that does come around again then there are going to be

spk_0 some winners inside of that as well. So yeah it's an interesting thing I think with all of these

spk_0 situations there's going to be positives and negatives and opportunities to find inside of it.

spk_0 We're going to pass over to our colleagues to talk about deregulation thank you.

spk_0 deregulations the changes to common regulations like DEI foods ingredients or chemicals

spk_0 amongst other areas there are policy drives that will affect the production of consumer health

spk_0 categories and of course the ingredients that go into those categories as well as categories

spk_0 in foods and beverages and here to talk about ingredients and consumer health are our two experts.

spk_0 The Make America Healthy Again movement also known as Maha is a major component of the first few

spk_0 months of the Trump administration especially when it relates to health policy and health regulations.

spk_0 Today I'm here with Ena who's going to be talking about the implications of Maha for

spk_0 ingredients and then I will step in and talk about how it's going to potentially affect the market

spk_0 for supplements and over the kind of drugs and I wanted to ask first of all about the Maha movement

spk_0 and and potentially its effects on food ingredients especially around ultra-process foods so what do

spk_0 you think this is the effect is going to be here on on ingredients in the United States.

spk_0 I think now that's a very very important question. Do you know Maha stands in

spk_0 ultra-process food has been very very strict. The administration has also proposed a lot of

spk_0 bands on synthetic dyes and alongside that you know there's a lot of pressure on food and

spk_0 beverage companies to sort of reformulate and remove all the synthetic dyes and artificial colors

spk_0 from their reformulations that said I think there are a lot of practical challenges that are

spk_0 going to restrict the complete overnight shift and the biggest of all is the regulatory ambiguity

spk_0 because as of now though these are only proposed bands there are no blanket bands which means that

spk_0 a lot of companies that are trying to just face out artificial colors they are doing it on a

spk_0 long few basis right and then we've also heard PepsiCo and a couple of other companies just announcing

spk_0 plans but doing it on a voluntary basis to sort of remove the artificial colors. PepsiCo's

spk_0 specificity has announced to remove artificial colors from their popular brand days by the end of

spk_0 2020. So yeah it's a it's a big shift. So when you're thinking about what this means for

spk_0 ingredient supply specifically around these dyes or maybe some of these alternatives for

spk_0 ultra-process foods how is that going to work like functionally either this year or in coming years?

spk_0 Maybe let's start with the supply right so firstly I think there's not going to be enough supply

spk_0 of natural alternatives immediately so let's say if all the brands were to shift to natural alternatives

spk_0 or natural colorants tomorrow the supply chain wouldn't just keep up. At the moment a lot of

spk_0 companies are exploring alternative colors like the plant-based extracts but a fly pea flower or

spk_0 calcium phosphate which by the way both have gotten approved by the FDA to get used in

spk_0 formulations but again the question remains if there's going to be enough supply ever so maybe

spk_0 it is going to be at a later stage but right now the question for companies is should they be

spk_0 thinking about reformulating now or should they be waiting for the supply of their desired

spk_0 ingredient to reach a point when it stabilizes and then start about then start thinking about

spk_0 reformulating. And do you get a sense that there's a lot of consumer momentum behind this I mean

spk_0 is Maha reflecting consumer sentiment in this in this way? Yeah we can say that Matt but I think

spk_0 the other thing to also think about is again from the consumer standpoint the moment there are

spk_0 going to be reformulations they are also going to impact the taste and then by that logic also the

spk_0 consumer acceptance you know if I and maybe you would be able to recollect this back in 2016 when

spk_0 general laws had actually done a reformulation for their very popular cereal brand tricks it just

spk_0 wasn't really accepted well by consumers a lot of consumers complained about the dullness and the color

spk_0 and the taste and the company was sort of forced to go back to their original formulation.

spk_0 So the point I'm trying to make is that you know even even if companies do want it firstly they would

spk_0 not be compromising I'm sorry if consumers do want it they wouldn't be really compromising on the taste

spk_0 and the second bit is also going to be the cost let's say we bring in a lot of natural

spk_0 colorants through the supply chain into the formulations the cost is going to increase so yes

spk_0 consumers do want clean labels but at the same time they're not going to be willing to pay

spk_0 real high prices for the same formulation so that is something that has to be kept in mind.

spk_0 So what do you think is going to happen maybe over the next few years if this Mahabh

spk_0 movement is really intent on making these changes? There are two things that are going to happen

spk_0 firstly rather than brands going or doing a data reformulation across all their skews I think

spk_0 we're going to see a lot of brands launching parallel product lines using natural colorants.

spk_0 Now what this does is it allows consumers to have more choices and it also allows brands to sort

spk_0 of optimize the taste and also secure stable supply chain. So which is I think going to be a very

spk_0 very important thing and then secondly I think brands are also going to start exploring

spk_0 reshoring and neo-shoring as options and then you know regions like Latin America and Canada

spk_0 they are going to emerge as very viable midterm solutions because of the agricultural compatibility

spk_0 that we three reasons regions have and also the regulatory stability as well.

spk_0 I'm hearing a lot of similarities to the markets for for instance vitamins and dietary

spk_0 supplements but also some important differences from what you're saying for the markets for food and

spk_0 beverage ingredients. Just on a first first blush you know the Mahabh movement I think the

spk_0 industry of vitamins and dietary supplements believes very strongly that Mahabh will be will be

spk_0 ultimately very beneficial for the industry. It's a philosophy that really foregrounds like

spk_0 you're saying a lot of these natural orientations that will that kind of that is is tied to the wellness

spk_0 universe so they're very interested in supplements writ large right so I think the baseline expectation

spk_0 from the industry perspective is that these structures and this philosophy is going to result in

spk_0 stronger sales for vitamins and dietary supplements but what you're saying in a as kind of these

spk_0 push and pull factors from the ingredient side is definitely the case in vitamins and dietary supplements

spk_0 to one chief kind of friction here is that the philosophy I think is there but like the nuts

spk_0 and bolts right now are creating some headwinds for the industry so instrumentally I think it's

spk_0 mostly around tariffs right so we do know I think historically vitamins and dietary supplements were

spk_0 thought of as being recessionary recessionary protected right people would gravitate towards

spk_0 supplements in periods of higher economic insecurity that didn't happen in 2022 and in fact we're

spk_0 actually in a period of slower growth for vitamins and dietary supplements in constant value terms

spk_0 the category hasn't grown it's negative 2% over the last four years and that in constant value

spk_0 terms so all the growth has just been in pricing in the last few years and so if consumers have already

spk_0 been reluctant to engage with these products if prices increase again I think that's going to be

spk_0 a real tricky aspect for them and the uptick for for for engagement with vitamins and dietary

spk_0 supplements and then one other quick point and I'll throw it back to you you know is that what

spk_0 you're saying about on-shoring or near-shoring and that might be beneficial medium term for

spk_0 for ingredients that's not necessarily going to be the case for vitamins and dietary supplements

spk_0 because the cultivation of herbal and botanical products there's going to be some inconsistencies

spk_0 there so you can't for instance on-shor near-shor to Mexico products are being made in India or

spk_0 grown in India and in China so there's going to be a lot of problems for those kind of fast-moving

spk_0 herbal ingredients and herbal supplements that have really supported the market in the last

spk_0 few years in the United States. So Mike you've spoken about supplements and deregulation overall

spk_0 what do you think is going to be the impact of deregulation both on supplements in OTC?

spk_0 Yeah I think the story for OTC is a little bit different because we do know that maha

spk_0 leased rhetorically is supportive of supplements and is not supportive of pharmaceutical

spk_0 based products chemically derived products which which are basically over-the-counter drugs.

spk_0 Now the main pipeline for innovation over-the-counter drugs is so-called switch pipeline which goes from

spk_0 pharmaceutical to over-the-counter and in the first Trump administration this was a big big

spk_0 component of the FDA commissioner at that time really fast-tracking the approvals of OTC switches

spk_0 and even the Trump administration right now they had an executive order in April where they

spk_0 basically outlined that they were still really supportive of a really aggressive switch process

spk_0 really trying to fast-track these products into the consumer market. That's great

spk_0 but I think that does create some friction with the expressed aims of the maha movement which

spk_0 we've already talked about and right now I think industry is trying to wait and see what this

spk_0 actually means right if the executive order is actually going to have any teeth if regulatory the

spk_0 health and human services and an FDA establishment are going to be putting a lot of muscle behind this

spk_0 or whether maha and the maha movement is going to maybe slow walk this and in fact then

spk_0 you're going to have a situation where OTC innovation will start to dry up and you'll see start

spk_0 start to see some downstream effects on sales in that category in the coming years.

spk_0 So it does seem like it's going to be a way to end what story across ingredients and supplements as

spk_0 well but that we're going to move on to consumer behavior. So consumers how is they changing their

spk_0 shopping choices what are they putting in their baskets in terms of food categories and how

spk_0 manufacturers maintaining the cultural capital that is particularly relevant to industries like

spk_0 alcoholic drinks. So over to our two experts on foods and beverages. All right so we're talking

spk_0 about the consumer we need to finally think about the long term of this right so if you look at

spk_0 your amount or data the number one concern of the consumer is things cost too much. Quenna

spk_0 this is a major problem for them. So from talking about what the consumer is doing in response to

spk_0 Trump policies it leaves the next step in a long term procedure. So that was you know the post

spk_0 pandemic supply chains and then we had the war in Ukraine and now we have the Trump policies and all

spk_0 these things just about remove prices up and up and up which means that their spots that we're seeing

spk_0 in many cases are just kind of what we've been seeing before. We would private labels things like

spk_0 that taking a new form and a spirit of consumer charm you like to use when describing this.

spk_0 There was a term that I you know as as we discussed previously it could potentially sound to

spk_0 a lemon like a little bit too negative or pessimistic but I think it is the best way to encapsulate

spk_0 this kind of overall environment that we're describing right now and the volatility of the

spk_0 Trump policies that are just at the latest step in the very long process that we described and I

spk_0 think that term is the state of Perma crisis. The idea that we have a series of interconnected

spk_0 crisis as you mentioned yourself starting you know around 2020 or some some would suggest

spk_0 even before that with the pandemic then the logistical disruption that followed that the massive

spk_0 boom at least in alcoholic drinks after people were allowed back outside and then the inflationary

spk_0 spikes geopolitical issues and the Trump policies that are still ongoing changing the the

spk_0 chessboard so to speak all the time and I think that state of Perma crisis is informing

spk_0 everything as I will be discussing very quickly about today from the from the exercise taxes to

spk_0 immigration policies to you know trade agreements to even ultimately the state of

spk_0 mind of the consumer they are confidence levels that actually have an impact across the

spk_0 bottom all that are there any particular areas that you think should be the priority you're looking

spk_0 at right now as under you know with a big question mark or a big exclamation mark where we should

spk_0 focus on well I think the key thing is unpredictability right really we don't know what tomorrow is

spk_0 going to bring so out focus on is the long term perspective what do we know it's going to be true

spk_0 tomorrow and I think we keep you look at is the globalization right that's the real trend here

spk_0 Trump anyways is the symptom he's not the cause of this we go back to Brexit or we go before that

spk_0 we go to the collapse the doha round of trade talks or Russian people from the G8 as we look

spk_0 globalization peaked 10 15 years ago and this is just the next phase of de globalization so we have

spk_0 a food industry is recovery reliance on globalization to keep prices low keep variety high bring those

spk_0 global flavors and varieties consumers we got to look at effect next couple years

spk_0 remember what happens in DC we're going to see less globalization take place that's just a long

spk_0 term trend and we got prepare ourselves what that's looked like for the consumer there's something

spk_0 we know we're going to take place as the commonization we know wellness is going to be big deal

spk_0 because as the world comes uncertain people try to prepare themselves by eating healthier and

spk_0 you know optimizing themselves and the farble adulteress the other world's stressful I'm maybe I can't

spk_0 buy the nice outfits I can't get the trip but I can buy the chalk at mark I can get the coffee right

spk_0 there's a lot of interest in those small indulances and I know in your industry of course that's

spk_0 huge and that is that is exactly what my interest is about and affordable indulgence of course

spk_0 includes the element of affordability there and I think that is one of the major casual

spk_0 this potentially of the environment that we're describing now because as some of our listeners

spk_0 potentially know the alcohol industry has been driven for the last couple of decades by the

spk_0 concept and mantra of premiumization the idea that people drink less but better quality

spk_0 aspirationally most of the educated drinks moving forward in terms of value if volume still

spk_0 remains largely subdued now the question of course is within the environment of permacryce that we

spk_0 describe now can primimization continue and I believe that partially it will but not in the way

spk_0 that we know and we have been accustomed to until now there will be deprimimization forces

spk_0 some trading down and some polarization replacing this kind of monodimensional primimization mantra

spk_0 and with the other point that you also mentioned which is the the forces of deglobalization basically

spk_0 alcohol is always reflective of this undercurrents society and I think we start seeing something

spk_0 singular in alcoholic drinks international brands potentially can face significant problems

spk_0 moving forward at least in the short to medium term as consumers are shifting inwards

spk_0 rediscovering their own local specialties at the same time that they take a step back from this

spk_0 kind of you know as I said massive focus on international aspiration of brands

spk_0 westernization the idea of emerging markets adopting western brands and ultimately that is

spk_0 the bigger concern I have here which is beyond the logistics beyond the economics beyond all of

spk_0 all of the numerical quantity is it easy to quantitatively or at least assess the points that we're

spk_0 making what happens when it comes to the cultural capital the soft power and and the fact that some

spk_0 of alcohol drinks brands encapsulate and reflect the values or at least are perceived as reflecting

spk_0 the values of the countries they are coming from. Berbon would be obviously reflective of all

spk_0 things americana or vodka eastern european markets would be iconic for them casasha in brazil or

spk_0 beiju in china these products have the potential to resurface as local specialties rather than just

spk_0 international we of course they will continue but it will we will be taking a step back from this kind

spk_0 of massive internationalization stage that you kind of alluded to as well would you agree to that?

spk_0 symbolically it's such a difference between drinking bourbon versus eating an american potato right

spk_0 I think the cultural resonance is so important here and as we kind of retreat into ourselves

spk_0 all that as countries it could be harder to have these international brands will succeed not

spk_0 impossible by any means but it becomes a lot more challenging because everything comes so

spk_0 politically coded ultimately. So we we obviously acknowledge that this was extremely brief and we

spk_0 tried to capture a fast moving situation from a number of different angles but obviously we will

spk_0 continue doing so we acknowledge the levels of uncertainty out there and the fact that things can

spk_0 change every day or every week following a single tweet sometimes but we're there here using our

spk_0 strategic intelligence our experience for many years to actually navigate this extremely interesting

spk_0 and challenging times and hoping to continue these conversations moving forwards quite often.

spk_0 thanks to those of you who have submitted questions for us we've gone through them and we're

spk_0 select a few representative ones so over to the Q&A now we've had a couple on we could

spk_0 group into say geographies categories and industries so maybe we start with the geographies the

spk_0 specific interest in Latam and Brazil maybe land you want to take that one so the broad

spk_0 impacts of policies in Latam and how will Brazil specifically be affected by them?

spk_0 yes thank you Zora that's a good question so Latin America is heavily linked to the US in many

spk_0 aspects including trade and migration and therefore obviously the impact of changes in US

spk_0 policies is significant for the region. For example countries like Mexico will be hit hard by

spk_0 US tariffs because more than 80% of the countries export go to the US so any decline exports in key

spk_0 sectors like automotive and machinery due to tariff can wait on Mexico over all economic growth

spk_0 post-pick. Now about Brazil why the country is not a major target for US tariff it can be affected

spk_0 by global trade tensions given its large export sectors especially those involving China

spk_0 which is the key trading partner of Brazil. So Brazilian key exports such as crude oil and iron

spk_0 or highly sensitive to changes in the Chinese economic performance so if China economy weakens

spk_0 due to US tariff it's demand for Brazilian metal and iron commodities may fall and on the other

spk_0 US tariff may also create some opportunities for certain exports from Brazil such as soybean for

spk_0 example because China would replace its US sourcing with other countries such as Brazil. So

spk_0 overall I think Latin America's countries is also under-trans pressure to tighten their

spk_0 old immigration enforcement and a decline in migration to the US means there would be some

spk_0 excess labor and unemployment may rise in Latin American countries in the short and medium term

spk_0 so this will be important for Latin American countries to strengthen its domestic economies

spk_0 and create in-up jobs for its population going forward.

spk_0 Thanks Lan and onto the category specific questions. Quite a few of them on food and drink.

spk_0 What categories of food and drink excluding alcohol will be most affected by trade disruption

spk_0 and what order of magnitude in terms of volume cell change in the context of imports and exports

spk_0 one for you Matt. Yes we're talking about the United States. You have to look at categories that

spk_0 really can't source domestically realistically so coffee and tea jump out to me as big ones there's

spk_0 just really no domestic dosing capability there a lot of produce be affected a lot that comes

spk_0 overseas to the out of season. If you're looking at year-round produce you've got to go overseas for

spk_0 that and that's for exposed to tariff risk seafood is another one a lot of American seafood comes

spk_0 imported as well as many of the trendier cooking oils so the olive oils the avocado oils

spk_0 lots of people really trying to move for these days are actually very exposed tariff risk.

spk_0 Looking at the other side of things what categories will affect it outside the United States

spk_0 it's going to be really iconically American products. They're exposed to boycott risk many cases

spk_0 although that's going to depend on targeted sanctions many cases we're seeing that

spk_0 tariff retaliation is being done systematically to target certain products from certain areas

spk_0 over others. This is a big question as to what specifically there's going to be and that's

spk_0 going to be subject to political wins or anything else but for sure a more visibly American

spk_0 product is probably the more reason it has to worry overseas so all the less of things like commodities

spk_0 you know soybeans potatoes things that nature. Thanks Matt and linked to that you know the point

spk_0 of provenance is also part of our next question here American retail chains still interested in

spk_0 European products or are they just fine in trading American foods and beverages. For us if you

spk_0 want to look in here that is a great question and I think it reminder for everyone that

spk_0 alcohol is not just simply interchangeable so it's not that someone will just shift very easily

spk_0 from drinking a California wine from Napavale to a French one and the other way around or simply

spk_0 can replace the local product you know their berbon the tequila with a local berbon or the other

spk_0 way around. There is a significant status and symbolism associated with these products and

spk_0 just as Matt just mentioned about other categories as well the soft power the cultural

spk_0 prowess of these kind of products and the associations, the linguistic cultural associations that

spk_0 people have with them even if it is not centrally controlled boycott per se we will start potentially

spk_0 seeing some ripple effects from all of these that some consumers are avoiding some of these

spk_0 products coming from these countries that doesn't mean that they don't want them anymore but the

spk_0 combination of the pricing the combination of the anemosity in the air and the general

spk_0 environment of the trade and how it evolves of course it will have an impact it's just very

spk_0 important to remember that it's not just going to be every loss will be a gain for local producers

spk_0 it can't be made like that and I would actually suggest that many of them can double down on their

spk_0 local expertise they are local credentials hyperlocal even sometimes to capitalize on this

spk_0 disruption but at the same time it's not a given that the losses from Europe the losses from

spk_0 Mexico the losses from Canada will definitely be a gain for local producers de facto it's just a

spk_0 process that we need to keep a keen eye on. So I wanted some industry specific questions we've had

spk_0 a few of these particular interest in a parallel is nearshoring a feasible option for the USA would

spk_0 you expect growth in central america and also another one on the effect of margins in the

spk_0 apparel industries this is one for you Margarete. In the short term I expect the margins to erode

spk_0 in the US due to the higher cost of importing the apparent foodware items to be sold in the country

spk_0 knowing that 80% of these is import driven. So I think in the short term US consumers are very likely

spk_0 to face higher prices as as bronze and retailers we need to pass on these extra cost to consumers

spk_0 and that means we might also see a surge in demand for second hand which will be seen as a cheaper

spk_0 alternative to the primary markets. Outside of the US in the short term I also expect Chinese

spk_0 manufacturers to diversify their export strategy and look for new export markets to sell their

spk_0 surpluses and that's why we have seen she in for example the Chinese fast fashion giant

spk_0 re-entering India in the last few months. In general we will see new trade agreements that will

spk_0 be signed new retail routes that will develop and some countries my may raise tariffs

spk_0 or take some special measures to protect the economy against Chinese imports that's the case in

spk_0 the EU for example that has already taken measures such as imposing a flat fee and parcels valued

spk_0 at less than 60 euros that come from outside of the block. And in terms of the near-shoring and

spk_0 reshoring of the supply chain I think yes there has been a growing interest into South America

spk_0 and Central America as a production hub for the textile industry in the last few weeks.

spk_0 The reality is that there is at the moment a capacity and infrastructure constraint in the

spk_0 region which will not be able to absorb all the volumes produced in China and Vietnam

spk_0 in the immediate future. For near-shoring to take off we will need to see a significant amount

spk_0 of private and public investment take place to really develop a new cluster of production.

spk_0 This will be also involving regulators and tax incentives as we have seen in the past for

spk_0 example in the special economic zones in China. We have a question here on reshipping

spk_0 reselling goods originally from China Nick do you want to take that one on? Super thanks

spk_0 Laura. Two thoughts to share on this. The countries in 2025 who have the largest tariffs landing

spk_0 after the 90-day portals coincides with the same list of countries that were major reshipping hubs

spk_0 for Chinese product that last time around when we did tariffs back in 2018.

spk_0 We have got Cambodia facing 49% for Vietnam 46, Thailand 36, the list is quite long.

spk_0 Mexico does an attempt to apply 25% that got caught up in USMCA and this saw the

spk_0 against the backdrop of a 10% tariff across the world. This is no accident and that's a

spk_0 suspect part of the tariff negotiation happening now is going to include more barriers to reshipping

spk_0 for everyone making deals this summer. This is how the wording is going to come out.

spk_0 So the first observation is that reshipping barriers are rising and the penalties of being

spk_0 seen reshipping are overtly more painful within US trade relationships. The second thought is that

spk_0 the US agreement with Canada and Mexico, the USMCA, articulates an active US view of what

spk_0 constitutes reshipping in a trade agreement. There are product specific complexities and there

spk_0 are exclusions that are special rates so there is no substitute for the due diligence

spk_0 of looking at the specific case for yourself but having said that, putting the rules of origin

spk_0 as simply as I can manage, for a skew not to be viewed as reshipped within that existing agreement,

spk_0 60% of the customs value on entry into the US needs to have come from value add from the materials

spk_0 or from the processes in the country you are shipping from and calling the origin.

spk_0 If that threshold isn't met, if you're just doing something like assembly or repackaging and

spk_0 the value add is 5-10% of what gets shipped onto the US, then by that USMCA trade rules,

spk_0 that's reshipping and that means a different origin country comes into play and for example,

spk_0 if this is a Chinese product being reshipped, the Chinese tariff will kick in. So I think the

spk_0 trade barriers around this are rising and I think the penalties of getting it wrong are rising.

spk_0 Thanks for watching. We have a couple more here on M&A activity. Has anyone seen an

spk_0 uptick in M&A activity in their industry as a result of the challenging operating conditions?

spk_0 I think maybe in a parrall we've already seen that the most Margaret do you want to take that one.

spk_0 I think there's been an uptake lately because private equity firms and businesses with the cash

spk_0 are looking to acquire distressed assets that in the mid and longer term, I think we will continue

spk_0 to see interesting movements when it comes to M&A's and these will multiply. Either to gain access

spk_0 to new markets or to complete strategic verticalization and control better once supply chain.

spk_0 I think also some businesses will be looking to make economies of scale or gain new skills,

spk_0 especially when it comes to AI and technology, which will be essential to maintain a competitive

spk_0 edge and maintain profitable margins as well in this challenging environment.

spk_0 Thanks Margaret and probably our last question now. We have, without quite a few actually on the longer

spk_0 term outlook, so looking beyond the next four years, what would be the implications of these

spk_0 economic changes beyond Trump's tenure ending in four years? Another one will it be possible to

spk_0 reverse these policies and so on. Link to de-globalization, obviously Trump has an invented

spk_0 de-globalization but certainly accelerated it. Will this continue beyond? Matt, do you want to take that?

spk_0 Given your categories of arguably the least discretionary spend?

spk_0 Yeah, I mean, I'll talk about food, but I think it's probably speaking to your cross CBG

spk_0 industries. So if you look at overall global consumer expenditure, at the end of the Cold War,

spk_0 it starts falling almost every year as globalization kicks off. So the 90s, 2000s, it's falling,

spk_0 it's falling, and it stops actually about about two decades ago now and starts to reverse,

spk_0 which shows us there's not really just Trump that's pushing these prices up, it's de-globalization,

spk_0 it's geopolitics changing, it's climate change, and we go over the last two decades or so roughly,

spk_0 every reputable spend more money of their of their electoral incomes on food. Another essential

spk_0 setting is probably speaking true, things like healthcare, housing, minicases, also going to

spk_0 have been cost. So if we look past the Trump administration itself, there's no reason to believe

spk_0 that this is going to reverse. If you look the long-term drivers, things like population growth,

spk_0 climate change are still going to be issues, which means that if you're the food industry,

spk_0 you're dealing with high prices for the foreseeable future. Barring some massive technological breakthrough,

spk_0 which is unlikely to take place in a short term, there's just a lot of pressures on the supply

spk_0 chains from various angles and a lot of demand, and that's not going to change things. So I'll

spk_0 be looking at a world in which we're in more, you know, cut off trade blocks, stuff's hard to move

spk_0 around the world, it's more expensive it does, and there's a lot more supply chain disruption and

spk_0 origin, and then all points to world in which we're just spending more of our incomes on essentials

spk_0 like food and beverage. And I think we can wrap up with that. But before we do, remember this was

spk_0 just a quick preview of how you're going to can help you unlock wells of opportunity. Don't forget

spk_0 to explore the resources tab below and join our community for even more insights to help you make

spk_0 those confident data-driven decisions. So thanks again to all of our speakers for sharing your

spk_0 expertise with us and most importantly, thank you listeners for joining us today. Enjoy the rest

spk_0 of your day and we look forward to seeing you at future you're going to webinars and events. Thank you.

The business of uncertainty: Impact of trump policies across industries

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