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Predicting President Trump's Effect on the Promotional Products Industry

5 HUGE Questions Answered

Excitement & Anxiety: Predicting the next four years and one man’s effect on the promotional products industry.

Walking through the lobby at his Doral resort in Miami last November, Donald Trump stopped for a moment to do what he’s done in his hotels a thousand times before. “How’s business?” he asked the front desk staff. His employees smiled and cheerfully shouted all positive things just as Trump pivoted to walk outside and climb into one of the large, black Chevy Suburbans that surrounded the main entrance.

Only minutes earlier, Trump sat in plain sight at the BLT Prime restaurant – something he’s known to do – talking to a group of foreign investors. Just hours before that, sporting his “Make America Great Again” hat, the GOP nominee was taking photos and videos with ASI staff in town for the Power Summit, giving his signature thumbs up as phone lights flashed around him. If Trump was stressed, it didn’t show.

In fact, it was clear to anyone watching closely that 96 hours before the U.S. presidential election that Donald Trump wasn’t thinking about Pennsylvania Avenue, the national debt, NAFTA, NATO or anything else that the world’s most powerful person would have to think about, worry about or lose sleep over. Trump was still in branding and deal-making mode, like he always had been, like many thought he always would be.

And then, the following Tuesday happened.

Across the country, reactions could not have been more polarized – a predictable phenomenon given the vast chasm between supporters of two candidates who’d just gone 15 rounds in the most virulently antagonistic election battle in modern memory. In economically depressed rural Appalachia, grown men cried tears of joy, firm in the belief that America’s new leader would return decent-paying jobs to their hard-hit region. Meanwhile, urban millennials wept woe into wine glasses and lashed out on social media, saying they felt personally hurt by anyone who voted for a man they found as contemptible and regressive as Trump. Some economists tolled the death knell for the stock market, predicting the onset of Ragnarok for the American economy, while liberal media’s most eloquent dipped quills in poison ink and unleashed written venom against the president-elect. Others, however, forecast the return of American middle-class prosperity, and triumphal conservative columnists reveled, lampooning what they termed the blindness of the left who failed to realize that their candidate’s inability to connect with many middle- and working-class Americans would cost her the election.

Of course, the controversy didn’t end on November 9. It dragged on with calls for recounts, allegations of Russia hijacking the election, celebrities imploring Electoral College voters to go rogue for Clinton, and all the rest of it. In the end, however, Donald Trump became the 45th president of the United States on January 20, 2017.

Which begs the question: Now what?

Promotional product distributors are asking that as much as everyone else. What does a Trump presidency mean for the industry? As Counselor details here, industry executives are heartened by certain potential developments, concerned by others, and generally keeping a careful eye on how things play out. Come what may, for better or for worse, they’re ready to adapt to the new American reality under President Donald J. Trump.

Video

Will Trump’s Policies Be Good for Our Industry?

Watch ASI's Dave Vagnoni and Andy Cohen duke it out over this topic. Read more here

Will Perception Power Reality?

For Matt Gledhill, 2017 sales roared to life with the momentum of a Texas tornado. The VP of sales and marketing at San Antonio-based Walker Advertising (asi/354440) says the first week of the year was his strongest for sales during that period since he entered the promotional products business a decade earlier. Even more encouragingly, the robust revenue surge appeared poised to continue, at least in the near term. “Business,” he says, “is booming.”

While Gledhill couldn’t be classified as an ardent Trump supporter, he believes the billionaire businessman’s ascension to the presidency was the fuel giving fire to 2017’s torrid start. “Many business owners are more optimistic because they believe Trump is going to do good things for the economy,” says Gledhill, whose core clientele consists of drink brands and manufacturers. “When they’re more optimistic, they loosen the reins on their budgets and they invest more to build their businesses. That can benefit our industry.”

Many executives and sales leaders in the promo products sector offered similar assessments, saying confidence among people who control the purse strings at businesses large and small appears to be swelling as a result of Trump’s election.

This initial optimism, they believe, is a byproduct of Trump’s personal track record of financial success as much as it is any policies or reforms he’s pledged to pursue. In this sense, Donald Trump has injected a bit of life into the economy simply by being Donald Trump – a leader whose reputation as a no-nonsense capitalizer of capitalism was advanced, in the eyes of some business leaders and workers alike, by a series of post-election occurrences. These included Carrier’s decision to keep jobs at an Indianapolis facility rather than shipping them to Mexico, Ford’s announcement that it would add 700 jobs in Michigan and scrap plans for a new small-car plant south of the border, and even Trump’s private meeting with Jack Ma in which the Alibaba executive chairman discussed creating one million jobs in America. Trump was able to leverage these into public relations victories, helping to elevate confidence, among some in the business community, that he is the chief executive to stoke the American economy.

“I think a lot of executives see him as someone who has their back – someone who is going to be good for business,” says Vicki Clayman, CEO of Partners N Promotion (asi/350153). “They’re feeling very optimistic with him in charge right now.”

As with Gledhill, the C-Suite confidence helped spur early first quarter sales for Clayman, too. Usually January is a slower month for Partners N Promotion, but no winter doldrums depressed the account books this year. “We’ve had a very steady flow of orders,” says Clayman, noting tool companies and organizations in the transportation industry were among the clients spending.

Despite the sales spark at the start of 2017, Clayman, Gledhill and other veteran industry pros balk at predicting that the momentum will continue long-term. The confidence bubble could burst, deflating businesses’ willingness to spend along with it, unless the new regime in Washington, D.C. enacts plans for generating sustained prosperity on a broad scale. “The optimism out there now might send stocks soaring and contribute to businesses doing well for the first year or so,” says Clayman. “But beyond that, it will only last if there is real improvement.”

Will Tax Breaks & Deregulation Boost Business?

So far, at least two tenets of Trump’s platform have inspired hope among certain ad specialty executives that lasting economic improvement could be in the cards. The president’s stated intention to reduce taxes on businesses and to abolish governmental regulations that he feels handicap American companies could, they say, help ignite economic activity – and benefit the promotional market. “Our industry tracks closely with GDP,” says Norm Hullinger, CEO of alphabroder (asi/34063). “If the president pursues policies that are good for business, and that turns on the afterburners for the economy, we are in a good position to capitalize.”

Under the stated tax plan, Trump would reduce the top business tax rate from 35% to 15%. The president has also pledged to eliminate the so-called “death tax,” which falls hard on small-business owners. To help stimulate stateside manufacturing, Trump has said he would allow firms to elect full expensing of their plants and equipment – a boon to industry suppliers that manufacture in the U.S., and to distributors whose client base includes manufacturers.

Of course, possibly closing certain tax loopholes and other factors could offset some of the benefits businesses would realize from tax reduction. But on net, the tax breaks could well lead to greater at-hand cash flow for companies across a swath of industries. At minimum, some firms will be keen to invest in marketing and advertising initiatives that help them grow. Therein lies opportunity for distributors. “The first avenue for growth for a business is good marketing,” says Brandon Mackay, CEO of SnugZ USA (asi/88060). “Fortunately, we are all in the marketing business, and we would be happy to help.”

Impact Canada

Canada’s economy is tightly interwoven with that of the United States. It’s no surprise then that suppliers and distributors over the northern border have kept a close eye on Donald Trump’s rise to power. What they’ve seen has given some cause for alarm.

“Overall, there is general unease about President Trump’s potential impact on the economy,” says Mark Graham, CEO of Toronto-based Rightsleeve (asi/308922) and chief platform officer at commonsku, which provides cloud-based business management software for distributors in the U.S. and Canada. “On the whole, I think Canadians find him more concerning than encouraging.”

A possible tariff on goods imported to the U.S. from Canada has, says Graham, the potential to “dramatically impact Canadian exports” – a problem to which Canadian suppliers would not likely be immune. Further, should the U.S. impose import tariffs on Canadian goods, Canada could respond in kind, slapping a tariff on imported American products – a move that could ramp up prices on a wide range of items in Canada. Such inflation could cash-strap businesses, sapping them of resources they’d otherwise use to invest in promotional products.

Among other issues, Canadians are concerned about how a reworked NAFTA treaty could affect their economy, and about the tenor of the relationship Trump will pursue with Canada and its prime minister – Justin Trudeau. Says Graham: “Does President Trump view us as a backwater? Does he want to have a bullying trade relationship or a trusted partnership? These are questions we don’t have answers to yet.”

While there’s worry, there is optimism, too, with some Canadian distributors believing that Trump’s plan to get the U.S. economy humming could jumpstart Canada’s marketplace, given the close economic ties between the nations. “By reinvesting back in the U.S., I believe that will also help the Canadian economy,” says Pete Thuss, marketing partner at Ontario-based Talbot Marketing (asi/341500).

Despite the concerns, Graham says that he is confident that Canadian distributors will adapt to whatever, if any, new challenges materialize, with the savviest companies finding ways to prosper. “Successful distributors are flexible,” he says. “From an economic perspective, I’m very optimistic about our industry and our position as a company.”

On the campaign trail, Trump emphasized that a key to unlocking economic growth would be scaling back regulations. “Every year, overregulation costs our economy $2 trillion dollars and reduces household wealth by almost $15,000,” Trump’s campaign asserted. To counteract such alleged negatives, the president has talked about placing a moratorium on new federal regulations that aren’t compelled by Congress or public safety. He’s also said that he wants federal agency and department heads to identify “job-killing regulations” so they can be removed.

Depending on the shape deregulation takes, vibrant new opportunities for distributors could arise in sectors that range from financial to energy, including the oil, natural gas and coal segments. Again, contingent on how deregulation initiatives go, companies in the promo space could even experience reduced costs and new efficiencies – positives that could allow for greater investment in business growth. “My hope would be that President Trump’s business orientation and distaste for government regulation will stop any further regulations that could negatively impact our industry and small businesses,” says Greg Muzzillo, founder of Proforma (asi/300094). “There are so many unknowns that only time will tell. That said, I am very hopeful.”

Is a Trade War Coming?

While many promo executives share Muzzillo’s positive outlook, there’s also nervousness in the industry about the trade policy Trump will pursue.

Even before he took office, the president had raised the possibility of imposing tariffs (various possible levies have included 5%, 10% and 35%) on imported goods in an effort to boost made-in-America manufacturing and to bring jobs back to the U.S. Decrying the North American Free Trade Agreement as bad for American workers, Trump has pledged to renegotiate the deal or remove the U.S. from it. Additionally, the president has placed China in the crosshairs, calling the country a currency manipulator, unfair trade partner, and stealer of American trade secrets. He has threatened to bring trade cases against China and impose tariffs on imported Chinese goods.

“When Trump attacks China and Mexico – our industry’s two biggest allies for producing products outside the U.S. – that’s something promotional products people need to be concerned about,” says Harry Ein, owner of Perfection Promo, an affiliate of iPROMOTEu (asi/232119).

It’s simple to see why some industry executives like Ein are worried about President Trump’s potential trade policies. The vast majority of promotional products sold stateside are produced abroad, especially in China. Tariffs, and a possible trade war, with China or other nations imposing retaliatory measures, could drive up the cost of branded merchandise. That could lead to end-buyers scaling back purchasing or deciding to invest their marketing dollars in mediums that might be less expensive, like online advertisements and social media ad campaigns. Ein has misgivings that end-clients who produce products overseas, such as technology companies he’s worked with, will be saddled with increased costs and operational upheavals that compel them to downsize their promo product spend. “Tariffs would ultimately be bad for producers and consumers,” says Jonathan Isaacson, president of Gemline (asi/56070).

While there is uncertainty about how Trump’s trade policy will unfold, a majority of industry executives interviewed for this article said they’re calm about the prospects.

For one thing, Hullinger pointed out that import tariffs would trigger higher prices for consumers, too. As long as any promo product pricing increase was generally in line with what’s experienced at retail, then there shouldn’t be sticker shock for end-buyers, he says. “Perceived value of our industry’s products is influenced by comparable products at retail, so if relative retail prices go up, it should help insulate us,” says Hullinger.

Similarly, others like Muzzillo and Gledhill anticipate that potential price increases resulting from Trump’s initiatives could cause some pain for distributors and their clients initially, but that a cranking economy where more businesses are thriving and more Americans are employed in quality jobs could ultimately outweigh any detriments. Import tariffs could, for example, “have a short-term negative impact on pricing in our industry and our overall economy,” says Muzzillo. “However, in the long term, if we are able to bring more manufacturing and jobs back to the United States and significantly improve our economy, it could have a very good impact for our industry and most U.S. businesses.”

What Will a Healthcare Overhaul Mean?

Trump has never been bashful about publicly lambasting plans and policies he doesn’t like. Without doubt, he’s subjected the Affordable Care Act to some of his most striking vitriol, calling the legislation commonly known as “Obamacare” a “catastrophic event” and pledging to repeal and replace the law – a process he started before even taking office by applying pressure on Congress.

In looming healthcare reform initiatives, promo product distributors have found cause for anxiety and excitement. Anxiety, because it’s unclear what type of long-term effect changes could have on companies within the industry, the healthcare market, the stock market and the economy as a whole; excitement, because if certain reforms are enacted, industry firms could possibly realize substantial cost-savings and discover fresh sales opportunities.

In particular, promo executives are enthusiastic about Trump’s stated desire to modify existing law that inhibits the sale of health insurance across state lines. This could lead, they say, to increased competition among insurers, placing an onus on them to keep costs down – a welcomed change that could help employers to find more cost-effective quality plans that meet the needs of employees. “We have to get insurance companies on a level playing field,” says Mackay.

With more cash at hand from savings on healthcare costs, businesses could increasingly invest in initiatives that accelerate their growth, including marketing outreach that involves promotional products. Plus, distributors and suppliers that provide health insurance would directly benefit from lower costs of doing business. They could also drop their lines into what might be a stocked new revenue stream: Health insurance companies that require branded merchandise to help invigorate the sales and marketing efforts they’ll rely on to expand across state lines into new geographic zones. “You could have companies scrambling to gobble up territory,” says Gledhill. “They could dump a lot of money into their marketing.”

While the unfolding of such a narrative would be welcomed, promo executives say it’s too early to predict winners and losers in the healthcare reform game. “Whatever is done,” says Muzzillo, “I hope we are able to lower the cost of healthcare.”

Will Trump Tremors Subside?

Encouraged by Trump’s background of billionaire success and the pro-American business platform he’s espoused, many promo executives have found grounds for optimism with the 45th president.

Even so, it’s equally clear there’s a current of apprehension. Some people are concerned about Trump’s political inexperience and what they perceive to be a plethora of shortcomings, including what they characterize as his volatile temperament and the specter of alleged corruption given his extensive business relationships. They also fear he’ll embroil the country in an economy-killing military conflict and that his closely watched tweets could affect everything from stocks to international relations.

Some promo pros worry, too, about the impact Trump’s hair-trigger immigration policies could have on industries into which they sell, including hospitality and landscaping. And they, like others, accuse Trump of playing on racial politics in a way that’s dangerous for society, creating a climate that’s not conducive to business. “For me, nothing he might do for business outweighs the kind of person he is and the damage he is doing to our country with his rhetoric,” says Ein.

Nonetheless, like others ill-disposed to the president or buoyant about the prospects he offers, Ein says distributors must do what they’ve always done to remain successful: Make the most of opportunities and evolve to best meet the needs of clients. Do that, and there’s a chance success will follow, regardless of who is in the White House. “Every administration brings their own agenda – benefits and challenges,” says Ira Neaman, founder and president of Vantage Apparel (asi/93390). “We, as business people, adapt.”

– Email: cruvo@asicentral.com; Twitter: @ChrisR_ASI