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News October 16, 2018

International Panel Shares Insights On Global Promo Market

The deep-reaching discussion at the 2018 ASI Power Summit touched on trade tariffs, price increases, NAFTA, European markets, the looming “Brexit,” and more.

By  Dawn Shurmaitis

When asked in an insta-poll during a Monday Power Summit discussion led by ASI’s Michele Bell for one to two words to describe the impact President Trump is having on the global stage, audience responses ranged wildly, from horrible, terrible, massive and “yuck,” all the way to awesome, Messiah, fantastic and improved.

The poll was indicative of the diverse reactions expressed by the panel during a talk titled “Going Global: The Impact of Trade Wars & Tariffs on the Promo Market, Here & Abroad,” which featured Chris Lee, managing director of Brand Addition (asi/202515), one of the largest distributors in the UK, with a U.S. office in St. Louis; Michael Freter, managing director of PSI, the largest member-based promotional products association in Europe; Jo-an Lantz, executive vice president of Top 40 distributor Geiger (asi/202900); and Steve Levschuk, owner of Talbot Marketing (asi/341500), a large distributor firm based in London, Ontario.

In another audience insta-poll taken by text during the 20-minute discussion, the audience was asked how much they expected prices to increase due to tariffs imposed by the U.S. The majority said they expected prices to jump 11-20%.

Levschuk’s response was swift and certain: “Price increases next year are going to be huge, huge – notwithstanding the tariffs,” he said, citing as an example a recent bag order that came with a shocking $425 tariff. “We as a company cannot absorb tariffs so guess who it’ll be passed on to?”

However, as Lantz pointed out, “There’s no tariff on your margins. The tariff is on your goods.”

Lee said many Europeans think the current state of American politics is “a little crazy,” with news outlets in the U.K. covering Trump as aggressively as their own politicians. But, he added, people understand that Trump is standing up for American trade and that the U.S. economy is growing.

Lantz, on the other hand, said she’s observed a definite shift in the way her global clients consider the U.S., mostly because of day-to-day uncertainty in Washington. “It’s not positive,” she said.

As to the current state of the global ad specialty market, Michael Freter, who’s based in Germany, said the German promo space is enjoying growth of 5.3%, with total revenues of $3.5 billion – the strongest market in Europe, with 28% margins. But, he said, “It’s a fragmented market with lots of challenges.”

Freter is also concerned with the sour relationship between Trump and German Prime Minister Angela Merkel. “The last 70 years there’s always been a reliable partnership between the U.S. and Germany,” he said. “But, the relationship between these guys is difficult.” At the same time, though, “We have issues with a lot of countries in Europe. It’s a very difficult situation I’m hoping gets better.”

“Okay” was the tepid word Levschuk used to describe the current Canadian economy. That said, “The promo market is not growing by leaps and bounds, but it’s not shrinking either. People have confidence in the economy and are looking forward to a strong 4th quarter.”

In early October, the U.S., Canada and Mexico reached a tentative agreement to replace the North American Free Trade Agreement (NAFTA). Importantly for the promotional products industry, before Canadian consumers could purchase just $20 worth of foreign merchandise online before incurring duty taxes. That limit has been raised to $100, under pressure from the U.S. In exchange, Canada will still be able to collect sales tax on purchases.

At the same time, Canada is legalizing marijuana, which will trigger a “massive, massive industry,” said Levschuk, adding that he recently got a $50,000 order from a client with a medical marijuana license. “There’s a lot of government regulation but it could be the wild, wild west. There’s a big opportunity for a new market.”

In other global drama, in March 2019, the United Kingdom is scheduled to exit the European Union in a potentially disruptive transition dubbed “Brexit,” which Lee described as scary. “There could be all kinds of frightening things,” Lee said. “There’s a lot of pressure. I hope we find a way through. We all want to trade together.”