The Trouble with Tariffs

Welcome back to Communication Breakdown, a weekly podcast from the Observatory on Corporate Reputation. Thanks for joining us. I'm Steve Dowling in Silicon Valley. And I'm Craig Carroll in Los Angeles. Each week Steve and I take a look at strategies companies are using to shape headlines and sometimes save their skins. It's a post game show for PR pros. This week the White House sends Wall Street on a wild ride. "President Trump has a spine of steel and he will not break." Break? No. Blink?

Yes. Way back on Tuesday, Press Secretary Caroline Levit, brushed aside suggestions that Trump might back down from his tariff threats. 34%, 104%, 145% on China, 20% on the EU for a while I think who can keep track, and a stubborn 10% on the penguins of McDonald Island. Seemingly unmoved by the whipsawed, punch-drunk stock markets. Trump had spent days posting things like my policies will never change. Spine of steel, remember? That was Tuesday. Wednesday was another story.

Market skyrocketed as Trump pulled a U-turn declaring a 90-day pause and a so-called "reciprocal tariffs". You know, the ones of the funny formula and all the Greek letters? That for China. And the rest of the world is apparently stuck at 10% far higher than when this whole process began and that sent the markets into another nose dive on Thursday. According to some reports, ultimately it was a bond market sell-off that stiffened the resolve of Trump's top advisors.

Bloomberg says CEOs are crediting a TV appearance by JP Morgan Chief, Jamie Dimon, and other statements by business leaders calling for a different approach. But Treasury Secretary Scott Bessent tells it differently. This was driven by the President's strategy. He and I had a long talk on Sunday and this was his strategy all along. Okay, good to know.

This week we thought we'd share what we learned during that chaotic period, proceeding Trump's climb down as executives watched their stock prices tumble. According Gary Friedman, CEO of furniture retailer RH, formerly known as Restoration Hardware, they source almost three quarters of their products from Vietnam, China, Indonesia, and India. Friedman was on his earnings call as the tariff news hit. "And I don't know, like, I don't know how sports are stock, man.

I mean, I guess, I guess, you know, the stock went down, you know, based on some of the numbers he reported and then it got killed because of, uh, uh, really? Oh, shit. Okay. I just looked at the screen. I hadn't looked at it." While everything else on that freewheeling 90-minute call will surely be forgotten, it's worth noting that Friedman had earlier praised the administration as smart, even mentioning Trump's book, The Art of the Deal.

But he was walking that fine line of expressing concern about the short term impact of tariffs while acknowledging the administration's apparent long term goal. And I think, Craig, over the past week, we've seen companies being tested in this new necessity of avoiding criticism at all costs, some spoke up, but companies literally lost trillions of dollars in valuation over a policy they all knew made no sense. And even then the silence from most was deafening.

Yes. Steve, this is one of those moments that exposes exactly how limited corporate communications playbooks become when policy turns into performance art. And like every Chief Comms Officer knows out there, what this past week reminded us, it's not just what you say, it's when you say it, and who says it first and whether you get punished for saying it at all. Terafs like these put companies into what I'd call a "communications choke point". They know policy is bad.

They know that staying quiet looks weak, but they also know that speaking out too soon or alone can turn a bad week into a bad quarter. So what do we see? CEO's waiting. Trade groups warming up the bullpen. Companies whispering in the background. Somebody else go first. And that's just not cowardice that is calculus because what's happening here isn'y just about tariffs.

It's also about companies navigating these moments where the business risk is huge, the political risk is personal and the communications would just keeps getting smaller and smaller before markets, or the White House, forces their hand. So I don't know. I'd say if you're leading comms at a major company right now, this would be a masterclass in what it looks like when clarity, courage and calculation all gets in the same room... and nobody wants to get first.

Yeah. Yeah. It was a really, really interesting story over the past week. One of them was in Politico and this got passed around online a lot over the last weekend. It said the headline quote was, "Everyone is terrified, but no one in the public or the private sector wanted to tell Trump that he's wrong." And then on Wednesday, after the markets had experienced all that turmoil over the past week and were bumping along Monday, Tuesday.

On Wednesday, the journal published, I think coincidentally, just as Trump was reversing course, but their Wall Street Journal headline was 'CEOs Break Their Silence', which we had been seeing to various degrees earlier in the week.

But the interesting part of that story for our audience, I think, was that CEOs were reportedly saying privately that trade groups should get more forceful in their opposition or start pulling together statements that a group of companies could sign on to, standard trade group stuff that they were looking for for more backup on that or maybe a tip of the spear or to your point that nobody wants to be the first one to speak up.

And no disrespect to trade groups, they serve a really important purpose. And we've seen them make some effort on tariffs and also on the legal issues we talked about

last week and other topics. They're speaking up all the time, but it's just not the same as a name you know, a company you know. And trade groups help, but they speak generically. And companies need to be telling their individual stories because those have more impact, the more relatable, they're more personal in a way, I think, and they have all the ingredients that you need for media attention. And I suspect probably for attention from the White House.

Yeah, I think it's probably true a lot of the time. You know, companies speak directly breakthrough in a way that trade groups can't, but also say there is a reason why trade groups exist, you know, they're built for protection. They let companies get their message out without being individually exposed. So it's not always about impact. I think it's also about insulation. And coalitions also show alignment.

But I wonder how much actually move public perception, you know, it's a signal, but it's not necessarily the story that sticks, you know, most people are not going to remember who signed the letter, but they are going to remember who spoke first and who spoke clearly. Yeah, what trade groups can do is they can help demonstrate momentum, right?

That it's not just, you know, one company singularly making a point that it is an industry, but to your point, an individual company can do a better job of kicking open the door and getting attention. Yeah. And that you'd like the trade group to sort of be back up. And we, and we were starting to see companies speak up, but it was only when the markets really forced their hand. And we all know why, as Politico and others have observed. And we've made the same observation on this podcast.

Like you said, no one wants to be the first one to speak up against this White House because dissent is disloyalty and therefore it's right for punishment. So the fear of the blowback is completely understandable. I just think you have to weigh that against the cost of staying silent. And I tend to believe that silence can cost you more. We're seeing companies use this new playbook, speak on policy rather than anything that could sound personal, you know, other than praise.

Yeah. They stick to the facts, the what and the why without suggesting anyone's to blame. And that seems to be getting a little traction. Yeah. Yeah. You know, this is what I'm watching right now- How many companies have actually built a muscle to speak when the window opens? Yeah. Versus how many have gotten so used to staying quiet that they missed the moment altogether. You know, for me, that's kind of a pattern to call out. Now, some companies have simply forgotten how to show up.

You know, they've built entire systems around risk avoidance, not voice readiness. And you know, silence just isn't it free. You know, I think at some point we're going to have to acknowledge that silence isn't always cowardice. Sometimes it's discipline. Sometimes it's wait and see, but the danger is when silence goes on too long and it starts to look like indifference.

Yeah. And I think one of the problems this week was that there was a period there in the middle of the week where that seemed to reward the strategy of staying silent because the market rallied like, as Trump likes to say, "as nobody has ever seen before" on Wednesday. And some people probably felt that they had made the right call and to that point maybe they did. But there's so much turmoil, so much chaos to borrow your phrase, this Chaos Communication.

The best approach I think here is to be steady, stick to the facts, talk about what company's

goals and values are. And I think the other downside about silence that we saw this week was before the market rallied a bit, How are we doing on reputation? There was Monday, Tuesday, there was a lot of chatter about who had enabled this kind of behavior and why weren't people speaking up? Folks were starting to look around and go, like, are you okay with this? And I just wonder if people will be as patient as this process rolls on. Yes, Steve, what I see going on in the environment is a shift.

You know, it's shift from episodic crisis response to permanent volatility management. I still like chaos management. I think this idea of playing into the permanent volatility is something that's key here. It's not like the old days where you manage your crisis, you clean it up and you move on. This is something entirely different, right? This is companies having to operate in chaos all the time where every signal you send out runs through a filter that you can't control.

And chaos management, like every signal is a gamble. If you speak too early, you look alarmist. If you wait too long, you look irrelevant. If you say too much, you look political. And if you say too little, you look complicit. So I think that's kind of the box companies are in right now. That's why so many of them, especially right now during this tariff environment, are waiting for somebody else to go first.

Yeah, I think as this volatility rolls on and because Trump did, whatever the reasons, pressure, all part of the plan, whatever, because he did pull that U-turn, I think, and this is, I think, the most important thing that I would leave people with from this podcast. There is a window right now for companies to take a different approach between now and July when the supposed pause is scheduled to expire.

Who knows if that's real, but in the meantime, we're in a trade war with China, which is not good for a huge swath of corporate America. And the rest of the world is being tariffed at 10%. It's hard to tell day to day what Canada and Mexico are under- whatever. But with Trump's policy reversal, nobody cares really how many people in Washington call it a negotiating masterstroke, art of the deal, whatever. Everybody knows that he blinked.

And everyone saw the immediate damage that the tariff policy was causing. But that started a conversation, I think, that will hopefully empower companies and they can use it to their advantage with a little less fear of retribution, maybe, or at least knowing that they've got the facts on their side. Corporate America kind of needs Trump to blink again on this 10% level of tariff, so I don't know that he will. But they've got to know that the audience is primed to hear criticism of tariffs.

They've seen it. They've seen the damage that it does. And that gives them an opening to talk more about why it's bad policy. That the case is a lot stronger today and there's no doubt that it's rooted in facts. Yeah.

Yeah. I think that's right. There's a window here, you know, but I'd say it's a narrow window and it comes with all the same risks that were there before. You know, it's just now that they're rearranged. Policy reversals don't just erase reputational damage, but they do create narrative permission. Just because Trump blinked doesn't mean reputational damage disappears, but what it does do is it gives companies narrative permission to speak without it sounding like partisan descent.

You know, now it's about business consequences. Now it's about real world impact. And you know, it's not about picking a fight. It's about telling the truth about impact. The lessons for companies isn't just that he blinked. The lesson is why he blinked. It wasn't because of pressure from CEOs. It was because the market cracked, you know, the bond market screaming at them and Wall Street moved.

Yeah. No, I think that was a remarkable thing about this week that even the few voices that had started to speak up and, you know, maybe Bloomberg is right, maybe watching Jamie Dimon on TV on that Wednesday morning, factored into, I'm sure it did. Yeah. Yes. Knowing what we know about what influences Trump's decisions. But yes, it was really remarkable that the stock market could fall as far as it did, but it was when the bond market started to wobble that they really took notice.

Just shifting gears here a little bit. I thought that the furniture makers made a really interesting case study because again, they were, you know, really starting to feel it given how much of their business is sourced from the companies that were under the tariff threat. Yeah. And you know, like we can laugh at Gary Friedman's little outburst on his conference call, although like who can blame the guy on a day like that?

Anybody looking at their portfolio, you know, had some sort of similar reaction, but he was walking that messaging tightrope, as we said, for like 90 minutes. Not familiar with many earnings calls that go on for 90 minutes.

But in that journal article that we mentioned earlier, the CEO of Ethan Allen Furniture was quoted and he took a similar tack, urging the President to retreat because tariffs hurt customers, but also praising the effort to bring back manufacturing, acknowledging the goal, just saying that the tariff escalation went too far. Yeah. Yeah. The furniture CEOs are certainly fascinating here because, you know, what we're seeing is the classic corporate tightrope in public.

It's not just that they're trying to have it both ways. It's that they have to have it both ways, right? You know, they're trying to stay aligned with the broader goal of reshoring of American manufacturing, but they're also staring down a business reality where tariffs directly hurt their customers and their margins. And that's not theory. That's fact. What do you hear from them? You hear a little praise for the principal and then a very clear signal about the pain and practice.

Support the goal, push back on the method. That's the formula. And what I think is important here, you know, for anyone watching how companies communicate

in this environment is that it isn't just a furniture story. This is going to be a template for a lot of industries going forward. You know, praise the goal, acknowledge the attempt, but get really specific and really local about what the costs are. You know, it's not message discipline for its own sake, it's message discipline for survival. Yeah. And so far as we've seen, I think it can be effective.

You know, I thought about this as the market was, you know, going through its gyrations and tumbles over the past week. And I think it's supporting evidence for a data point that we've talked about on the podcast in the past. Think back to, there was about a month ago when the Yale School of Management held that conference for CEOs in Washington.

And the Wall Street Journal spotted that slide with the results of a straw poll that had asked how much more to stock markets need to collapse before CEOs need to speak out collectively. Right. And it was a plurality of executives. 44% said it would take a 20% decline. That would be the trigger for them.

And at that point, the S&P was down, I think 7% since Trump had returned to office. This week, we came perilously close to that 20% down marker and low and behold, we started to see CEOs - pardon the pun for furniture makers - coming out of the woodwork and speaking up just a little bit. So it was an interesting catalyst, surprising to some of us that it would take that much.

But hey, I think that with the opening that we described, the opportunity now that there's some cracks in the front of the facade that the White House has put up about tariffs and this playbook that you've articulated that there's a way to make the point maybe without, you know, poking the bear. Yeah. Could be really interesting as we look at the upcoming earnings season and then again, this supposed July deadline that that Trump has reset.

What I keep noticing in moments like this is just how predictable some of the communication patterns are when the stakes get this high. Companies aren't rushing out to take bold stands or not. They're not eager to jump in front of the microphones. What I'm seeing is that companies doing what they've always done with business risk and communication risks start closing in on each other. They spread the risk out.

You know, in Washington, that means letting the trade association say it first. Overseas it means letting the local team adjust the message or in some cases might mean just saying completely quiet and living in just hoping somebody else goes first. Yeah. I think the thing for me is that you also, I think your instinct as a comms leader should be that you want control in every area that you can.

And so saying nothing or letting somebody else sort of drive the narrative about your company, your industry, that doesn't feel very good to me. And we talk about companies whose reputation may suffer or perceptions about their positions, could be being shaped by an outside forest like the White House. I would much rather be saying something and seeing the results of that in my reputation or in other reactions rather than staying silent and seeing somebody else drive the

drive the story. And yeah, there's so much unpredictability now. There's so much chaos. It really becomes a challenge, I think, to motivate people to go, "Well, you ought to just, you know, dive in." But you want control. And you can chart your own course with your communications. And so I think when the whole world is going crazy around you, it's important, as important as ever, to be consistent about your policies, your values, what's important to you, what's critical to your company.

And again, chart your own course. Companies have the ability to do that. And they don't necessarily need to do it with sharp elbows to offend anybody else. But do it like your powering a boat through choppy waters. For me, with this whole episode reminds me of is just how much corporate communications has changed over the past few years. You know, it used to be (that) company's spoke up when that something to say. Now, you know, they speak when the environment gives them permission.

And that permission doesn't come from the White House. It comes from the market. And it comes from the facts on the ground. It comes from the consequences that people can see for themselves. And you know, this week just didn't test companies' message discipline. It tested their timing, their nerve, their ability to sit and discomfort and wait for the right moment to speak. And then to have something worth saying.

You know, in this environment, it's not just about who speaks first, it's about the credibility and whether anyone believes you when you finally do. Yeah, I think that point about people waiting for permission is a really strong one. Because you know that old saying, "You'd rather ask forgiveness than have to ask permission." I think that's sort of similarly applies here.

Like, I don't think companies should wait around for permission to talk about something that is critical to their business, to their industry, to the US economy.

And hopefully, as I said, hopefully people will recognize that there is a window now where it should be easier to talk about tariffs not being good, to talk about why, at least the approach to economic policy needs to change so that companies have more certainty about the markets they're going to be, and the conditions they're going to be operating in these markets. I think what I'll be watching is how companies are using this one at a reset, not just their talking points, but their posture.

You know, can they shift from reactive messaging to proactive framing? Can they move from defending their interest, to defending their relevance? When policy reverses this fast, what companies say next doesn't just reveal their strategy, it reveals their nerve. Good point. And that's a great way to end the show for this week. We want to thank Shawn P Neak and the team at AdvoCast, as well as the People Forward Network for making our podcast possible.

If you have comments or suggestions for the podcast, we'd love to hear from you. Our email address is podcast@ocarnetwork.com. Communication breakdown is a production of the Observatory on Corporate Reputation. I'm Steve Dowling. And I'm Craig Carroll. Thanks for listening. We'll be off next week and back with a new episode April 25th. [MUSIC]

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