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Welcome back to Communication Breakdown, a new podcast from the Observatory on Corporate

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Reputation.

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Thanks for joining us.

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I'm Steve Dowling in Silicon Valley.

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And I'm Craig Carroll in New York City.

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Each week Steve and I take the look at the strategies companies are using to shape headlines

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and sometimes save their skins.

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It's a post game show for PR Proves.

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This week, the trade war takes hold and companies dig in for economic uncertainty.

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Those on-again, off-again tariffs against Canada and Mexico were on-again this week and

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then perhaps predictably off-again once the markets and critics weighed in.

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Now it's not in my habit to agree with the Wall Street Journal, but Donald, they point

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out that even though you're a very smart guy, this is a very dumb thing to do.

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Canadian Prime Minister Justin Trudeau on Tuesday morning talking Trump's language and pushing

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his buttons once the tariffs kicked in, 25% on nearly all imports from Canada and Mexico

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prompting both countries to retaliate.

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Hours later, as markets suffer to second day if Steve declines, the Trump administration

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appeared to be looking for an off-ramp.

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With Commerce Secretary Howard Lutnik already talking about ways the U.S. might grant

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some temporary relief for certain products.

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Trump and Kim have been talking with American car makers in the run-up to the tariff deadline.

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On the day the tariffs went into effect, the CEO is a four general motors and Stanlantis

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got on a phone call with the president to make the repeal directly.

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That night, in his address to Congress, Trump vowed that more tariffs on more countries,

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including China, would begin in April 2nd.

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Tariffs are about making America rich again and making America great again and it's happening

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and it will happen rather quickly.

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There'll be a little disturbance, but we're okay with that.

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It won't be much.

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No, you're not all.

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But by Wednesday, the tariffs were on pause, at least for automakers, at least for a month,

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and Trump seemed to invite other industries to let them know if they should be exempt

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as well.

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On Thursday, Trump delayed the broader Mexico tariffs as well.

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That climbed down came after a call with Mexican president Claudius Shinebop.

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So over the past month, Trump has twice threatened and twice delayed tariffs, allowing them to

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go into effect once, while signaling more delays and exemptions may be there for the asking.

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Greg, we've made much out of Ford CEO's Jim Farley's comments in February that Trump's

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trade policy is sowing what he called costs and chaos.

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For shadowing that little disturbance, Trump says he's okay with, though his actions

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may say otherwise.

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We don't know what Farley said on their call or what Mary Barra or Stellantis chairman John

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El-Con said for that matter.

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But the outcome on Wednesday seems to reinforce the conventional wisdom about this White House,

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that private appeals from business leaders are more effective than public ones.

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Now that we have a few weeks to reprieve, how are you thinking about the ways big business

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is talking about this trade war?

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Well, Steve, what we're seeing isn't just a trade war.

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It's a chaos management war.

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For CCO's, this isn't just about messaging, it's about critical business decisions that

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will shape their companies for years.

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Right now, companies aren't just asking, you know, how do we talk about this?

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They're asking, how do we survive this?

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And so far, as of this morning, I've counted up to like several different strategies they

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are in play.

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Number one, supply chain diversification is, you know, the question, can we stay the course?

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Are we going to shift suppliers to avoid future risk?

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You've got, you know, lobbying and corporate diplomacy, you know, the question of whether

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we're going to fight this publicly or privately.

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The third is pricing and consumer strategy.

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Do we pass the cost of consumers or eat the hit to stay competitive?

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Others are talking about how they're engaging in strategic stockpiling, such as, you know,

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do we buy inventory now before things get worse?

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The fifth is the trade route optimization.

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The question of whether they rejoulder logistics maps to avoid any tariff heavy zones.

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Investing in automation technology, obviously that's not surprising, you know, the question

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of whether we double down on automation, does that labor costs?

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And then also not surprising given that, you know, this is CCOs, how are we thinking about

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communication, reputation management?

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How do we control the story before it controls us?

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So, yeah, they're communicating, but I think the, the big thing is they're also making

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high-stakes bets about where this is all going ahead.

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And the company to get it wrong, I think it's just not just that they're losing the messaging

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or they're going to lose market share.

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Interesting list of strategies there.

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I think some of them, the pricing strategy, at least I think, is kind of a no brainer, though.

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I don't think there's a lot of taking a hit to profits on this one.

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Everything I've heard is that these costs are going to be passed along to consumers one

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way or another.

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That's how it works.

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And that strategic stockpiling sounds like some of that has already been going on and that

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may be exacerbating the trade deficit in places.

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Yeah, I think what's different about it here is that some companies I've talked to,

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their traditional approach, is just in time management, right?

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And this is saying just in time is not going to work in this case.

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Right.

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And they're trying to get ahead of that, the tariffs taking effect.

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I found it interesting.

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The companies do seem to just be finding their voices on this one like this week.

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You saw a target, best buy, hasbro and others, and it's earning season.

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So some of that is just because the topic has become unavoidable.

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But to your point about lobbying and corporate diplomacy, you know, private versus public,

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it's something that we've talked about on this podcast.

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My question is where was the anti-tariff campaign before this took effect?

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Think about all the regulatory and legislative issues we see ads for in newsletters like

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Politico and Axios stuff that's important to one industry sure but completely irrelevant

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to a lot of other readers.

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But things like who's creating jobs, who's protecting teens, where were the explainers

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on tariffs for as broad a swath of the US economy that knew it would be in the path

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of the tariffs if they became real.

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Even if you were banking on it just being a bluff, I'm surprised no one bothered to at

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least try to rally the public.

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I've got a great answer from that just actually coming out one of one of my calls this morning

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with one of the senior leaders who was actually spent the past couple of days on the hill talking

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about this.

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And the issue was that look, there's a lot of smart people out there in this role of corporate

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affairs, both on the side of companies and both on the side of legislators.

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So many people thought that of the tariffs was just figurative language that Trump was

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not serious, that it was just a metaphor and maybe his typical path of exaggerating.

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So there's surprisingly a few people who thought, "Ah, we'll just kind of wait it out, maybe

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it's a matter of which is going to happen first."

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tariffs or, "Ooo, donut."

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Well, I can totally see there's so many reasons not to take it seriously, right?

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First, and we're seeing this play out again this week.

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We may see it play out again in a month.

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Trump always seems to find a way to back down.

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So why worry?

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The second thing I think is big companies seem to be getting exemptions when they ask for

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them and Trump has now signaled that they will continue to.

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So why worry?

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Third, if you endure this and you get an extension, let's say on the corporate tax cuts that

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a lot of business want, why worry?

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From my point of view, the reputation concern is not necessarily on the government side here.

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I think it's on the consumer side because prices will go up.

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In categories, people don't expect, as you offset, other cost increases because of the tariffs.

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But I think the reputation risks on the consumer side, the potential risks are longer reaching,

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because it's going to be hard to bring consumers back if they feel like your prices are too

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high.

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And as we'll talk about later, in countries whose consumers are becoming more loyal to local

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brands as a result of this trade war, they may find alternatives locally that they like

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better and stick with them.

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So I think in the meantime, I would rather be known for fighting for lower prices.

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That's one way, but humanize the tariffs.

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I was really disappointed to see there wasn't much of an effort to do that.

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They were just so abstract for so long and now here they are.

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Yeah, yeah, yeah.

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You know, look, tariffs, they don't just tax goods, they're testing companies.

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And the best ones aren't panicking when resources become constrained.

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They pivot and that's where good leadership comes into play.

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The expression I use is when you lack resources, you've got to lean in on your capacity and

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that is your capacity to adapt, your capacity to innovate and you've got to be able to outthink

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the challenge and to be able to respond.

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The companies right now that are thriving in a tariff heavy world aren't just the ones that

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are the biggest, they're the ones that are the most adaptive.

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And when supply chains get hit, what costs are spiking and the market shifting, resilience

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isn't just about having more, it's also about using what you have better.

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Yeah, understanding how to make the pivot, understanding how to bounce back as you put it.

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I think the thing is though, at least most of the companies that we've been talking about

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in this, they're not lacking for resources, but it is certainly, it's testing their resilience.

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Hold on, I want to hit on that really quick because yeah, you're right.

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A lot of them do have resources and this is just beyond the sideline.

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But what I think about some of the conversations I have is like, oh yeah, we've got budget

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for that or we've got an answer for that, right?

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The thing I see about resources is it doesn't give you the opportunity to look at your resourcefulness

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and understand your capacity.

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If you could just store resources at it, right?

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You still have to have imagination in ingenuity.

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Yeah, those resources, they're not self-directing.

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So no, I think to that point about whether this should play out behind the scenes or whether

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it's played out in public, I really feel that transparency should be business's friend in

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this moment, especially in this moment because those sweeping tariffs seem like a really

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bad idea for pretty much everyone.

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I know that the behind the scenes approach is effective.

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We've seen that.

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We continue to see it play out both between governments and especially between industries

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and the Trump administration.

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But managing this behind the scenes alone also gives the administration an advantage in a

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moment when their working theory is not in the interest of business.

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They don't want this discussion taking place out in the open because when it does, you end

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up with interviews with car dealers in Pennsylvania saying people aren't going to buy that ram

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truck when it's 25% more expensive.

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And if you're not making your case in public or at least making clear to the public where

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you stand, I think you're letting the White House not only frame the debate, but redefine

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your position in some cases.

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Look at what Trump said in front of Congress.

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He said, "Car makers are so excited."

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Well, clearly they're not because they pushed for an exemption faster than you could say,

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sign and drive.

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I think this idea of resources is pretty important, right?

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I mean, because that right there gives companies a lot of opportunity for responding in particular

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ways.

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What are the talks that gave with the conference board we were looking at?

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All the different ways that we're talking about reputation.

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And I realized, really, what we need here is a checklist of all the things that from a reputation

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management perspective so that you can start thinking ahead and getting ahead of things.

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I came up with the idea of these contracts and one of the contracts is capital versus

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capacity, right?

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If you can think about financial capital, cash investments, political capital, the ability

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to influence, engage in policy or navigate regulations, reputation capital, operational

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capital is one that's certainly playing out a lot here, but we could also think about,

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human capital and social relationship capital as well, which is your trust with suppliers,

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partners, customers, governments and so on.

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But here's the thing, right?

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At some point, when capital runs low, capacity is going to have to take over.

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These are burning through capital to survive the tariff storm, but capital is finite.

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Capacity, I think, is going to be one of the things that keeps companies in the game to

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start going back.

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When you like capital, you got to lean in on capacity.

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Change gears here for a second.

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In a trade war, how are companies going to navigate this new, quite nationalism that's

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currently driving consumers?

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Yeah, I think this is the most remarkable short term result of the tariffs, at least

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so far, and it's playing out, we see it in Canada.

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The Canadians are ticked off, and they are not quiet about it at all.

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Yeah, yeah.

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I watched a Vancouver conucks hockey game last night, and the Vancouver fans, as Canadian fans

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have been doing for the past month, they booed the US national anthem loudly and throughout

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the anthem, and they were cheering and singing along loudly with O Canada.

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It's still, by the way, unsettling to hear the star-spangled banner get spontaneously booed,

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it's jarring.

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But so is this flexing of the economic muscle that's going on in Canada.

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The premiere of Ontario canceled a $100 million contract with SpaceX for Starlink terminals,

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sort of a two-fer against Trump and Elon, whose CEO of Starlink, let's be forget.

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But I think the biggest PR challenge for American companies, I would say, as you're getting

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out here is this galvanization of Canadian consumers against American goods.

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This new buy Canadian movement that's taking hold.

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This market research firm La Jair, they said 70% of Canadians report increasing their purchases

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of locally made Canadian goods, and almost as many, they say, have actively reduced their

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purchases of American made products.

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And Craig, I know you don't spend as much time on TikTok, I think, as I do, but there

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are Canadian influencers out there giving advice on where to find Canadian alternatives.

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Starting in the grocery store.

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You supporting Canada?

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Here's a way to do it.

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Instead of getting Fuji apples from the United States, you can get galvan apples from Ontario.

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Instead of blue water fish burgers made in the US, you can get highlander fish burgers, which

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are very Canadian.

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The battle for the produce and the frozen sections looks quaint in comparison to the battle

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for the liquor store.

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The liquor control board of Ontario has pulled American liquor off the shelves.

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It's really something to see.

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Yeah, I think the question isn't just, do we acknowledge nationalism?

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How do we acknowledge it without boxing ourselves in?

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Since the salt started, I've heard a few themes, and then I've seen a few from news coverage.

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I picked up on five different ways that companies are responding right now.

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One is the localized branding.

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We're one with you strategy.

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We're companies are repositioning themselves as deeply embedded to the local economy, even

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if they are global.

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Some are highlighting heritage and domestic job creation or committee investments.

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You could think, for example, Black McDonald's in different markets.

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I'm not saying that this is the one that they're using, but this phrasing of 100% locally

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sourced beef or proudly Canadian and Canada are examples there of that category.

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Yeah, this is the playbook.

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Second is reframing globalization to be the good corporate citizen approach.

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It's one that I've seen a few companies set.

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That's where companies are embracing their global footprint strategically and trying to

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show how their presence benefits the local economy, right?

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So you could think about maybe some of the foreign automakers here in the US right now,

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like BMW where they're emphasizing their American workforce, but not their country of origin.

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So there that would be something like we're international and we're invested in you.

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A third is just simply trying to neutralize the narrative, right?

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Just playing into the whole idea of price and value positioning, offering a superior price

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or quality and trying to make loyalty about value rather than origin.

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I don't think that one's going to work.

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You don't think so?

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I think that a lot of companies, there's a playbook for this laid out and it's made in America

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because American companies are multi-nationals have been running this playbook in America.

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For years, a lot of them stepped up in the first Trump administration, a lot of them dusted

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it off more recently.

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And this is to the earlier point about ads you see in Politico or Axios or wherever.

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This is where a lot of companies make these points and now they may have to do it locally

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in another country.

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Like you say, when you're sourcing an item locally, whether it's, I think your McDonald's example

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is the most convenient and direct because it's something that gets done by restaurants and

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restaurant chains in other countries, you source an ingredient locally and you want people

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to know about it.

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I'm just thinking about, okay, there might not be very many companies playing this strategy,

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but I'm going to say if tariffs hit a particular company eventuous that we have both have discussed

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before, I'm still going to buy my phone from that company, right?

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No matter.

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So does everyone else is going to buy their phone from that particular company too?

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Just recently, there are customers who are priced sensitive, unless we forget.

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Yeah, yeah.

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So that's what I mean.

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I mean, there's a few companies that I would say are able to lean in on the value positioning

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and the premium.

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Okay, so that's the third.

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And then I think the last two, one is supply chain transparency, which is showing the domestic

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contribution.

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And then, you know, I would say, I don't know what a good word for it is, but playing

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both sides without taking a side, maybe silent adaptation, possibly.

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Does you mean just sort of like standing still and hoping nobody notices that you're an

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American brand?

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Yeah, that could be it, right?

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You know, kind of adjusting their strategy quietly without making any public statements or

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tweaking the marketing language and trying to avoid it.

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It's just really interesting to watch it play out in Canada because it does seem authentically

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organic and it does seem to really have momentum.

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Tick-tock is just the most convenient window that we have into it, at least from my vantage

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point.

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But I do think that some of this consumer behavior might stick, you know, maybe you end

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up as a Canadian consumer, really liking high-liner fishburgers.

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And that's a problem for blue water fishburgers, if in fact, that is a US brand.

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So I think companies are going to do what they can to emphasize their support for the local

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market, whether it's one of the ways that you outlined.

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I think that job creation is a tried and true one.

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And localizing and calling attention to your local sourcing, but it's just really interesting

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to watch how quickly this has taken hold and that by Canadian movement does feel real.

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Yeah.

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And made in Canada is becoming a popular slogan so much so I saw that was really interesting

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that Canadian advertising industry, their self-regulatory organization.

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They issued new guidance because then they say if you're not Canadian owned, you shouldn't

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say truly Canadian or proudly Canadian was one of the slogans that they called out, but

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made in Canada apparently only requires 51% Canadian content.

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And we're paying attention to that now.

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But to your point earlier, you might expect to see supply chain adjustments like you described

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where it's strategic or maybe just convenient.

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You get those fishburgers from Nova Scotia instead of Alaska, maybe you can be proudly

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Canadian or made in Canada.

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I don't know, I buy fresh fish from Alaska, but last time I checked Alaska, it was a part

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of the US, not Canada.

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Well, that's the thing.

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I think this is the issue about this new nationalism.

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Yes, some of it may play out here, I guess, but I think we're mostly going to see this phenomenon

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in countries where the administration is target our administration is targeting their country

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with tariffs.

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So right now we're looking at Canada, Mexico, Canada, I think the phenomenon is the most

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pronounced probably because of the interdependency of the two economies, but we could also see

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China certainly would not be surprising to see something like this play out in China given

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episodes in the past.

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And now according to Trump, we may have tariffs on Korea, maybe the EU.

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It's going to be really interesting to see this dynamic if the trade war continues the

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way the president says it's going to.

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Yeah, so we've got Bukka, right, which is so important right now during chaos management.

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You're talking about VUCA is the acronym.

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Yeah, VUCA, right, volatility uncertainty, complexity and ambiguity.

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The one I came up with was a vision understanding clarity and agility.

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And I thought, okay, that kind of fits here, right?

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So the vision is companies are going to need long term strategies that are going to go

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beyond the reacting to tariffs.

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You're going to need understanding, deep consumer research to track customer sentiment

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before it starts showing up in sales data.

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You're going to need clarity, clear messaging about brand identity across markets and they're

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going to need agility, right?

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Localized marketing and supply chain flexibility to adjust without alienating anyone group.

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That's in case anyone has a drinking game of that Craig's framework of the week.

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I don't know.

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Yeah, they'll, hey, those sound like capacities to me.

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Those sound like the type capacities versus capital you were making the point earlier.

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Oh, yeah, yeah, yeah.

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Yeah, I think these four items that you've outlined, I think those are good for any

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sort of local team of a multinational to be aware of whether you're in Toronto or Tokyo.

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These are things you want to understand.

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Your company's connection to the local market, even if you're not using it as part of your

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strategy most of the time, it cannot hurt to have that kind of insight.

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So even when the product is what you're focused on, when things go sideways like this, if you

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have a local backlash on something, whether it's specific to a company or as we're experiencing

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now, the result of a trade policy, you've got that in your back pocket, you can understand

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your connection to the local market.

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I'd say the strongest brands are realizing that they can't let politics define them.

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They have to know how to navigate when politics define the market.

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So look, you know, some companies are actively defending their global presence.

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They're lobbying against protectionist policies.

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Others are working behind the scenes to influence policy.

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But big question is, you know, does engaging nationalism help or hurt or won't you reputation?

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Well, we think about nationalism.

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I think that's as a term, it implies competition or conflict like in this trade war.

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So I don't engage with nationalism, I think, is risky business.

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It's not what you want to aim for.

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There are times when patriotism makes sense.

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And if you're a multinational, talking about your connection to a market in times of patriotism,

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I think it can be good.

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But I think generally you want transparency here.

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You want people to understand, you don't want to put up some sort of facade.

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You're a global company.

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You probably source globally.

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And right now the messaging around that is being tested because of these nationalist tendencies

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that are stemming from the trade war.

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But hopefully those will pass and we'll get back to recognizing that live in an integrated

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global economy.

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There's no changing that and the reality of that will hopefully be okay with everybody.

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Generally, it's very clearly, this is less about waving flags and more about consumer comfort.

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People are just gravitating towards brands that feel locally even if they're not explicitly

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marketed that way.

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Right?

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Here's the risk.

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But if consumers get comfortable with local alternatives, the shift might be permanent.

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A tariff can be reversed, but brand loyalty, I think that's a little tougher to win back.

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That's the point I was getting at earlier where when it starts to reach the consumer and

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the reputational risk can be longer reaching.

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And people may find a new brand loyalty that started with some sort of a nationalist inclination.

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But now it's just the brand that you like and that's to your point going to be harder to

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reverse.

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Yeah.

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This is for me another way in which this idea of capacity versus capital comes into play.

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Some companies have the ability to throw money at a problem.

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They can offer discounts or ad campaigns or whatever it takes.

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But the companies that are really going to win here are the ones that have long term strategies

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that are building deep authentic relationships with consumers so that loyalty isn't transactional.

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It's emotional, it's deeply invested.

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Yeah, nothing beats authenticity.

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And when you have authenticity, then transparency doesn't feel very risky at all.

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I thought you were going to go the direction of the George Burns quote, right?

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If you have authenticity, if you can fake that, you can fake anything.

396
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Well, that too.

397
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Okay, just to wrap up Craig, final thoughts here from the professor on where we are and

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how companies are navigating this.

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You know, I didn't think we're going to land here, but I'll circle back on this VUCA2 framework,

400
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right?

401
00:25:14,400 --> 00:25:19,680
So we've all heard about VUCA volatility and certainly complexity and ambiguity.

402
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It's sort of the corporate world's favorite way of saying things are mess and we don't know

403
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what to do next, but just describing the chaos is certainly can make us feel better, but

404
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that's not going to solve it.

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And I honestly look, we're not going to be able to solve chaos.

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That is the world that we're living in.

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But I would say this idea of VUCA2 isn't just a response.

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It's a countervailing force.

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It's how companies can fight back against uncertainty with strategy.

410
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You know, so just thinking about vision, understanding, clarity, and certainly right now we need

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agility more than anything else.

412
00:25:56,680 --> 00:25:57,680
Well put.

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We certainly nailed the clarity on that last point.

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And on that note, that's our show for this week.

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We want to thank Shawn P Neal and the PeopleForward Network for making our podcast possible.

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If you'd like to tell us what you think, have a topic you'd like to suggest for the show,

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we'd love to hear from you.

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Our email address is podcast@ocrnetwork.com.

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Communication breakdown is a production of the observatory on corporate reputation.

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I'm Steve Dowling.

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And I'm Greg Carroll.

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Thanks for listening.

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We'll be back next week.

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[MUSIC]

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[BLANK_AUDIO]

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#tradewar #corporatecommunication #economicuncertainty #nationalism #brandloyalty #tariffs #consumersentiment #businessstrategy #VUCA #Ford #GeneralMotors #Stellantis #SpaceX #Target #BestBuy #Hasbro #McDonalds #Toyota #BMW