What: Trump's sweeping tariffs, including a 54% rate on Chinese imports, are forcing a dramatic reallocation of retail media spending, threatening to reshape the USD 62 billion industry as brands cut advertising budgets to offset margin pressures.

Why it is important: The reallocation of retail media spending due to tariffs could accelerate the industry's evolution toward more efficient advertising models, as retailers and brands seek to maintain visibility while adapting to new economic pressures.

The implementation of Trump's extensive tariffs is catalysing significant changes in retail media spending patterns, particularly affecting Amazon's advertising ecosystem. Brands face difficult choices between absorbing tariff costs to maintain pricing and customer loyalty or raising prices and potentially losing sales momentum. The impact varies significantly by product category, with toys and games facing the highest tariff rates and import percentages. This has prompted many brands to cut advertising spend as a first response to margin compression, potentially dampening Amazon's consistent growth in ad investment. Beyond simple budget reductions, companies are fundamentally rethinking their retail media strategies, prioritising efficiency over growth and conducting detailed contribution margin analyses to determine which products can sustain advertising support. Interestingly, some industry experts advocate maintaining advertising investment while competitors retreat, suggesting opportunities for market share gains through improved conversion optimization rather than reduced spending. The situation is particularly complex for Chinese sellers, who maintain significant advantages despite the tariff environment and are pursuing more aggressive brand-building strategies.

IADS Notes: The impact of Trump's tariffs on retail media spending emerges at a critical juncture in the industry's evolution. As reported in March 2025, BCG's projection of USD 640 billion in additional import costs coincides with retailers' need to optimise their advertising efficiency. This pressure intensified in February 2025 when the elimination of the USD 800 de minimis rule disrupted e-commerce operations, forcing brands to reconsider their digital marketing strategies. However, the retail media sector shows resilience, with January 2025 seeing Amazon's strategic move to offer its advertising technology to other retailers, suggesting a path toward standardisation. This development builds on July 2024 research showing retail media networks could double retailers' margins from 1.7% to 4.3%. With March 2024 projections targeting USD 100 billion in US retail media spending by 2027, the industry faces a pivotal moment where tariff pressures could either accelerate digital transformation or force significant reallocation of marketing resources.

Tariff shock may drive major shift in retail media spending