Global Trade Dynamics Drive Growth for Meta and Amazon

The ongoing trade tensions between the United States and China are reverberating across global industries, with major implications for online platforms in the Asia-Pacific (APAC) region. As billions of dollars are at stake, the evolving dynamics of this dispute are reshaping the advertising landscape, particularly for platforms such as Meta and Amazon.

Over the past 12 to 18 months, Chinese advertisers targeting North American and European markets have played a critical role in Meta’s advertising success. This trend, which has also benefitted other platforms like Amazon, is now facing a potential disruption due to the US-China trade disputes.

Notably, Chinese e-commerce giants such as Shein and Temu have been exploiting the US “De Minimis” tariff exemption, which allows goods under $800 to enter the US tariff-free. This has fueled aggressive pricing strategies, significantly boosting their presence in the US advertising market. For example, Temu secured numerous ad slots during the 2023 Superbowl.

However, these practices have drawn political backlash, with concerns ranging from overwhelming US Customs’ ability to intercept illegal drugs to the broader economic impact of these trade activities. A US House of Representatives report recently highlighted that Shein and Temu accounted for over 30% of shipments under the De Minimis exemption. In response, the Biden Administration has begun tightening these regulations, aiming to close loopholes and introduce stricter tracking measures. The timing of these changes, as the US gears up for the 2024 presidential elections, underscores the political dimensions of the issue, with trade and US-China relations taking center stage.

For APAC businesses, the key question is how these policy changes will affect major advertising platforms like Meta and Amazon. Meta’s advertising revenue from Chinese clients reached $13.69 billion in 2023, marking an 85% year-on-year increase. Similarly, Amazon benefits from the substantial presence of Chinese sellers, who comprise nearly 50% of its top sellers on the US platform.

While the new tariff regulations could impact these figures, the effect may be moderated by factors such as Meta’s revenue from gaming companies, which are less exposed to tariffs, and the increasing US-based operations of companies like Shein and Temu.

Initial estimates suggest that Meta could see $7.5 billion in advertising revenue at risk, while Amazon may face an impact exceeding $10 billion. Nonetheless, these companies are taking steps to mitigate the risks, including scaling up their US-based operations to reduce reliance on the De Minimis exemption.

This scenario underscores the intricate link between geopolitics and advertising, presenting both challenges and opportunities for businesses in the APAC region. It also highlights how broader political issues can significantly impact advertising ecosystems on a global scale.

Disclaimer: This is not investment advice.