BREAKINGVIEWS-Meta’s magnificence threatened by trade clash

By Jennifer Saba

NEW YORK, April 30 (Reuters Breakingviews) - Social media is about to endure some tariff-related doomscrolling. Meta Platforms META.O, the owner of Instagram and Facebook, relies on Chinese advertisers for 10% of its top line while producers of everyday goods from laundry detergent to potato chips contribute another big slug. Despite a robust start to 2025 for Mark Zuckerberg’s empire, likely trade-related cuts to marketing budgets make the projected 13% rise in sales this year optimistic.

The $1.4 trillion company has benefited plenty from China even without a presence there. Ecommerce retailers Temu and Shein are among those spending heavily to attract more American shoppers, and helped more than double Meta’s revenue attributable to the People’s Republic to $18 billion last year, or 11% of the total, from $7 billion in 2022. The country is now second behind only the United States, MoffettNathanson analysts reckon.

Money may start drying up soon, however. A U.S. tax exemption for cheaper goods underpins much of the success at PDD-owned PDD.O Temu and Shein’s fast-fashion operation. Their business models will be upended when duty-free entry for shipments valued at less than $800 ends on May 2.

Zuckerberg has other potential problems, too. Companies ranging from Pepsi to General Motors to Home Depot represent 48% of Meta’s advertising base. Such consumer packaged goods producers, automakers and retailers are especially sensitive to higher levies, and spending on promotion and marketing is typically one of the first places targeted for savings.

Mom-and-pop firms are also a big concern. Collectively, they account for 60% of Meta’s ad buyers, according to estimates by consultancy Madison and Wall. A survey conducted by the Small Business Majority lobbying shop as Trump took office found that 42% of respondents said their revenue had decreased over the previous three months and six out of 10 said their expenses had increased. Higher taxes on imports are likely to exacerbate such challenges.

Meta isn’t yet feeling any effects. It unveiled 16% revenue growth in the first quarter, to $42 billion, after charging an average of 10% more per ad.

Wall Street is also showing little unease. Since Meta last reported quarterly results in January, analysts only lowered their annual revenue forecast by about $3 billion, or 1.5%, to some $180 billion, according to Visible Alpha. Even after those trims, the broad expectation through Wednesday was a 13% increase for the year. The optimism suggests that once the impact of tariffs seeps in, Zuckerberg’s cheery financial feed will be more distressing.

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CONTEXT NEWS

Meta Platforms said on April 30 that its first-quarter net income grew 35% year-over-year to nearly $17 billion on a 16% gain in revenue to about $42 billion.

The social-media company increased its 2025 capital expenditures outlook to between $64 billion and $72 billion from a previous range of $60 billion to $65 billion, to reflect more investment in data centers for its artificial intelligence initiatives and anticipated higher costs for infrastructure hardware.