By Adam Clark

Chinese advertisers are set to slash their advertising spending on U.S. digital platforms. That is bad news for Meta Platforms, but it should still be a better bet than smaller rivals Pinterest and Snap, according to Raymond James.

Tariffs slapped on Chinese imports by the Trump administration are already hitting trade between the two countries. China's e-commerce giants Shein and Temu face the removal of the "de minimis" tariff exception, which allowed them to import goods below $800 without facing levies, effective May 2.

The knock-on effect is that they will likely reduce advertising to American consumers online.

"We expect that China-based advertisers will significantly pullback ad spend on U.S. digital platforms if low-margin sales become unprofitable due to recent trade policy (reciprocal tariffs, de minimus revocation)," wrote Raymond James analyst Josh Beck in a research note

Facebook and Instagram owner Meta is the most at risk of the major U.S. digital companies, with 11% of its revenue exposed to China, according to Beck. If China-based advertisers reduce spending on its platforms by 10%, then that would reduce revenue by as much as 2% relative to what it would have been otherwise. That potential hit could be reflected in a wider range of financial forecasts when Meta reports its earnings after the market close on Wednesday.

So is it time to sell Meta stock and switch to smaller social-media rivals such as Pinterest and Snap? Not so fast, says Beck.

Snap and Pinterest also would be hurt by reduced Chinese spending, with respective damage of about 1.2% and 0.3% of revenue, according to the Raymond James analyst. The other problem for them is that they don't have the same scale of benefits from artificial intelligence as Meta and are exposed to a downturn in brand advertising, he says.

"Given reciprocal tariffs and escalating China trade war, we are most cautious of Snap/Pinterest where Street estimates exceed our pre-tariff [proprietary] growth data," Beck wrote.

Pinterest and Snap didn't immediately respond to requests for comment.

Write to Adam Clark at adam.clark@barrons.com

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April 29, 2025 12:22 ET (16:22 GMT)

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