Meta’s core online advertising business may face a $7 billion loss this year due to the impact of President Donald Trump’s aggressive tariffs on China, which are affecting retailers in the country.
A research note from MoffettNathanson, published on Tuesday, analyses the potential consequences for Meta, particularly as China-linked sellers like Temu and Shein are expected to cut back on their Facebook and Instagram ad spending amidst the ongoing U.S.-China trade tensions.
MoffettNathanson analysts highlighted Meta’s latest annual report, which revealed that its revenue from China reached $18.35 billion in 2024, accounting for over 11% of its total sales. The analysts believe that Temu and Shein are responsible for much of Meta’s Chinese revenue. If these retailers reduce their advertising budgets this year, Meta’s ad sales for 2025 could see a $7 billion hit.
The analysts pointed out early signs of this pullback, referencing a CNBC report indicating that Temu had already reduced its U.S. ad spending and saw a notable drop in its rankings on the Apple App Store following the introduction of Trump’s tariffs on Chinese goods.
“China’s importance to Meta’s business cannot be overstated,” the analysts wrote. “While Meta does not provide a country-level breakdown of revenue within Europe, we logically can presume that China is Meta’s second-largest revenue source after the United States — a remarkable position for a country where Meta has no users or active platforms.”
Meta could face even more challenges if a broader recession hits this year, as some analysts and corporate leaders predict. A prolonged economic downturn combined with escalating trade tensions between the U.S. and China could lead to a $23 billion drop in Meta’s 2025 ad revenue, which would cut earnings by 25%, according to MoffettNathanson.
“As noted earlier, we believe Meta is particularly exposed to a pullback in ad spend from Chinese advertisers,” the analysts said. “In a scenario where a recession is triggered or exacerbated by escalating trade tensions, Meta would face a dual headwind: cyclical advertising weakness and a targeted decline in Chinese ad spend.”
Despite these concerns, MoffettNathanson maintains a Buy rating on Meta, although they’ve lowered their target price by $185 to $525.
Since Trump was inaugurated for his second term as president, Meta’s stock has dropped around 19%, falling to $499.36.
The company is set to report its first-quarter earnings next Wednesday.
