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Good Thursday Morning. Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: We have heard all about the Trump Administration’s looming tariffs and their potential impact on global business. This week, we’re looking at three ways the trade policy could impact the sports industry.

• 🍸️ Impress Your Friends at Cocktail Party: Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? Hit the “Impress Your Friends at Cocktail Party” section at the bottom for a CliffsNotes of this week’s topic

• 🤯 “Whoa of the Week”: Rory McIlroy completing the Career Grand Slam meant big numbers for Masters Sunday

• 💪 Weekly Reminders that Sports are Awesome: Rory’s celebration, an unlikely photographer, and a tradition unlike any other — THAT’S WHAT GOIN’ AT AUGUSTA!

Hey team,

The United States finds itself potentially steering into a global trade war following the Trump Administration’s decision to potentially impose sweeping tariffs on a large number of countries and goods, many of which are closely intertwined with the American supply chain.

It remains to be seen if this holds (I’m writing this on Tuesday night, and the Administration’s position will likely change several times before this piece publishes on Thursday morning), but 60+ countries stand to have tariffs levied against them higher than the 10% base level once the 90-day pause ends.

Putting aside personal feelings on tariffs as an economic policy and the subsequent geopolitics at play, assuming they are implemented in some capacity, one thing is clear: it’s going to have ripple effects throughout the global economy.

The sports business is traditionally seen as relatively insulated from market fluctuations in terms of asset values. That being said, it is not immune to an exogenous, concentrated shock to supply chains and prices like this, and we could be in for an interesting ride in the industry if these tariffs are implemented.

I certainly did not have this on my bingo card back in November when I wrote about the ways the Trump Administration could impact sports, but here we are. In this week’s SBP, we’re looking at three areas — two direct and the potential knock-on effects — that could be impacted by the tariffs.

Physical goods

One of the main goals of the tariffs (depending on which advisor you ask🤷) is to bring manufacturing back to the United States. As such, many of the more aggressive tariffs are focused on manufacturing hubs in Southeast Asia like China, Vietnam, and Indonesia.

Similar to other industries, much of the sports industry’s producers of physical goods — think apparel, footwear, and equipment, to name a few — have supply chains that run through these countries.

The charts below from Sportico on notable companies’ exposure are incredibly telling, but this macro statistic from the World Trade Organization cited by ESPN caught my eye: “Between 1996 and 2022, according to the WTO, annual sports goods imports grew from $15 billion to $64 billion, globally. In 2024, of the $10.3 billion worth of sporting goods imported into the U.S., $6.27 billion — nearly 61% — came from China.”

The problem here is that the general consensus from economists on tariffs is that while the companies absorb the initial costs, the consumers end up being the ones footing the bill because the companies have to raise prices to maintain margin.

Given the size of the exposure in the sports goods space, some analysts are projecting prices in this area could increase up 10-12% on goods produced in Southeast Asia. That’s also not factoring in the companies sliding in price increases under the guise of these incremental costs.

This tariff policy could not only lead to inflation but eventually suppressed demand from consumers in the physical goods space — a no-win situation.

Stadium/mixed use developments

It’s been well publicized that sports team valuations have exploded over the last few decades. As the Ross-Arctos Sports Franchise Index illustrates, sports franchises have compounded at 13% annually the past 60 years, and the index has outperformed the S&P by 2x since 2000.

In addition to media rights, one of the big drivers of these increased valuations are the investments clubs are making in and around their stadiums.

Bolstered by success stories like the Battery in Atlanta (Braves) and District Detroit (Red Wings, Pistons), these sports-anchored, mixed use districts are all the rage now, and according to a recent whitepaper published by Klutch Sports Group and RBC, we are in the early innings of a building boom.

In 2024, there were 37 mixed use districts announced in North America, and there are many teams that will be considering this over the next several years — 40 stadium leases for North American professional sports teams will expire in the 2030’s.

The building of these often happens a number of years in advance of the lease expiring, so the process could be in for a shock when the cost of materials to construct these stadium districts increase dramatically.

The U.S. imports roughly 25% of both cement and steel/aluminum — the two main materials used in stadium construction — with Canada, Mexico, and Vietnam being three of the five biggest importers. These goods could potentially face a blanket 25% tariff if the Trump Administration’s current economic position holds.

Stadium district projects are already often going over budget, and this new cost basis could both drive up expenses for existing or planned stadium/renovation projects and suppress longer term demand for these districts in a time when they are needed.

Second Order Effects

The two subsectors above will face direct, “hard” costs that will take effect almost immediately should the tariffs go through.

I spoke in the introduction about how these tariffs could send ripples throughout the economy. The thing with ripples is that they do not hit all at once, instead making impact at various points after the initial shock.

So, I want to close this piece with a look at potential areas that could be subject to these knock-on, second order effects.

First up is the $100 billion sports sponsorship market. These deals could face pressure due to companies having to cut marketing expenses in order to maintain profit margins, which hits at an inopportune time when the U.S. has a string of high profile sporting events coming over the next three years — the 2025 FIFA Club World Cup, the 2026 FIFA World Cup, and the 2028 LA Olympics.

Next, if the tariffs go into full effect and we see a potential recession, high net worth individuals may face two potential issues: 1. their liquid assets (i.e., stocks) are going to be worth less, and 2. the cost of borrowing is likely going to rise in order to combat the increased inflation that tariffs create.

As for how that impacts the sports industry, look no further than the accelerating club ownership market that has seen double digit transactions over the last five years. Valuations have continued to rapidly increase across all of sports, and the get-in price for a North American professional sports team in the big four leagues is north of $1 billion now.

The pool of wealthy individuals who can afford that price is already small, and a recession and general uneasiness about the market fueled by tariffs stands to shrink that addressable market even further. You could make an argument that smaller stakes in clubs will become cheaper as minority owners look to get some liquidity out of the market, but the teams looking for a majority ownership deal may have to lower their expectations on purchase price.

As Alex Michael, a managing director at investment and merchant bank LionTree, told Front Office Sports: “Uncertainty is the enemy of M&A…People want strong footing before they jump at things.” This is a longer tail effect that could come into play should we enter a true recession similar to 2008.

Lastly, depending on the severity and duration, we could potentially see a change in fan spending habits that have been insulated from inflationary pressures in past years.

A Sportico analysis showed that while the overall consumer price index (CPI) rose 22% between 2019-2024, the two sports-related factors in CPI — tickets and sporting goods — only rose 6.3% and 8.8%, respectively.

While fans have historically been resilient, the uncertainty around the economy creates anxiety for sports executives.

We have written a number of times about the juxtaposition of the current sports business — while the industry continues to rapidly grow, there are aspects of the space that are continuing to extract more and more from fans via tickets, streaming, and other areas while providing a more corporatized, less interesting product. The existential question has always been where the line in the sand is that could start to turn off fans.

These trends, combined with a sustained market downturn due to the tariffs, could begin to move us closer to the brink if we are not careful.

🍸️ Impress Your Friends at a Cocktail Party

Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? This section is the CliffsNotes of this week’s topic

• Opener: The United States finds itself potentially steering into a global trade war following the Trump Administration’s decision to potentially impose sweeping tariffs on a large number of countries and goods, many of which are closely intertwined with the American supply chain. The sports business is traditionally seen as somewhat insulated to general market fluctuations in terms of asset values, but it is not immune to an exogenous, concentrated shock to supply chains and prices like this. If the tariffs get implemented, we could see the sports industry impacted in three ways.

• Shot: Similar to other industries, many of the sports industry’s producers of physical goods — think apparel, footwear, and equipment, to name a few — have supply chains that run through Southeast Asia. Given the size of the exposure in the sports goods space and the severity of the potential tariffs, some analysts are projecting prices could increase up 10-12%.

• Shot: Bolstered by success stories like the Battery in Atlanta (Braves), sports-anchored, mixed use districts are all the rage now and are a key part of driving increasing revenues and valuations. In 2024, there were 37 mixed use districts announced in North America, and there are many teams that are considering this over the next several years — 40 stadium leases for North American professional sports teams will expire in the 2030’s. With 25% tariffs on steel/aluminum and cement on the table, the costs for these new stadium districts could balloon and make them untenable in certain instances.

• Chaser: If the tariffs lead to a sustained downturn or recession, we could see second order effects impacting the sports sponsorship market due to cutting marketing spend and potential slowing of the franchise sales market due to less liquidity, rising cost of borrowing capital, and general market uncertainty. The biggest concern, though, is if these tariffs create enough chaos in the market that they create seismic shifts in consumer spending habits, which have historically been insulated from inflation. A major shift like this could have massive implications on the industry as a whole.

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. Rory McIlroy’s roller coaster win to complete the career Grand Slam (winning all four majors) netted huge ratings for the Masters on Sunday, making it the most watched golf event in seven years.

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. Rory’s win and the subsequent celebration had some amazing moments

2. Bonus: Ken Griffey Jr. (like his former Mariners teammate and fellow Hall of Famer Randy Johnson) is a really good professional photographer?

3. Double Bonus: Memphis-based sports pundit Chris Vernon’s annual rap “THAT’S WHAT GOIN ON AT AUGUSTA” to give score updates on the Masters’ first two rounds is unequivocally one of the weirdest but best parts of Masters week.

Thanks for reading! Let me know what feedback you have.

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Until next time, sports fans!

-Alex