Wells Fargo Flags Decline in Spending Amid Tariff Effects

A new analysis from Wells Fargo suggests that US discretionary service spending has slowed, contradicting the prevailing view on Wall Street that tariffs have had a limited economic impact.

In a recent note, the bank points to revised consumer spending data and historical trends to argue that the effects of tariffs may be more significant than acknowledged. The economists at Wells Fargo say that declines in discretionary service spending have typically occurred during or shortly after recessions.

“Never was it asserted that consumer spending was unaffected by the implementation of tariffs,” reads the note.

Wells Fargo also challenges what it calls a “false narrative” that tariffs are having a benign impact on the economy. The bank highlights that initial estimates of consumer spending were substantially revised downward. The first-quarter GDP growth estimate, for example, initially showed consumer spending rising at an annualized pace of 1.8%. That figure was later adjusted to just 0.5% in the third estimate.

While recent macroeconomic data have helped ease concerns about inflation and a tariff-induced recession, Wells Fargo maintains a more cautious outlook. The institution argues that early GDP estimates painted an overly optimistic picture of consumer resilience and understated the drag from trade policy.

The note does not offer a specific forecast but implies that continued weakness in service spending could signal broader economic pressures if the trend persists.