Hiding in plain sight: Spotting the impact of tariffs on the consumer
Summary
There is already plenty of emerging evidence of the impact of tariffs on consumer spending, you just have to know where to look.
You can’t see me, my time is now
A false narrative took shape during the first half of 2025 that centered around a benign impact from tariffs on consumer spending. Revisions should have disabused financial markets of that notion, but a big drag from trade is the main thing most people have taken from the Q1 GDP report.
Even while it is an under-appreciated fact that consumer spending has been revised lower, one of the top questions we get these days involves when we will see the impact of tariffs on consumer spending and in the retail sector. The time is now. The details of consumer spending and retail inventory data already reveal some concrete evidence that tariffs are undeniably impacting consumers:
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When it comes to discretionary service outlays, households are cutting back.
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In terms of goods-spending, some key tariff-linked items show a measurable pull-forward prior to Liberation Day announcements followed by an air pocket in the months since.
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Stockpiling by retailers has mitigated the inflation impact for many goods items. When pre-tariff inventories have been drawn down, the cost pass-through will be stark.
Author
Wells Fargo Research Team
Wells Fargo
