Economists at Wells Fargo predict that the United States economy will experience a major slowdown in growth this year due to the presence of uncertain policies and tariffs that have reached the highest rate in more than a century.
In a statement made on Thursday, Jay Bryson, the chief economist at Wells Fargo, stated that the economy of the United States began the year doing very well. “However, it is unfortunate that growth has slowed down.”
The consequences of tariffs on the economy were discussed by experts from Wells Fargo during a conference call that took place on Thursday. On Wednesday, President Donald Trump put a 90-day hold on the imposition of increased tariffs on the majority of countries, with the exception of China. Those who bring goods into the United States are required to pay tariffs, which are a form of taxation.
Economists at Wells Fargo estimate that the effective tariff rate is 27%, given that the United States imposes a tax of 10% across the board on all of its trading partners and a tariff of 125% on China.
According to Bryson, “That is the highest rate it’s been in over a century,” and the reason for this is primarily due to the rate on China.
If there is a “significant slowdown” in the growth of the GDP this year, then stagflation will occur, according to economists at Wells Fargo. When high inflation, slow economic growth, and high unemployment all occur together, this phenomenon is referred to as stagflation.
Bryson stated that the pace of inflation is increasing, that growth is slowing down, and that the unemployment rate is expected to rise.
During a call for earnings on Friday, CEO Charlie Scharf also expressed concern that tariffs could potentially hamper the growth of the economy.
Scharf stated that “we support the administration’s willingness to look at barriers to fair trade for the United States,” despite the fact that there are certainly risks connected with moves of such a substantial kind. We are prepared for a slower economic climate in 2025 and anticipate that there will be continued volatility and uncertainty; however, the final outcome will be contingent on the effects of the policy adjustments and the timing of those changes.
Wells Fargo, which has its headquarters in San Francisco, has over 27,000 employees in Charlotte, making it the city with the largest employee base.
Five potential ways in which tariffs could impact the economy of Charlotte and the United States are as follows:
Inflation that is elevated
Even though inflation has been decreasing over the course of the previous few years, it is still running higher than the target rate of 2% that the Federal Reserve has set.
According to Sara House, a senior economist at Wells Fargo, “the problem with this is that the longer you see elevated inflation, the more likely it is that it will become institutionalised in your expectations.” You are, in essence, normalising high rates of inflation, and this can make it more difficult for the Federal Reserve to eventually return to a lower level of inflation and stability.
According to her, the majority of the increase in inflation would be attributed to the higher prices of imported goods, which are predicted to reach 3.5% by the end of the year.
The House of Representatives predicted that inflation will increase this year.
A decrease in the amount of business investment
According to House, as firms take on increased tariff expenses, their profit picture will deteriorate, and they will be less likely to deploy financial resources, notably in the purchase of equipment and structures. For the past year, real company fixed investment has increased by little more than 2%, which is a rate that is lower than the GDP.
According to what she said, “We are anticipating a slowdown in investment, particularly as those profits are being squeezed.”
A decrease in economic activity may also be a consequence of the lack of clarity regarding fiscal and immigration policies.
The statement made by House was that “there are still a lot of questions that need to be answered for businesses that are trying to navigate this environment.”
When a company is considering constructing a new facility or expanding its operations in the United States, for instance, they want to know what the cost structure of that facility will be when it opens in a couple of years.
According to House, “There are still a lot of questions that remain that could dampen activity here in the near term.” This was in addition to the fact that tariffs are going up by a certain amount.
An increase in the unemployment rate
Over the course of the last several months, the United States has added approximately 150,000 new employment. However, when businesses see a reduction in their profit margins, the labour market will become more unstable.
“We are anticipating that hiring will come very close to coming to a complete halt by the time we reach the fourth quarter,” House said.
According to House, it is anticipated that the jobless rate would surge to 4.6% by the time the year comes to a close. If the unemployment rate is below 4%, this indicates that the job market is in good shape.
According to House, “We are not seeing businesses bring on a lot of new workers right now, so in order to compensate for this, they have already reduced their hiring.” It would appear from this that there is not a great deal of potential for expansion when demand decreases before businesses resort to layoffs.
With regard to consumer expenditure, a “double whammy”
House stated that higher inflation will have a negative impact on the purchasing power of consumers.
As a result of a softer labour market, slower pay growth, and greater inflation, which in turn causes slower income growth, it “creates a double whammy for the consumers,” according to House.
The House of Representatives stated that they believe expenditure to decrease throughout the course of this year.
Deterioration of the dollar
As a result of the tariffs, the value of the dollar has decreased in comparison to other major currencies such as the Swiss franc, the Japanese yen, and the euro, according to Brendan McKenna, an internationalist economist at Wells Fargo University.
According to him, this is due to the fact that policy uncertainty originates from the United States, which is a pretext for avoiding the United States dollar.
The growth prognosis for the United States has deteriorated “pretty significantly,” and the financial markets have responded to the decreasing growth prospects for the United States.
McKenna stated that the yield gap that is related with the dollar has experienced a worsening over the course of the past few months.
There is a possibility that tariffs may cause the global economy to enter a recession, with growth projections coming in at 2.3%.
On the other hand, pleasant news is on the horizon.
After the first impact of the tariff shock has subsided, House believes that things will begin to improve in the year 2026. “On the other hand, it appears that this year is going to be quite challenging.”
The initial publication of this article took place at 1:54 p.m. on April 11, 2025.
