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Tariffs far from the biggest threat to consumers' wallets, says banking expert
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April 16, 2025
Key Points
Retired Head of Global Ops and Fraud Prevention for Citibank and President & CEO of Guardinex, Aravind Immaneni, on why tariffs and inflation not the main issues affecting the economy.
Immaneni sees a large potential drop in consumer demand as the primary concern for U.S. economic health.
The bigger risk to the economy is a drop in demand. What we’re seeing is that people are pulling back on spending, and that’s going to put more pressure on the economy.
Aravind Immaneni
Retired - Citibank, TD, Capital One | Current President and CEO - Guardinex
The conversation around global tariffs often ends with a focus on the short-sighted, near-term effects they bring—chaos in the supply chain, geopolitical uncertainty, and the fear of rising prices. But tariffs aren’t the only factor affecting the wallets of American consumers.
Amid rising discussions about tariffs and their downstream economic impacts, Aravind Immaneni, retired Head of Global Operations and Fraud Prevention for Citibank and President and CEO of Guardinex, offers a distinct perspective on the real risks the economy faces and what we might expect in the coming months.
Missing the bigger picture: While tariffs are often cited as a driving factor for higher costs, Immaneni argues that this is not the full story. "Tariffs aren’t going to be the problem," Immaneni asserts. "Inflation won’t be the issue either. In six months, we’ll likely be talking about deflation or disinflation. When demand goes down, companies—especially those holding onto inventory—will be forced to lower their prices. They’ve already begun stocking up, particularly on durable goods, and now they’ll need to sell those goods at a discount. The key thing here is that demand needs to be there for prices to hold. Without demand, prices won’t stay up, even if costs rise."
A drop in demand: The real economic concern, according to Immaneni, lies in the possibility of a sharp decline in consumer spending. "The bigger risk to the economy is a drop in demand. That’s where the real problem lies," he explains. "What we’re seeing is that people are pulling back on spending, and that’s going to put more pressure on the economy. In the next couple of quarters, earnings will likely look terrible for many companies."
As spending slows, recessionary pressures will grow. We're already seeing signs of it, like negative GDP growth for January, according to the Atlanta Fed. Credit card spending is also down by 10%, which is another indicator that consumers are starting to pull back.
Aravind Immaneni
Retired - Citibank, TD, Capital One | Current President and CEO - Guardinex
Nearing recession: Immaneni predicts that the downturn in demand will push the U.S. economy closer to recession. "As spending slows, recessionary pressures will grow. We're already seeing signs of it, like negative GDP growth for January, according to the Atlanta Fed," he notes. "Credit card spending is also down by 10%, which is another indicator that consumers are starting to pull back. This is a huge risk that we need to keep an eye on."
People at risk: One of the key factors contributing to this slowdown is the rising uncertainty about the future, particularly among groups whose futures depend on the outcomes of the presidential administration's next move. "There’s a real fear among legal immigrants, government workers, and contract workers that they might lose their jobs or face deportation. With uncertainty about their futures, they’re cutting back on spending, especially on big-ticket items or luxury goods," says Immaneni.
The result is a significant portion of the population—about 12 to 14%—that is now reluctant to spend. "When you combine all the people who are uncertain about their financial futures, that’s a large part of the population that’s going to cut back," Immaneni points out.
The Fed responds: Looking ahead, Immaneni anticipates that the Federal Reserve will face mounting pressure to cut rates as the economy shows signs of slowing down. "By the second or third quarter, I think President Trump will apply pressure on the Fed to lower rates, and we’ll likely see that happen," he says. "Deflation or disinflation will become the reality, rather than inflation."
