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PayPal, Bill Holdings and Block are among the payments companies most likely to be negatively impacted if President Donald Trump’s tariff war triggers a recession and curbs consumer spending, analysts said in recent reports.
As prices for imported goods rise, consumers typically spend less, generating less income for payments players that derive revenue from processing transactions, Morningstar analyst Brett Horn said in a report Monday.
Payments companies often earn a percentage of the transaction processed so fewer, or smaller, purchases means less money flowing to them.
Trump last week spearheaded a campaign to impose tariffs on U.S. trading partners, aiming to rebalance trade with countries that export more to the U.S. than they import. A Trump administration tariff of 10% on some countries’ imports took effect April 5, but then the president this week pulled back on most higher tariffs, except against China, after some countries retaliated and the U.S. stock market plunged.
There might be some limited benefit for payments companies if inflation persists and increases prices, pushing up transaction amounts, Horn suggested.
“Presumably, in a recession consumer spending is going to go down,” Horn said in a Tuesday interview. “One element that may be a little bit of an offset is if we get into stagflation, obviously, in a lot of cases, the revenue is tied to the size of the transaction.”
PayPal’s focus on e-commerce makes it more vulnerable than some other companies in the industry, Horn said. That’s because such digital spending is more discretionary, he explained. While San Jose, California-based PayPal provides some options for paying in stores too, Horn doesn’t consider that a major revenue source.
On another front, Oakland, California-based Block, and specifically its Square unit, as well as Atlanta processor Global Payments, also have businesses that are more susceptible because of their focus on smaller merchants, which tend to suffer or shutter more readily in an economic downturn, Horn said.
While PayPal also offers some services to small merchants, that’s not a significant part of its business so it’s less of a drag, he said.
“Small merchants tend to fail in larger numbers during recessions, so that becomes an additional headwind,” Horn said.
A PayPal spokesperson declined to comment while spokespeople for Global Payments and Block didn’t immediately respond to requests for comment.