How Could Tariffs Impact the U.S. Payment Cards Market and Should the Market Be Tariff-Exempt?

Over the past 5 years, turbulence is the most appropriate word to describe the payment cards market, impacted by COVID-19, the chipset shortage, and overstocking.

With the new dynamic of tariffs looming, and the fact that the market is in flux and constantly changing, questions remain around the potential impacts and what this will mean for those active in the payment card manufacturing and personalization ecosystem supplying U.S. banks and financial institutions.

It will remain to be seen whether tariffs will directly impact the issuance of payment cards as it relates to component and consumables pricing, but indirect tariff impacts will likely reverberate across the payment card issuance market, regardless of the outcome.

With consumer products increasing in price, consumer confidence and, thus, spending will likely decrease or at least soften over the next 12 to 18 months and, as a direct result, demand for credit cards could slow.

The credit card market is tied closely to consumer confidence and should a downturn or even recession come into force, an inevitable reduction in credit card issuance should be expected. Often in times of economic hardship, debit card issuance increases, somewhat counteracting the reduction in credit card issuance, and this may be one scenario whereby a shift in product mix will result in less of an impact than initially expected.

However, on top of this is the potential tariff impact on payment card component and consumable pricing, resulting in the cost of each payment card increasing. Should tariffs come into play and the cost of bank cards increase, banks and financial institutions will likely look toward spreading increased payment card costs over a longer period of time, thus increasing card expirations from 4 to 5 years for credit and debit, respectively, toward 6 and 7 years. The payment cards market is price sensitive with many banks issuing cards without an annual fee tied to standard account types, making it near impossible for issuers to pass on these additional costs directly to the majority of their customer base.

In a market that ships in excess of 600 million payment cards annually, any small price adjustment upward will drastically increase the cost base and may be an increase that suppliers are unable to swallow or that issuers are not happy about paying.

Although some payment cards are manufactured and issued by U.S.-based companies, most prominently CPI Card Group and Perfect Plastic Printing, there remains a host of European vendors that are integral to the supply and issuance of finished cards and/or components, including Thales, IDEMIA and Giesecke+Devrient (G+D).

With the ever-changing rhetoric related to tariffs, it’s very difficult to pinpoint exactly what, if anything will change. Trump has already threatened a 50% base tariff on all European Union (EU) products and, as of May 29, news dropped that a federal court had blocked tariffs, with the Trump administration immediately appealing. In itself, the latter tariff blocking development doesn’t change anything in the shorter term, thanks to the appeal, but presents a new potential problem, which could result in slowing tariff negotiations between the United States and other countries/territories.

Currently, the damage may be minimal with the vast majority of tariffs paused, but all EU vendors will remain hopeful that either negotiations can continue or that the appeal by the Trump administration is unsuccessful (although this remains unlikely), which would mean reverting back to pre-Liberation Day tariff percentages.

Arguably, whatever the outcome of the tariffs, some level of damage will have already been done. In response to possible tariffs, card manufacturers and those within the personalization business will have stockpiled components and consumables, resulting in heightened inventory levels that will impact, to some degree, 2025 business.

For any EU vendor active in supplying finished products, components, or consumables to the U.S. payment cards market, scenario planning will be key to help minimize any potential market disruption. Best, worst, and likely case scenarios should be planned and strategized for:

1. Best Case: Liberation Day tariffs remain blocked and a return to pre-Liberation Day percentages avails.
2. Likely Case: New trade deal struck between the EU and the United States, meaning that some form of tariff levy is to be expected.
3. Worst Case: Implementation of 50% tariffs.

In the interim, most tariffs have been put on temporary hold. This presents an opportunity for further inventory buildup pre-tariff implementation and allows a continuation of business with limited impact; although this is arguably a “Band-Aid” approach, but one that will buy active vendors time to better prepare for mid-to-longer term impacts.

In the best and likely case scenarios, not much impact should be expected, but a worst-case scenario could send shockwaves through the ecosystem, resulting in significant market share shift, while forcing some EU-based vendors to make some difficult investment decisions related to new or further investment in localized U.S. manufacturing facilities, or exiting the market, should it become unviable from a competitive standpoint, reinvesting efforts in other territories.

Despite all the uncertainty, it should be argued that the payment cards market needs an exception from tariffs. The payment card is part of everyday life and critical to ensure minimal disruption to daily purchasing activities. In times of economic hardship, placing emphasis on digital form factors that seamlessly and easily allow consumers access to funds will be imperative to a nation’s economic health. With over 50% of all payment cards provided by non-U.S.-based vendors, it is this message that should be lobbied during this uncertain period to help avoid any potential disruption to supply and to ensure continued levels of card supply that can match demand.