Goldman Sachs: 64% of tariff costs are "paid" by American companies, while consumers only bear 22%

According to an analysis by Goldman Sachs, so far, the cost of tariffs has mainly been borne by American companies. Scott Lincicome, Vice President of Economic and Trade Affairs at the Cato Institute, shared Goldman Sachs' "preliminary" analysis results on Twitter. The data shows that as of June, 64% of the tariff costs were absorbed by American companies, 22% were borne by American consumers, and the remaining 14% were absorbed by foreign exporters.

Goldman Sachs estimates that as of June, tariffs have caused the core Personal Consumption Expenditures (PCE) price index to rise by 0.2 percentage points; for the remainder of this year, tariffs will further push the core PCE up by an additional 0.66 percentage points.

Goldman Sachs stated that this means the year-on-year core PCE inflation rate will reach 3.2%, "but excluding the impact of tariffs, the underlying inflation trend will moderately decline to 2.4%."

U.S. President Donald Trump first announced the increase in tariffs in February of this year, but investors have been trying to figure out what impact the tax increase will have on American companies. David Kostin, Chief U.S. Equity Strategist at Goldman Sachs, wrote in a recent report: "Clients have been closely monitoring who will ultimately bear the cost of the tariffs."

Previously, economists in Goldman Sachs' research department believed that companies would pass on 70% of the direct costs of tariffs to consumers through price increases. However, some business surveys indicate that the extent to which tariff costs are passed on to consumers has decreased.

Kostin wrote: "Early earnings reports have conveyed mixed messages about the profit margin outlook. So far, companies have only announced modest price increases this year, but those most affected by tariffs have raised prices more significantly."

On the other hand, if companies themselves must bear a larger proportion of tariff costs than expected, their profit margins will face pressure. The general expectation adjustment for corporate profit margins indicates that some companies may not be able to fully offset the impact of tariffs.

Some companies will be able to utilize backlogged inventory to minimize the impact of tariffs on their profit margins. The inventory-to-sales ratio of S&P 500 constituents has remained relatively unchanged in the first quarter of 2025, but some companies had accumulated inventory before the implementation of tariffs