Who will pay the price of tariffs? Goldman Sachs warns: 70% of the "bill" is being passed on to American consumers
Goldman Sachs warns that the impact of Trump's tariff policy on U.S. consumer prices is becoming evident. Research shows that consumers have already borne 22% of the tariff costs, and this proportion is expected to rise to 67%. Businesses are passing more costs onto consumers, leading to accelerated inflation. The core personal consumption expenditures index, which the Federal Reserve is focused on, is expected to rise by 3.2% year-on-year. The market anticipates that the consumer price index in July will increase by 2.8%, affecting the outlook for Federal Reserve interest rate cuts
According to research from Goldman Sachs, the impact of U.S. President Donald Trump's tariff policy on consumer prices is just beginning to emerge. Economists at Goldman Sachs, including Jan Hatzius, stated that so far, U.S. companies have borne most of the brunt of Trump's tariffs, but as companies raise prices, this burden will gradually be passed on to consumers. As of June, U.S. consumers are estimated to have borne 22% of the tariff costs, but if the latest tariffs follow the collection patterns of previous years, this proportion could rise to 67%.
Goldman Sachs indicated that to date, U.S. companies have absorbed about 64% of the tariff impact, but as they pass more costs onto consumers, their burden will drop to below 10%.
Goldman Sachs added that the impact of this tariff policy on U.S. companies is complex; while some companies have suffered greater losses due to tariffs, domestic producers shielded from competitive pressures have raised product prices and benefited from it. This opportunistic price increase has also contributed to rising inflation.
Goldman Sachs noted that as of June, foreign exporters have borne about 14% of the tariff costs, but this proportion could rise to 25%. The impact on foreign exporters can be seen in the slight decline in import prices of tariffed goods.
The end result is accelerating inflation. Goldman Sachs analysts stated that one of the Federal Reserve's preferred inflation indicators, the core Personal Consumption Expenditures (PCE) index, is expected to show a year-on-year increase of 3.2% in December. The actual inflation rate, excluding tariff factors, will be 2.4%. The inflation rate in June was 2.8%.
Bond traders are currently focusing on the U.S. Consumer Price Index (CPI) for July, which will be released on Tuesday, to look for clues about the pace of Federal Reserve interest rate cuts. The market expects the U.S. July CPI to rise by 2.8% year-on-year, an increase from June's 2.7%.
Investors anticipate an over 80% probability of a Federal Reserve rate cut in September, but the impact of tariffs on inflation remains unclear, casting a shadow over the prospects for further rate cuts in the coming months
