A recent Goldman Sachs report finds that American consumers will absorb 55 percent of the costs from President Trump’s tariffs this year as companies raise prices.
American businesses and foreign exporters will bear 22 percent and 18 percent of the costs, respectively, while 5 percent of the costs will be evaded, according to economists Elsie Peng and David Mericle in a Goldman Sachs report published Sunday, October 12. The report also notes that “American firms will pass on their costs to consumers over the next few months.”
“At the moment, however, U.S. businesses are likely bearing a larger share of the costs because some tariffs have just gone into effect and it takes time to raise prices on consumers and negotiate lower import prices with foreign suppliers,” said Goldman Sachs in the report.
The report also adds, “If recently implemented and future tariffs have the same eventual impact on prices as the tariffs implemented earlier this year, then U.S. consumers would eventually absorb 55 percent of tariff costs.”
The wide-ranging levies will likely hike the inflation rate to 3 percent, well above the Fed’s 2 percent goal, by December, according to the report. Trump’s tariffs have already pushed core personal consumption expenditure prices, which are used in the Fed’s key inflation reading, up by 0.44 percent so far this year, the economists wrote.
While the President has claimed that foreign countries will pay the costs of the levies, the Bureau of Labor Statistics said last month that consumer prices in August were up 2.9 percent from August 2024.
Addressing the report in a media statement, White House spokesman Kush Desai said, “The President and Administration’s position has always been clear: while Americans may face a transition period from tariffs upending a broken status quo that has put America last, the cost of tariffs will ultimately be borne by foreign exporters. Companies are already shifting and diversifying their supply chains in response to tariffs, including by onshoring production to the United States. Americans can rest assured that the Administration will continue to deliver economic relief from Joe Biden’s inflation crisis while laying the groundwork for a long-term restoration of American Greatness,” Desai added.
The Trump Administration has also pointed to the billions in revenue the duties have brought into the U.S. In September, tariff revenues totaled over $31 billion, bringing the year-to-date haul to about $215 billion.
Goldman’s analysis is hinged on a sizable “if,” since Trump’s tariffs are constantly evolving during trade talks with foreign nations.
On Friday, October 10, Trump threatened to impose higher levies on Chinese imports over Beijing’s requirement that foreign entities obtain a license to export products containing more than 0.1 percent of rare earths sourced or manufactured in China. Rare earth metals are used in products such as semiconductors and laptops.
Over the past six months, President Trump has imposed tariffs on copper, steel, aluminum, and some automobiles and auto parts. He has also levied country-specific tariff rates of up to 28 percent on China and 16 percent on much of the rest of the world, according to the Yale Budget Lab. In November, the Supreme Court will hear appeals in multiple cases regarding whether President Trump can impose the widespread tariffs under the International Emergency Economic Powers Act.
Goldman Sachs has lowered its projected tariff impact from its August analysis. At the time, it wrote that consumers had absorbed just 22 percent of tariff costs thus far but forecasted their share would jump to 67 percent.
Image courtesy FDIC
