US consumers will pay majority of tariffs, say Goldman economists

US consumers will end up bearing the brunt of President Trump’s tariffs once the taxes finish working their way through the economy, according to a new report from Goldman Sachs economists.

So far, companies have paid the majority of the tariffs, which has shielded consumers from the full impact of Trump’s sweeping taxes on foreign goods, according to a group of economists including Jan Hatzius.

Through June, consumers have absorbed just 22% of tariff costs – but their share is expected to jump to 67% as more US firms start to hike their prices, the report said.

US businesses have taken around 64% of the hit from tariffs so far, but that share is expected to shrink to less than 10%, the economists said.

Foreign exporters have absorbed 14% of tariff costs through June, though this may rise to 25%, according to the report.

Goldman economists predicted inflation will rise at a faster pace, with core PCE – one of the Fed’s preferred gauges – hitting 3.2% year-over-year in December.

The underlying inflation from tariffs would be 2.4%.

Core PCE, which excludes volatile food and energy prices, rose to a hotter-than-expected 2.8% in June.

Meanwhile, even domestic producers – who do not have to cough up the extra costs associated with the tariffs – have raised their prices to enjoy a boost in profits, further heating up inflation, according to the report.

Uncertainty around Trump’s tariffs and their potential impact on inflation has kept the Federal Reserve in a stubborn “wait-and-see” approach, leaving interest rates unchanged in the 4.25% to 4.5% range since last December.

Meanwhile, Trump has only ramped up his pressure on “Too Late” Fed Chair Jerome Powell to slash rates immediately. 

The president is also planning to nominate Stephen Miran to a board seat that unexpectedly opened up after Fed governor Adrianna Kugler announced she was retiring.

Miran is an outspoken Trump ally, having accused central bankers of “tariff derangement syndrome.”

The odds of a quarter-point interest rate cut at the Fed’s September meeting have jumped to over 85%, according to 30-day Fed Funds futures prices tracked by CME FedWatch.

July’s Consumer Price Index is set to be released Tuesday morning, which will give more insight into how tariffs are impacting inflation. 

Goldman said tariffs have already boosted core PCE by 0.2% so far this year through June, with another 0.16% expected in July and an additional 0.5% over the rest of the year.