Trump tells Goldman Sachs CEO to hire a new economist after bank says consumers will pay bulk of tariff costs

Former President Trump publicly criticized Goldman Sachs CEO David Solomon and the firm's chief economist, Jan Hatzius, over a report projecting consumers will bear a growing share of tariff costs, escalating from 22% to a projected 67% by October. Trump countered that tariffs have not caused inflation but rather generate Treasury revenue, also making personal remarks about Solomon. This public dispute underscores a significant divergence on the economic impact of trade policy, despite recent CPI data showing July consumer prices rose only 0.2%, maintaining an annual inflation rate of 2.7%.

Analysis

A public dispute has emerged between former President Donald Trump and Goldman Sachs over the economic impact of tariffs, creating a notable point of friction between political rhetoric and institutional economic analysis. The catalyst is a research report from Goldman's chief economist, Jan Hatzius, projecting that the share of tariff costs borne by U.S. consumers will escalate significantly from 22% as of June to 67% by October. Trump directly refuted this, asserting that tariffs have not caused inflation and instead serve as a major source of revenue for the U.S. Treasury. This conflict is underscored by the latest Consumer Price Index data, which showed a modest 0.2% monthly increase in July, keeping the annual inflation rate at a contained 2.7%. While this current data seemingly supports the view that inflation is not accelerating due to tariffs, it does not invalidate the forward-looking nature of the Goldman Sachs forecast. The credibility of the bank's projection is bolstered by Hatzius's strong track record, including his correct contrarian call that the U.S. would avoid a recession in 2023, and the fact that other major financial institutions hold similar warnings about future tariff-related price increases.

Key Decisions for Investors

• Investors should closely monitor forward-looking inflation indicators, such as import prices and corporate margin guidance from retail and consumer goods companies, to get an early signal on whether the cost pass-through predicted by Goldman Sachs is materializing.
• The divergence between current inflation data and expert forecasts on future tariff impacts creates uncertainty; assess exposure to consumer discretionary sectors, which are most vulnerable to the margin compression and demand destruction that would occur if the 67% cost absorption by consumers comes to pass.
• Factor in the heightened political risk surrounding trade policy, as the public criticism highlights how future policy could be driven by political narratives rather than consensus economic analysis, adding a layer of volatility for internationally exposed equities.