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A new Goldman Sachs analysis indicates American consumers will bear 55% of President Trump's tariff costs this year, with businesses expected to pass on their share to consumers over the coming months. Concurrently, the ongoing U.S. government shutdown, now in its 13th day, is increasingly impacting the real economy and people's lives, according to Treasury Secretary Scott Bessent, as lawmakers remain deadlocked on a resolution.

Analysis

A recent Goldman Sachs analysis indicates that U.S. consumers are projected to bear 55% of President Trump's tariff costs this year, with American businesses and foreign exporters absorbing 22% and 18% respectively. Economists note that while businesses currently shoulder a larger share due to recent tariff implementation, these costs are expected to be passed on to consumers over the coming months. This suggests potential inflationary pressures and a drag on consumer purchasing power.

Concurrently, the ongoing U.S. government shutdown, now in its 13th day, is increasingly impacting the real economy and citizens' lives, as stated by Treasury Secretary Scott Bessent. Speaker Mike Johnson warned of one of the longest shutdowns in American history, with lawmakers remaining deadlocked over funding. The prospect of federal workers losing paychecks is expected to intensify pressure for a resolution, highlighting significant fiscal policy uncertainty.

The confluence of rising tariff-related consumer costs and the economic drag from a prolonged government shutdown presents a moderately negative outlook for domestic economic stability. These factors contribute to an uncertain market tone, as indicated by a sentiment score of -0.4, and carry a significant market impact score of 0.65. The dual pressures could dampen consumer spending and introduce headwinds for corporate earnings, particularly for consumer-facing sectors.

Key Decisions for Investors

• Investors should closely monitor consumer spending data and inflation metrics, particularly in sectors sensitive to discretionary income, given the projected pass-through of tariff costs to consumers.
• Evaluate the potential for prolonged government shutdown effects on specific industries, such as government contractors or sectors reliant on federal permits and services, and consider defensive positioning.
• Scrutinize corporate earnings guidance for any commentary on tariff impacts or government shutdown-related operational disruptions, adjusting revenue and margin forecasts accordingly.