US consumers shouldering 55 percent of Trump tariff costs: Goldman Sachs

A Goldman Sachs analysis projects that U.S. consumers will bear 55% of President Trump's tariff costs this year, with American businesses and foreign exporters absorbing 22% and 18% respectively, as firms gradually pass on expenses. This assessment contradicts the Trump administration's assertion that foreign entities ultimately pay, despite a Bureau of Labor Statistics report indicating a 2.9% rise in consumer prices in August. The ongoing tariff policy faces potential escalation, as Trump recently threatened new levies on Chinese rare earth exports, and its legality is slated for Supreme Court review in November under the International Emergency Economic Powers Act.

Analysis

Goldman Sachs analysis indicates that U.S. consumers are projected to shoulder 55% of President Trump's tariff costs this year, with American businesses bearing 22% and foreign exporters 18%. This assessment directly challenges the administration's stance that foreign entities primarily absorb these costs, despite the Bureau of Labor Statistics reporting a 2.9% increase in consumer prices in August. This suggests a direct inflationary impact on the domestic economy.

The report further notes that while U.S. businesses are currently absorbing a larger share, they are expected to pass these costs onto consumers over the next few months as price adjustments and supplier negotiations materialize. Compounding this, Trump recently threatened increased levies on Chinese rare earth exports, which are critical components for semiconductors and laptops, signaling potential future supply chain disruptions and elevated input costs for relevant industries.

Adding to the policy uncertainty, the Supreme Court is scheduled to hear appeals in November concerning the legality of Trump's widespread tariffs under the International Emergency Economic Powers Act. The outcome of this legal challenge could significantly impact the stability and enforceability of current and future trade policies, introducing a material regulatory risk for businesses operating with international supply chains.

Key Decisions for Investors

• Investors should evaluate portfolio companies' exposure to import costs and their pricing power, considering the projected 55% consumer burden from tariffs and the 2.9% rise in consumer prices.
• Monitor developments in U.S.-China trade, especially regarding rare earth metals, as potential new tariffs could significantly impact supply chains and input costs for technology and manufacturing sectors.
• Assess the regulatory risk posed by the upcoming Supreme Court review of tariff legality, as the ruling could fundamentally alter the trade policy landscape and necessitate strategic adjustments.