U.S. businesses are absorbing two-thirds of tariff costs so far

Goldman Sachs analysis indicates that U.S. companies have absorbed the majority (64%) of tariff costs through June, with consumers bearing 22% and foreign exporters 14%. The firm estimates tariffs have already added 0.2 percentage points to the core PCE price index and will contribute an additional 0.66 percentage points by year-end, projecting core PCE inflation at 3.2% year-over-year, while noting an underlying trend of 2.4% when tariff effects are excluded. This highlights significant direct financial pressure on domestic firms and an artificial inflationary boost masking a softer underlying price trend.

Analysis

According to early analysis from Goldman Sachs, the economic burden of tariffs is being primarily absorbed by U.S. corporations rather than foreign exporters. Through June, U.S. companies have shouldered 64% of the tariff costs, with U.S. consumers bearing 22% and foreign exporters only 14%. This direct cost pressure on domestic firms is happening alongside a notable impact on inflation metrics. Goldman estimates that tariffs have already contributed 0.2 percentage points to the core PCE price index and are projected to add an additional 0.66 percentage points through year-end. This would elevate the headline core PCE inflation to 3.2% year-over-year. Crucially, the analysis suggests this figure masks a softer underlying inflation trend of 2.4% when the direct effects of trade policy are excluded, indicating that tariffs are creating an artificial inflationary pressure distinct from core economic price dynamics.

Key Decisions for Investors

• Investors should scrutinize companies with significant import exposure, as the finding that U.S. firms absorb 64% of tariff costs indicates a direct and material risk to their profit margins.
• Consider the divergence between the projected 3.2% headline core PCE and the softer 2.4% underlying trend, as monetary policy decisions based on the tariff-inflated figure could be misaligned with fundamental economic conditions.
• Monitor corporate earnings reports for specific commentary on margin compression and the ability to pass on higher input costs, as this will be a key performance differentiator in tariff-impacted sectors.