Goldman Sachs now projects that American consumers are absorbing more than half the cost of the current tariffs. This finding challenges earlier assumptions and raises broader questions about inflation control, economic policy, and the true impact of protectionist trade strategies.
Shifting the Burden: From Business to Consumer
Goldman Sachs economists recently updated their assessment, estimating that 55 percent of the tariff burden is now being paid by U.S. consumers. Previously, businesses had absorbed the majority of these costs by either narrowing profit margins or delaying price hikes. However, that buffer appears to be eroding as more tariffs are implemented and pricing pressures build across supply chains.
According to Goldman’s report, only 22 percent of the cost is being covered by domestic companies and about 18 percent is falling on foreign exporters who have lowered their prices to remain competitive. The remainder is increasingly passed on to consumers, who face higher prices on imported goods and, eventually, domestically produced alternatives as well. The firm warns that as the year progresses, consumers may end up shouldering closer to two thirds of the total cost.
This directly contradicts repeated claims by the current administration that foreign companies are absorbing the tariffs. The mechanics of tariffs function more like a sales tax on imports, meaning it is U.S. buyers who ultimately pay more at the checkout line.
Rising Prices and Inflation Pressures
The economic implications are significant. Goldman Sachs estimates that tariffs have added about 0.44 percentage points to the core personal consumption expenditures index so far this year. That figure could climb further, pushing inflation above 3 percent by the end of the year. This exceeds the Federal Reserve’s target and complicates decisions around interest rates.
Data from other sources support this trend. Analysts tracking retail prices show that import-sensitive goods have climbed by nearly 4 percent, while prices for domestically produced items have risen roughly 2 percent. As the costs spread beyond the most directly affected items, inflation risks becoming more deeply embedded in the economy.
Consumers Feel the Pinch
Higher prices are not evenly distributed. Lower-income households tend to spend a greater share of their income on goods rather than services, making them disproportionately vulnerable to rising costs driven by tariffs. With ongoing pressures from housing, energy, and food prices, the added strain from trade policies could slow spending and consumer confidence.
Businesses are also feeling the effect, especially those that depend heavily on imported components. Some are attempting to shift supply chains or relocate manufacturing, but such changes take time and often require significant capital. In the short term, many will likely continue passing costs to customers.
Policy and Political Fallout
These developments are likely to sharpen the political debate around trade. While tariffs were originally promoted as a tool to protect domestic industry and level the playing field, the economic pain is now being felt at the household level. That creates pressure on policymakers to reconsider whether the current strategy is delivering results or backfiring domestically.
At the same time, the Federal Reserve is put in a difficult position. If tariffs continue driving inflation, it may have to raise interest rates further to keep price stability in check. That, in turn, risks slowing down economic growth at a time when consumers are already tightening their budgets.
In summary, Goldman Sachs’ latest findings make one thing clear: tariffs are acting as a hidden tax on American households. As prices rise and consumer costs grow, the long-term sustainability of trade policy choices is coming under increasing scrutiny. The economic and political consequences are only beginning to surface.
