• Trump disputes Goldman Sachs' research on tariff impacts, arguing markets won’t suffer.
  • Goldman estimates 64% of tariff costs are currently borne by U.S. firms, with consumer pass-through expected to rise later in 2025.
  • Market reactions to tariff announcements have become more muted as risks are priced in, though underlying cost pressures persist.

Clash Over Tariff Economics

Former President Donald Trump publicly dismissed Goldman Sachs' assessment that his proposed 2025 tariff increases are pressuring U.S. companies and could soon push more costs onto consumers. In a sharp rebuttal, Trump argued that markets would remain resilient and accused Goldman CEO David Solomon of misreading the economic landscape.

Goldman’s latest research indicates U.S. firms have absorbed roughly 64% of tariff costs so far, with consumers shouldering 22% and foreign exporters 14%. However, the bank warns that the consumer share could climb toward two-thirds later in 2025, potentially stoking inflation. The effective U.S. tariff rate has already risen about 10 percentage points to 13%, with a path toward 17% under announced policies—levels unseen since the 1930s.

Market Adaptation vs. Long-Term Risks

While early tariff shocks triggered volatility, subsequent announcements have elicited more muted reactions as investors adjust expectations. Goldman notes that markets have developed some "immunity" to tariff headlines, though underlying cost pressures remain a concern for earnings and inflation. Sectors like household appliances, information processing equipment, and furniture are particularly exposed due to reliance on imported components.

"You’re seeing firms eat these costs now, but that can’t last forever," said one Goldman analyst, speaking on condition of anonymity. "By late 2025, we expect consumers to feel the pinch." The bank’s research desk forecasts S&P 500 EPS growth of 7% in 2025 but warns tariffs could dent margins for companies with weak pricing power.

Political and Economic Fallout

The escalating tariff regime has drawn criticism from economists and trade experts, with some arguing it risks straining alliances while adversaries exploit gaps in U.S. trade policy. Yale Insights projects 2025 GDP growth could slow to 1.4%, down from 2.8% in 2024, citing tariff-related headwinds.

Trump’s dismissal of these concerns sets the stage for a broader debate over trade policy’s role in inflation and growth. With earnings season underway, analysts are scrutinizing management commentary for signs of tariff-related margin pressure—a trend that could reshape investor sentiment in the months ahead.