Goldman Sachs Defends Tariff Impact Prediction Amid Trump’s Criticism: Consumers to Feel the Pinch
Goldman Sachs Stands Firm on Forecast: Consumers to Bear Most Tariff Costs Despite President Trump’s Criticism
Goldman Sachs now backs its view. The bank expects that US buyers will cover most tariff costs. This idea comes amid sharp talk from President Trump. He questioned the bank’s study and its team of economists.
Tariff Impact on Consumers: Goldman’s Projection
In a CNBC interview on Squawk on the Street, economist David Mericle stuck to the bank’s view. He said the data shows tariffs will come hard by fall. Mericle explained that US buyers will pay about two-thirds of the extra cost.
“If the April tariffs act like the ones from February, our plan shows buyers face about two-thirds of the cost by fall,” said Mericle.
The President’s Response
On his social media site, Truth Social, President Trump spoke out on Tuesday. He told CEO David Solomon to “get a new economist” or quit. Trump called the bank’s view off track.
Still, Mericle ignored these claims. He stood by the bank’s models. A report by economist Elsie Peng, which sparked the president’s anger, noted that exporters and businesses have so far picked up most tariff costs. This balance will soon shift more to US buyers.
Economic Insights and Inflation Projections
The bank’s numbers show that tariff-driven price hikes could push the PCE price index to about 3.2% by the end of 2025. This index is the inflation tool favored by the Fed. At one time, the core PCE rate was 2.8% in June, while the Fed still aims for 2%.
Mericle added, “A US company shielded from global rivals can raise its prices and see gains.” His estimates sit well with those from other top economists.
Future Policy and Market Implications
Mericle said that even with rising prices, the president may see some relief in the form of Fed rate cuts. He described the rise as a one-time price jump. This change will not force the Fed to shift from its focus on jobs.
Recent data points—small gains in the consumer price index and a soft July nonfarm payroll report—make markets think that rate cuts may come at later Fed meetings in 2025. ### Summary of Key Points:
- Goldman Sachs sees US buyers covering about two-thirds of tariff costs by fall 2025.
- President Trump openly rejected Goldman’s forecast and called for a change in leadership.
- Tariffs may lift the key Fed inflation measure to near 3.2% by year-end.
- Even if prices grow, Goldman expects some rate cuts because of job market needs.
- The debate shows a clear divide between economic views and political opinions.
For updates on market moves, inflation, and Fed plans, stay tuned to CNBC.
