Goldman Sachs: U.S. Businesses and Consumers Carry the Weight of Rising Tariff Costs

A new analysis from Goldman Sachs reveals that American businesses and consumers not foreign exporters are absorbing the vast majority of the costs from recent U.S. tariffs. As trade tensions continue to simmer, the report underscores how the economic fallout from tariff policy is rippling through supply chains and household budgets alike.

According to Goldman’s economists, as of August 2025, U.S. businesses were bearing roughly 51% of total tariff expenses, while consumers were responsible for about 37%. In contrast, foreign exporters accounted for just 9% of the overall burden, and the remaining 3% stemmed from tariff evasion and circumvention efforts.

“Our analysis suggests that at this stage, American companies are carrying most of the tariff costs because many of these measures are newly implemented,” the report stated. “It takes time for businesses to adjust their pricing, pass along costs to consumers, or negotiate better terms with suppliers overseas.”

The economists noted that as tariffs remain in place and supply contracts renew, a greater share of these costs will inevitably filter down to households in the form of higher prices for goods ranging from electronics to building materials. By the end of 2025, Goldman projects that consumers will be absorbing 55% of the tariff burden, while 22% will remain with U.S. businesses, 18% with foreign exporters, and 5% attributed to evasion.

Consumers to Shoulder the Majority of Tariff Burden

The report emphasized that this shifting dynamic is largely due to the structure of global trade. U.S. importers pay the tariffs directly, often as taxes at the border. They can either eat those costs cutting into profit margins or pass them along to buyers and consumers. Over time, the latter tends to prevail.

“The 22% estimate for businesses represents a net effect,” the economists explained. “Some U.S. firms that rely heavily on imported goods will face greater pressure, while domestic producers shielded from competition may actually benefit by raising their prices and improving margins.”

The trend has already begun to show up in inflation data, as tariffs push up prices for everyday products. Goldman’s analysis estimated that tariffs have increased inflation by nearly 0.5 percentage points so far in 2025. The core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation measure, has climbed 0.44 percentage points this year as a result of tariff passthroughs.

As consumers shoulder a greater portion of the cost, Goldman expects this upward pressure to continue. If the pass-through rate rises from 55% to 70%, core PCE inflation could increase by an additional 0.6 percentage points, keeping inflation above the Fed’s 2% target well into next year.

By December 2025, Goldman forecasts core PCE inflation at 3% year over year, compared to 2.2% if tariff effects were excluded. By the end of 2026, that figure is expected to moderate slightly to 2.4%, or 2% net of tariffs.

Inflation and Policy Implications

The findings come as Federal Reserve officials continue to monitor the complex interplay between inflation, tariffs, and economic growth. The Fed’s latest data showed headline PCE inflation at 2.7% and core PCE at 2.9% in August both well above the central bank’s 2% goal.

The inflationary effects of tariffs have contributed to the Fed’s cautious approach to rate cuts this year. While the central bank implemented a 25-basis-point reduction in September, officials signaled that continued uncertainty around trade policy and prices could influence future decisions.

“Tariffs are effectively functioning as a tax increase on American importers,” one senior Fed analyst noted. “They not only add to consumer costs but can also complicate the Fed’s efforts to steer inflation back to target.”

Despite some easing in inflationary momentum over the summer, the broader trend remains elevated. Many economists now expect the Federal Reserve to deliver another 25-basis-point rate cut at its upcoming policy meeting, citing signs of cooling demand and a softer labor market.

The Broader Economic Ripple Effect

Tariffs, often viewed as tools to strengthen domestic industries, can also have unintended consequences. When imposed on intermediate goods materials used to make other products they raise input costs for manufacturers, squeezing profit margins and potentially slowing production.

For example, construction firms, auto manufacturers, and technology companies have reported rising supply costs linked to imported steel, semiconductors, and equipment. Those expenses are often passed to consumers, amplifying the inflationary feedback loop.

“It’s a domino effect,” said Torsten Slok, Chief Economist at Apollo Global Management. “Tariffs drive up business costs, businesses raise prices, and households feel the pinch. That, in turn, can dampen spending and slow economic momentum.”

Meanwhile, some domestic producers benefit from the reduced competition. U.S. manufacturers producing similar goods to those facing tariffs often see temporary boosts in pricing power and market share. But economists warn that such gains can be offset by weaker consumer demand and higher production costs across supply chains.

Looking Ahead

As trade tensions with China and other major partners continue, the outlook for tariffs remains uncertain. President Donald Trump’s administration has hinted at further increases, while China has responded by tightening export restrictions on critical materials like rare earths escalating the trade chess match.

Should additional tariffs be introduced, Goldman’s economists warn that the inflationary effect could intensify and linger longer than expected. Their models suggest that cumulative tariff impacts could add 0.7 to 1 percentage point to inflation through 2026 if current policy trends persist.

At the same time, rising tariffs could erode consumer confidence as Americans face higher costs on imported goods ranging from home appliances to groceries. Businesses may delay investment decisions amid policy uncertainty, leading to slower growth and reduced hiring.

A Balancing Act for Policymakers

Ultimately, the Goldman Sachs report highlights the delicate balancing act facing both Washington and the Federal Reserve. While tariffs are designed to protect American industries and reduce trade deficits, they also risk fueling inflation, squeezing profits, and weighing on household budgets.

“If current patterns continue, the U.S. consumer will end up shouldering the majority of the tariff burden,” the economists concluded. “That outcome could complicate monetary policy decisions and slow the path to a full economic recovery.”

As policymakers weigh their next moves, one reality remains clear: tariffs may start as trade policy but their costs end up at the checkout counter. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.