Goldman Sachs Stands by Forecast: Consumers to Bear Brunt of Tariffs Despite Trump’s Criticism

Goldman Sachs, one of the world’s leading investment banks, has reaffirmed its forecast that consumers will ultimately bear the brunt of tariffs imposed during President Donald Trump’s trade war, despite a fierce backlash from the President. In a recent interview with CNBC, economist David Mericle of Goldman Sachs emphasized that the bank’s projections on the economic impact of tariffs, particularly on consumer spending, remain intact. This came after President Trump took to social media to criticize the firm and its research, calling for the resignation of Goldman Sachs' CEO David Solomon and suggesting that the bank should find a new economist.

Tariffs’ Impact on Consumers: A Goldman Sachs Forecast

Goldman Sachs has been at the forefront of analyzing the economic effects of U.S. trade policies, particularly the tariffs imposed by the Trump administration on imports from China and other countries. According to a recent report authored by economist Elsie Peng, the bank’s research indicates that, despite the fact that businesses and exporters have largely borne the cost of tariffs up until now, this burden will shift to American consumers in the months ahead.

Mericle reinforced these findings during an appearance on CNBC’s Squawk on the Street, explaining that by the fall, he expects consumers to shoulder approximately two-thirds of the cost of these tariffs. He clarified that this forecast assumes tariffs, like those introduced in April, will follow a similar pattern to the earlier rounds of tariffs introduced earlier in 2025.

“We stand by the results of this study,” Mericle said. “If the most recent tariffs, like the April tariff, follow the same pattern that we’ve seen with those earliest February tariffs, then eventually, by the fall, we estimate that consumers would bear about two-thirds of the cost.”

Goldman Sachs’ study suggests that tariffs, which initially impacted businesses and exporters, will ultimately result in higher prices for consumers. The bank's research highlights that by the end of 2025, these tariffs could push core inflation—the measure closely watched by the Federal Reserve—up to 3.2%, excluding food and energy prices. This would be a significant jump from the current level of 2.8%, further straining household budgets and potentially complicating the Fed’s inflation goals.

Trump’s Reaction: A Call for a New Economist

President Trump’s reaction to Goldman Sachs’ report was swift and vocal. In a post on Truth Social, Trump accused Goldman Sachs of issuing misleading forecasts, claiming that the bank’s predictions were overly pessimistic. The President went as far as suggesting that CEO David Solomon should either replace the firm’s economist or step down from his role entirely.

Trump’s criticism focused on the idea that Goldman’s research painted an unnecessarily negative picture of the impact of tariffs. While the President has long argued that tariffs would protect U.S. businesses and encourage domestic production, Goldman Sachs’ findings suggest that the broader economy, particularly consumers, will feel the negative effects over time. Trump has been a staunch advocate of tariffs, which he views as a tool for bringing foreign manufacturers to the negotiating table and reducing the U.S. trade deficit.

Despite the President’s public denouncement, David Mericle remained firm in his stance during the CNBC interview. He pointed out that while the Trump administration may continue to push for more aggressive tariffs, the reality of the situation is that these measures are expected to increase costs for consumers, particularly as companies pass on the higher import costs to buyers.

“If you are a company producing in the U.S. who is now protected from foreign competition, you can raise your prices and benefit,” Mericle explained. “So those are our estimates, and I think actually, they’re quite consistent with what many other economists have found.”

Mericle also added that while Trump’s calls for aggressive trade policies may continue, his research aligns with the views of many others in the field, underscoring that the cost burden of tariffs will inevitably reach the American consumer. According to Goldman Sachs, U.S. businesses that are protected from foreign competition by tariffs have the ability to raise prices, which ultimately results in consumers paying more for goods and services.

Economic Implications and the Path Ahead

Goldman Sachs’ forecast highlights a growing concern that inflation, driven by tariffs and higher consumer prices, could have broader consequences for the U.S. economy. This concern is especially relevant as the Federal Reserve looks to navigate the challenges of maintaining price stability while fostering economic growth.

Mericle also touched on the possible responses from the Federal Reserve, suggesting that the central bank may consider interest rate cuts to counteract any negative effects from the tariffs. However, he believes that the main focus of the Fed in the near future will likely be on the labor market, especially given recent reports showing weak job growth.

“I do think most of the impact is still ahead of us,” Mericle said, adding that despite the potential price increases, he doesn’t foresee the Fed making drastic changes to its stance in response. “I think, like the White House, like Fed officials, we would see this as a one-time price level effect.”

He went on to explain that while inflation could rise due to tariffs, the Fed will likely remain focused on the labor market and other factors that have more immediate implications for economic stability. The Federal Reserve has already made moves to lower interest rates in the face of economic uncertainty, and many market analysts are anticipating more rate cuts in the remainder of 2025.

Consumer Price Index and Market Reactions

In the wake of Goldman Sachs’ report and President Trump’s criticism, the financial markets have been adjusting their expectations for future monetary policy. Recent data, including a modest increase in the Consumer Price Index (CPI) and weaker-than-expected job growth in July, have led to speculation that the Fed may implement more rate cuts in the coming months.

The weak labor market report for July, along with downward revisions to previous employment figures, suggests that economic growth may be slowing more than anticipated. As a result, markets are pricing in the likelihood of interest rate cuts at each of the three remaining Federal Reserve meetings in 2025.

While the Fed has been cautious about reducing rates too aggressively, the recent data could prompt a more dovish approach in the coming months. For many, including Mericle, the expectation is that the price level impact from tariffs may be temporary, and that the Fed will focus on stimulating economic activity through lower interest rates to counteract any slowdown in growth.

The Global Impact: Tariffs Beyond the U.S.

The effects of U.S. tariffs extend far beyond American borders. As one of the largest economies in the world, changes in U.S. trade policy and inflation can have significant ripple effects on global markets. Higher tariffs on Chinese goods and other imports from around the world could lead to rising costs for consumers in other nations as well, especially in countries that are major trading partners with the U.S.

For international consumers, the impact of U.S. tariffs could be felt in the form of higher prices on goods, especially those imported from the U.S. or those that rely on U.S. manufacturers. The global economy is interconnected, and price increases in the U.S. often result in cost increases elsewhere. As such, economists and policymakers around the world will be closely watching how the situation develops.

Conclusion: A Divided Debate on Tariffs and Their Impact

Goldman Sachs’ prediction that consumers will eventually bear most of the cost of tariffs is one that has stirred significant debate. While some, including President Trump, argue that tariffs will benefit U.S. businesses and bring manufacturing jobs back to the U.S., others, like the economists at Goldman Sachs, believe that the burden of these tariffs will ultimately fall on American consumers.

In the wake of President Trump’s public criticism of Goldman Sachs, it’s clear that the debate over the economic impact of tariffs is far from over. The next few months will be critical in determining how tariffs affect inflation, consumer behavior, and overall economic growth in the U.S. and beyond. As the situation unfolds, global markets and policymakers will have to navigate a challenging landscape, balancing trade policy with the need to maintain economic stability.

For international audiences, the effects of U.S. tariffs on inflation, interest rates, and trade could create ripple effects that influence the broader global economy. With Goldman Sachs standing firm in its predictions, it remains to be seen whether the President's criticism will change the broader outlook or simply add fuel to an already heated debate.