American consumers will absorb 67% of the additional costs companies face from tariffs, up from 22% as of June.
U.S. businesses are poised to shift the burden of additional costs from tariffs to consumers, potentially pushing inflation higher later this year, according to a new research report by Goldman Sachs.
According to the analysis, reported by Bloomberg, U.S. consumers absorbed an estimated 22% of tariff costs through June, and their share is expected to rise to 67%. The projection is based on patterns followed during previous levies.
American businesses have absorbed around 64% of the costs of tariffs so far, and their share is expected to fall to less than 10%, according to Goldman Sachs. Foreign exporters have absorbed approximately 14% of the cost of tariffs through June, with their share expected to rise to 25%.
Rising consumer prices are a hot-button topic nationwide as Donald Trump’s tariffs took effect last week. A host of companies, such as Procter & Gamble (PG), Nike (NKE), and Walmart (WMT), have warned of price hikes, while the cost of 1,200 low-cost essentials, including deodorant and protein shakes, has increased over the last few months.
This comes in the backdrop of persistently high inflation, already prompting consumers to tighten their purse strings and throwing growth challenges for companies. Trump has been pressuring companies to absorb the costs, telling Walmart in May to “Eat the Tariffs”. To be sure, inflation cooled in June, due to lower fuel prices; July’s reading is expected on Tuesday.
Amid tariff pressures, consumer staple firms have traded in a broadly range-bound manner, while stocks of discretionary goods sellers have rallied.
Since April 2, when Trump first announced the tariff rates, the Consumer Staples Select Sector SPDR Fund (XLP) has gained 1.7%, while the Consumer Discretionary Select Sector SPDR Fund (XLY) has gained over 10%.
Goldman Sachs forecasts a year-on-year core Personal Consumption Expenditures price index reading of 3.2% in December, based on the assumption that underlying inflation, net of tariffs, would be 2.4%.
For updates and corrections, email newsroom[at]stocktwits[dot]com.<