A new analysis breaking down the passthrough of tariff costs finds that U.S. businesses and consumers are shouldering the majority of the cost at this point, rather than foreign exporters.
Goldman Sachs economists estimated that as of August, U.S. businesses were absorbing a net 51% of tariff costs, while American consumers were shouldering 37% of the burden. They also estimated that 9% of the cost was paid by foreign exporters, and about 3% was attributed to potential tariff evasion.
"Our analysis suggests that at the moment, U.S. businesses are bearing the largest share of the tariff costs because some tariffs have only recently gone into effect and it takes time to raise prices on consumers and negotiate lower import prices with foreign suppliers," the Goldman economists wrote.
The report went on to note that if the newly implemented and future tariffs end up having the same price impact as those that have taken effect so far, then American consumers will eventually be absorbing the majority of costs.
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Goldman's economists assessed that by the end of 2025, U.S. consumers will be absorbing 55% of tariff costs, while 22% will fall on U.S. businesses, 18% on foreign exporters and 5% on potential tariff evasion.
"Our 22% estimate for U.S. businesses is modest because it is a net impact – companies that use or sell imported goods will bear a larger share of tariff costs, while domestic producers that are shielded from foreign competition by tariffs will be able to raise their own prices and increase their margins," the economists wrote.
FED'S FAVORED INFLATION GAUGE SHOWS CONSUMER PRICES REMAINED ELEVATED IN AUGUST
The Goldman Sachs report also estimated that tariffs have pushed inflation higher by nearly half a percentage point so far this year and the trend is expected to continue in the months ahead.
The analysis found that core personal consumption expenditure (PCE) prices have increased 0.44 percentage points this year and that with the passthrough of tariff costs expected to rise from 55% to 70%, core PCE inflation is expected to rise an additional 0.6 percentage points.
As a result, the analysis sees core PCE inflation at 3% year over year in December 2025, or 2.2% net of tariff effects. In December 2026, economists estimated core PCE inflation will be 2.4%, or 2% net of tariff effects.
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Federal Reserve policymakers have observed an uptick in inflation this year as tariff costs began affecting the economy and consumer prices, with PCE inflation at 2.7% and core PCE at 2.9% as of August.
Those figures are well above the Fed's 2% target and concern over the inflationary impact of tariffs on the data caused policymakers to refrain from cutting interest rates for much of the year, as they proceeded with a 25-basis-point cut in September amid signs of a weakening labor market.
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The central bank is expected to cut interest rates by another 25 basis points at its meeting next week, as uncertainty about economic conditions lingers.
