Goldman Sachs: 64% of tariff costs are borne by US companies, consumers only bear 22%

Goldman Sachs analysis shows that so far, the cost of tariffs has been mainly absorbed by American companies. Scott Lincicome, Vice President of Economic & Trade Affairs at the Cato Institute, shared Goldman's "preliminary" analysis results on Twitter. The data shows that as of June, 64% of the tariff costs are absorbed by American companies, 22% by American consumers, and the remaining 14% by foreign exporters. Goldman estimates that tariffs have raised the core Personal Consumption Expenditures (PCE) price index by 0.2 percentage points as of June, and for the rest of the year, tariffs will push the core PCE index up by another 0.66 percentage points. Goldman says this means the year-over-year core PCE inflation rate will reach 3.2%, "but excluding tariffs, the potential inflation trend will moderately decrease to 2.4%". President Donald Trump announced the tariff hikes for the first time in February this year, but investors have been trying to figure out what impact the tax increases will have on American companies. David Kostin, Chief U.S. Equity Strategist at Goldman, wrote in a recent report, "Clients have been closely watching who will ultimately bear the cost of tariffs." Previously, economists at Goldman's research department believed that companies would pass on 70% of the tariff costs directly to consumers by raising prices. However, some business surveys show that the degree to which tariff costs are passed on to consumers has decreased. Kostin wrote, "Early financial results have sent conflicting signals on profit margin outlook. So far, companies have only announced marginal price increases this year, but the companies most affected by tariffs have raised prices more significantly." On the other hand, if companies have to bear a larger proportion of tariff costs than expected, their profit margins will come under pressure. Analysts' widespread revisions of profit margin expectations for companies indicate that some companies may not be able to fully offset the impact of tariffs. Some companies will be able to use existing inventory to minimize the impact of tariffs on their profit margins. The ratio of inventory to sales for S&P 500 index constituents remained essentially unchanged in the first quarter of 2025, but some companies accumulated inventory before the implementation of tariffs.