U.S. Consumers Now Bearing Over 50% of Tariff Costs, Goldman Sachs Reports
American households are now absorbing more than half of the total cost of U.S. tariffs, a significant increase from earlier in the year, according to new modeling released today by Goldman Sachs.
The investment bank’s recent analysis indicates consumers are shouldering over 50% of the tariff burden, up from approximately 22% at mid-year. This shift comes as the administration has announced plans to substantially increase tariffs on goods from China, creating uncertainty for businesses and impacting consumer prices. Recent price increases are already being felt across the economy, potentially contributing to inflationary pressures.
Data from PYMNTS Intelligence shows that roughly one-third of U.S. consumers have been directly told by retailers that tariffs are the reason for higher prices, with nearly a quarter hearing more general explanations of “increased costs.” A full 90% of goods firms have raised prices in the last year due to macroeconomic factors, including tariffs, and many are adjusting their strategies – from renegotiating with suppliers to discontinuing certain products – to mitigate the impact. Consumers are responding by trading down to generic brands, seeking cheaper retailers, and reducing non-essential purchases; over 80% have already modified their spending habits. You can learn more about consumer spending trends here.
Businesses are now grappling with the balance between absorbing tariff costs and passing them on to consumers, a challenge highlighted by the Federal Reserve Bank of Minneapolis. As consumers increasingly factor tariffs into their purchasing decisions, companies must adapt their pricing strategies and risk management. The ability to navigate this changing landscape will be a key indicator of business resilience, and understanding Federal Reserve policy is crucial for businesses.
Officials have indicated that monitoring the pass-through rate of these costs will be essential in assessing the broader economic impact.
