New research from Goldman Sachs highlights a notable shift in who ultimately pays for the tariffs introduced by the Trump administration. Economists led by Jan Hatzius find that, through June, American consumers have been responsible for only 22% of those tariff costs, while U.S. businesses have absorbed the remaining share. That balance appears to be changing quickly as firms begin passing more of their added import costs on to customers via higher prices.
Goldman’s analysis projects a significant reallocation of tariff burdens: if recent trends persist, consumers could end up paying roughly 67% of tariff costs. This transition from business-bearing to consumer-bearing tariffs matters because it feeds directly into measured inflation. Goldman estimates that core PCE inflation could rise to about 3.2% year-over-year by December if tariffs continue to work through prices, compared with a projected 2.4% without the tariff effect.
Higher inflation driven by tariffs complicates the Federal Reserve’s policy choices. The Fed must weigh inflationary pressures against growth and employment considerations while also responding to political calls for easier policy. President Trump’s push for interest rate cuts comes at a moment when rising consumer prices could argue for tighter or at least more cautious monetary policy. That tension leaves policymakers navigating a narrow path between supporting the economy and preventing inflation from becoming entrenched.
Market participants are watching closely. Bond traders, who set expectations for the path of interest rates, have largely priced in a September rate cut — with more than 80% anticipating that move — but those expectations could shift if tariff-driven inflation proves persistent. In short, the evolving distribution of tariff costs from firms to consumers is an important factor that could sharpen inflation risks and influence the timing and direction of future monetary policy.
For businesses, the change in cost allocation reflects a combination of margin management and competitive pressures. Early on, many firms absorbed tariff costs to protect market share or preserve price competitiveness. As those costs accumulate and profit margins tighten, companies appear more willing to raise prices, pass through import costs, or adjust sourcing and supply chains. The speed and extent of that pass-through vary by industry, product substitutability, and market dynamics, but the trend toward greater consumer exposure is clear.
Consumers, meanwhile, may soon feel a more direct impact on household budgets through higher prices on goods affected by tariffs. As firms shift more of the tariff burden onto buyers, discretionary spending decisions could change, potentially slowing consumption growth in affected categories. Policymakers and economists will be watching consumer-price indicators such as core PCE and CPI closely for signs that tariff pass-through is accelerating inflation beyond baseline expectations.
In summary, Goldman Sachs’ findings show a dynamic redistribution of tariff costs that began with businesses shouldering most of the burden and is moving toward consumers taking on a much larger share. This shift has important implications for inflation forecasts, household purchasing power, corporate pricing strategies, and the Federal Reserve’s policy calculus. Continued monitoring of price data and corporate behavior will be essential to assess how tariffs ultimately affect the broader economy.