Goldman Sachs warns: Trump's tariff proposal will push U.S. core PCE inflation up by 0.9%

Goldman Sachs stated that the latest tariff proposal from U.S. President Donald Trump could put upward pressure on inflation in the country. On Monday, Trump announced on the social media platform Truth Social that he would impose a 25% tariff on goods from Canada and Mexico. On Tuesday, November 26, Eastern Time, Goldman Sachs Chief Economist Jan Hatzius pointed out in a report that this proposal would significantly raise consumer prices in the U.S. Hatzius explained: "Based on our experience, for every 1 percentage point increase in the effective tariff rate, the core PCE (Personal Consumption Expenditures Price Index), which is the inflation measure favored by the Federal Reserve, will rise by 0.1%. Based on this estimate, if these tariff proposals are implemented, core PCE inflation will increase by 0.9%." According to Goldman Sachs' calculations, the countries Trump claims will face increased tariffs account for 43% of total U.S. goods imports, and these tariffs would generate less than $300 billion in revenue annually. Previously, Federal Reserve Chairman Jerome Powell stated that the Fed would consider the impact of these factors on inflation once the specific details of the tariffs and other fiscal policy changes are clarified. Currently, U.S. inflation remains above the Fed's 2% target, and the new tariff proposal could further widen this gap, disrupting market expectations for Fed rate cuts. Traders have begun to reduce their expectations for a Fed rate cut in 2025. However, it remains uncertain whether the tariffs proposed by Trump will be implemented at the suggested levels. On one hand, Trump has linked these tariff proposals to other policy reforms. He stated on social media that one of the conditions for implementing these tariffs is a change in immigration policy and drug enforcement. On the other hand, some of Trump's advisors and supporters believe that the tariffs he proposed during the campaign are not the final policy but rather a negotiation strategy. Looking ahead, U.S. PCE data for October will be released on Wednesday, with expectations that the data will show a year-on-year increase in core PCE of 2.8%