According to the Zhitong Finance APP, Goldman Sachs economists stated in a research report released last weekend that by the end of this year, American consumers will more significantly bear the impact of tariffs. This has sparked dissatisfaction and criticism from U.S. President Trump. He posted on social media suggesting that Goldman Sachs CEO David Solomon should fire the economist who wrote the report, or consider resigning himself.
Goldman Sachs economist David Mericle defended the bank's position in an interview on Wednesday, stating that they would not be swayed by Trump's criticism. Importantly, Goldman Sachs is not the only Wall Street institution holding this view. Although the relatively mild U.S. July CPI data released on Tuesday elicited a positive market reaction, economists generally expect that the maximum impact of tariffs on inflation has yet to be seen.
Inflation Will Rise
Economists believe that as the inventory prepared by businesses before the implementation of tariffs is gradually consumed, effective tariff rates continue to rise, and companies become increasingly unwilling to bear the higher costs imposed by tariffs, consumers will increasingly feel the pressure of rising prices for the remainder of this year.
Michael Feroli, Chief U.S. Economist at JPMorgan, stated, &#34;Tariffs could reduce GDP by 1% and increase inflation by 1% to 1.5%, some of which has already occurred.&#34; &#34;There is significant uncertainty regarding the extent to which tariff costs will be passed on to consumer prices, as this year's tariff increases far exceed any experience in the U.S. since World War II.&#34;
Most expect that as tariff policies become clearer, with effective tariff rates rising to about 18% (compared to about 3% at the beginning of the year) and solidifying, prices will at least steadily rise, although there are still some limiting factors. UBS senior economist Brian Rose pointed out, &#34;As tariffs begin to be passed on to retail prices, the downward trend in core inflation seems to be broken.&#34; &#34;We expect inflation to continue to rise gradually, as businesses will pass on higher costs, but the slowdown in housing inflation and increasingly tight consumer spending should partially offset the impact of tariffs.&#34;
No one predicts that inflation will spiral out of control; rather, forecasts suggest a month-on-month increase of 0.3% to 0.5%. This is enough to push the Fed's preferred core inflation measure up to the lower to mid-range of 3%. Furthermore, regardless of the extent of inflation acceleration, it is expected that this will not prevent the Fed from starting to cut interest rates in 2025 while maintaining a wait-and-see approach. Economists believe that the judgment of a weak labor market and rising inflation being temporary will open the door to more accommodative monetary policy.
However, in the short term, rising inflation may suppress consumer spending and drag down economic growth for the remainder of this year. JPMorgan expects the impact on GDP (two-thirds of which comes from consumption) to be &#34;slightly below 1%.&#34;
The August &#34;Blue Chip Economic Indicators&#34; report—which surveyed leading economists on Wall Street—predicts that U.S. GDP growth in the second half of this year will be only 0.85%. However, this is actually an improvement over the July forecast of 0.75%, as some of the most pessimistic forecasters adjusted their views, believing that &#34;the restrictive impact of tariffs is expected to be temporary, and growth is expected to improve significantly next year.&#34;
Concerns for the Future
Short-term concerns include the expiration of the &#34;low-value tax exemption&#34; on August 29, which previously allowed goods valued under $800 to enter the United States duty-free. This could particularly impact retail goods.
Pantheon Macroeconomics predicts that core inflation will rise by 1 percentage point, ultimately reaching 3.5% by the end of the year. The firm stated, &#34;So far, only about a quarter of this increase has been passed on to consumers, so we believe there is a high likelihood that core goods prices will rise more rapidly in the coming months.&#34;
BNP Paribas noted that price increases are expected to extend beyond the commodity sector, as recent surveys &#34;indicate upward pressure on input prices in the service sector.&#34; The bank stated in a report, &#34;The Federal Reserve's main concern about inflation is not the specific level, but the stickiness issue.&#34; &#34;The core service prices in the July CPI data were unexpectedly strong, so it is not convincingly good news.&#34;
Inflation Stickiness
Additionally, the so-called inflation &#34;stickiness&#34; is also an important issue. The Cleveland Fed's &#34;sticky price CPI&#34; inflation indicator (which includes items such as rent, dining out, insurance, and household goods) shows a steady increase, currently annualized at 3.8% over three months, the highest level since May 2024. In contrast, &#34;flexible price&#34; inflation for food, energy, and auto parts is much lower.
Gus Faucher, chief economist at PNC, stated, &#34;Tariffs will push inflation higher in the coming months.&#34; &#34;With the core CPI rising in July and businesses passing on higher tariff costs to consumers, core PCE inflation will further exceed the Federal Reserve's target in the coming months.&#34; He added that although most Wall Street analysts expect a rate-cutting path to open, higher inflation could cause some hesitation among decision-makers even in the face of a weakening labor market

American economists generally warn that tariffs will have a significant impact on consumer spending, with core inflation expected to exceed 3%. Although the July CPI data showed moderate performance, the full impact of tariffs has yet to be realized. Analysis from Goldman Sachs and JP Morgan indicates that tariffs could lead to a 1% reduction in GDP and an increase in inflation by 1% to 1.5%. With the clarity of tariff policies, prices are expected to rise steadily, and the downward trend in core inflation may be disrupted

- Goldman Sachs economists predict that by the end of this year, U.S. consumers will increasingly feel the impact of tariffs, prompting criticism from President Trump.  
- Economists expect inflation to rise as businesses deplete pre-tariff inventories and pass on higher costs, with estimates suggesting a potential GDP reduction of 1% and inflation increase of 1% to 1.5%.  
- Despite short-term inflationary pressures potentially dampening consumer spending, some analysts believe the restrictive effects of tariffs may be temporary, leading to improved growth next year.

The tariff shockwave is coming! Wall Street widely warns: US core inflation may exceed 3%, consumer spending faces a "1% GDP tax"