By John Q. Hosedrinker 
Goldman Sachs economist David Mericle defended the firm’s forecast that tariffs will negatively impact consumers despite criticism from President Trump. Mericle asserted Goldman’s research, authored by economist Elsie Peng, indicates consumers will bear approximately two-thirds of the costs. This would push the personal consumption expenditures price index to 3.2% by year-end. The economist believes this effect is a one-time occurrence unlikely to significantly influence the Federal Reserve’s policy decisions, as the labor market remains a primary concern.
Read the original article here
Goldman Sachs, it seems, is standing firm. The financial institution is sticking to its assertion that consumers will ultimately bear the brunt of tariffs, even after a public scolding from a former president. It’s a position rooted in basic economics: tariffs, which are essentially taxes on imported goods, inevitably find their way into the final price tag.
Think about it this way: if a business is faced with increased costs due to tariffs, they have limited options. They can absorb the hit, reducing their profits, which could impact investments and potentially lead to layoffs. Or, and this is far more common, they can pass the added expense onto the consumer in the form of higher prices. It’s a simple case of supply and demand.
This isn’t some groundbreaking economic revelation; it’s a fundamental principle understood even at a high school level. The core idea is that tariffs don’t magically vanish or get absorbed by distant countries. They’re a cost, and someone has to pay it. The end consumer, the person buying the product, is usually the one holding the bill.
Consider the example of someone buying tools from overseas and reselling them. The initial cost of the tools is lower, but tariffs add a significant surcharge. To maintain a profit, the seller has no choice but to increase the price to the end buyer. The consumer is the one absorbing the impact of the tariff, paying more for the product.
The idea that businesses won’t pass these costs on is, quite frankly, unrealistic. Companies exist to make money. If their costs go up, they’ll try to recoup those costs somehow. This is why Goldman Sachs’s stance is far from a radical opinion; it’s a reflection of how the economic world operates.
There seems to be a disconnect between the economic reality and the political narrative. Some political figures may portray tariffs as a tool to punish other countries or protect domestic industries, but at the end of the day, the consumer is usually the one who faces the direct consequence.
If companies don’t adjust prices, their profitability suffers. This can be a problem for investors. A drop in profits will affect the stock market.
The argument is often framed around the idea that tariffs somehow benefit the United States, or that the other country “pays” the tariff. In reality, the financial burden rests on the shoulders of those who are buying the items.
There appears to be a perception that a particular former president lacks a grasp of these fundamental economic principles. His strategies sometimes seem disconnected from the practical realities of business and trade. The focus on how tariffs work and who ultimately pays them is critical.
It is important to understand that tariffs can have different effects. It could affect the stock market, with fewer profits. Tariffs can lead to reduced investment or increased layoffs.
The long-term implications of tariffs, however, are not always clear-cut. While domestic industries might see a temporary boost, the increased costs for consumers and businesses can lead to a range of negative consequences.
The key takeaway is that tariffs have a real-world impact. Businesses pass the cost of the tariffs on to the consumer. There is the potential for a reduction in consumer spending, a decrease in investment, or in some cases, lost jobs.