Goldman Sachs Forecasts: Increased US Tariffs and Their Economic Impact

Economists at Goldman Sachs Group Inc. are predicting that the U.S. baseline tariff rate will rise from 10% to 15%, with a 50% tariff imposed on copper and critical minerals. Analysts believe this increase has the potential to exacerbate inflation and put pressure on economic growth.

The investment bank has revised its forecasts for U.S. inflation and gross domestic product (GDP) growth to reflect the new tariff assumptions, incorporating “early lessons” regarding the impact of import taxation.

“So far, the main lesson from tariffs is that the pass-through to consumer prices seems a bit lower than in 2019,” David Mericle, chief U.S. economist at Goldman Sachs, wrote in a weekly update. “While it is too early to estimate the pass-through effect, surveys asking firms how much they ultimately intend to raise prices also suggest a smaller pass-through than last time.”

As a result, Goldman Sachs now forecasts a 3.3% annual rate for core U.S. inflation in 2025, down from a previous estimate of 3.4%. The rate is expected to slow to 2.7% next year, and then decline to 2.4% in 2027 – both figures are higher than Goldman Sachs’ previous estimates of 2.6% and 2.0%, respectively. Mericle says that cumulatively, tariffs will push core inflation up by 1.7% over 2-3 years.

He added that tariffs will drag down U.S. GDP growth by 0.1 percentage point this year, 0.4 percentage point in 2026, and 0.3 percentage point in 2027. Consequently, Goldman Sachs now forecasts U.S. GDP growth of 1% in 2025.

Trump announced an agreement with Japan on Tuesday to set tariffs on imported goods from that country at 15%, including automobiles, or the largest component in the trade deficit between the two countries.

Additionally, a separate agreement between the U.S. and the Philippines set a tax rate of 19%, the same level agreed to with Indonesia, and one percentage point lower than Vietnam’s baseline level of 20%, suggesting that most of Southeast Asia may get similar rates.

Currently, Trump is touting trade victories, and investors appear generally relieved.

“I just signed the biggest trade deal in history with Japan, I think maybe the biggest trade deal in history, and it’s a great deal for everybody,” Trump said after announcing the agreement at a White House event on Tuesday.

Goldman Sachs anticipates that in 2026, the Trump administration will impose industry-specific tariffs on heavy trucks and aircraft and delay tariff increases on pharmaceuticals after the 2026 midterm elections.

Mericle said that on a weighted-average basis, the effective U.S. tariff rate is expected to increase by 16 percentage points this year. “This implies that the risks from tariffs are slightly tilted to the upside for inflation and slightly to the downside for growth,” he wrote in a note to clients.

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Economic Analysis and Potential Impacts

The potential for increased tariffs raises significant questions about their impact on the US economy. While tariffs can protect domestic industries, they also increase costs for consumers and businesses that rely on imported goods. The effect on inflation is particularly concerning, as higher prices erode purchasing power and can lead to decreased consumer spending. This, in turn, can negatively impact economic growth.

Furthermore, tariffs can disrupt global supply chains and create uncertainty for businesses that operate internationally. Companies may need to adjust their sourcing strategies, relocate production facilities, or absorb higher costs, all of which can have significant financial implications.

The impact of tariffs will depend on several factors, including the specific goods and countries targeted, the size of the tariff increases, and the response of other countries. If other countries retaliate with their own tariffs, it could lead to a trade war that further disrupts global commerce and harms economic growth.