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People shop for pet supplies at a pet retail store in Manhattan on August 12, 2025 in New York City. <\/p>\n
Spencer Platt | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
Goldman Sachs is taking the heat for its call that heavier tariff-induced consumer inflation is ahead, but it\u2019s far from alone in that view among its Wall Street brethren.<\/p>\n
Despite investors\u2019 embrace of Tuesday\u2019s fairly benign consumer price index report<\/a>, economists expect that the biggest impact to inflation is yet to come.<\/p>\n With pre-tariff inventories rolling off, effective tariff rates climbing higher and companies less willing to absorb higher costs from the duties, the general feeling is that consumers are increasingly going to feel the bite through the rest of the year.<\/p>\n \u201cTariffs could subtract 1% from GDP and add 1-1.5% to inflation, some of which has already occurred,\u201d Michael Feroli, chief U.S. economist at JPMorgan Chase, said in a note. \u201cThere is considerable uncertainty around the degree of pass-through to consumer prices, given that this year\u2019s tariff increases are well larger than anything in the post-war US experience.\u201d<\/p>\n President Donald Trump lambasted Goldman Sachs<\/a> on Tuesday for research the firm\u2019s economists released over the weekend asserting that consumers will take on a significantly stronger hit from tariffs through the end of the year. Goldman Sachs economist David Mericle, appearing Wednesday on CNBC, defended the call<\/a> and said the firm was undeterred by Trump\u2019s criticism.<\/p>\n In a Truth Social post, the president suggested CEO David Solomon fire the economist who wrote the piece or consider resigning himself.<\/p>\n However, if every market economist who is in the same camp on tariff impacts were to be dismissed, there would be a lot of empty desks on Wall Street.<\/p>\n<\/div>\n Most see at least a steady grind higher in prices as tariff clarity emerges and what looks to be effective rates around 18% \u2014 compared with around 3% at the start of the year \u2014 take root, with some caveats.<\/p>\n \u201cIt appears that the downward trend in core inflation has been broken as tariffs start to feed through into retail prices,\u201d UBS senior economist Brian Rose wrote. \u201cWe expect inflation to continue on a gradual upward trend as businesses pass along their higher costs, but slowing shelter inflation and push-back from increasingly stretched consumers should help offset some of the tariff impact.\u201d<\/p>\n To be sure, no one is calling for runaway inflation \u2014 more like monthly gains of 0.3%-0.5%. That\u2019s enough to push the Federal Reserve\u2019s preferred core measure to somewhere in the low- to mid-3% range.<\/p>\n Moreover, whatever the acceleration ends up being, it\u2019s not expected to dissuade the Fed from starting to lower interest rates<\/a> after staying on the sidelines through all of 2025 so far. Economists figure a deteriorating labor market<\/a> along with a belief that the inflation move will be temporary to allow for easier monetary policy.<\/p>\n However, in the near term rising inflation could hold back consumer spending and dent growth through the rest of the year. JPMorgan sees the hit to gross domestic product, two-thirds of which comes from consumption, at \u201ca bit under 1%.\u201d<\/p>\n The Blue Chip Economic Indicators report for August, which surveys the leading economic names on Wall Street, sees GDP growth averaging just 0.85% in the second half of this year. But that\u2019s actually better than the 0.75% forecast from July as some of the most pessimistic forecasters changed their outlooks on the view \u201cthat the constraining effect of tariffs is expected to be temporary, as projected growth improves considerably next year,\u201d the August report said.<\/p>\n<\/div>\nInflation to creep higher<\/h2>\n
Worries ahead<\/h2>\n