Goldman Sachs economists now estimate that U.S. consumers will bear more than half of the total cost of tariffs, signaling a significant shift in the economic burden from firms to households.
In a client note widely circulated Monday (Oct. 13), Goldman said that while consumers had absorbed about 22% of tariff-related costs as of mid-2025, that share will climb above 50% as companies continue to pass along price increases amid escalating trade tensions.
The analysis arrives amid what the bank called “policy whiplash,” with the Trump administration recently announcing tariff hikes on Chinese goods exceeding 100% — a move that has heightened uncertainty for businesses, supply chains, and consumers alike.
“The volatility means firms face high uncertainty about future sourcing and cost structures,” Goldman analysts wrote. “Many appear to be acting on the assumption that tariff costs will not recede anytime soon.”
Merchants Push Costs to Consumers
The retail and consumer goods sectors are bearing the brunt of tariff pass-through dynamics, turning macro trade policy into tangible price hikes at checkout.
According to recent PYMNTS Intelligence data:
- 1 in 3 U.S. consumers said a retailer explicitly cited tariffs as the reason for higher prices.
- Nearly 25% said they were told prices rose due to “increased costs.”
- 90% of goods firms have raised prices over the past 12 months in response to macro pressures such as tariffs, supply shortages, and higher transport costs.
| Corporate Adjustment Strategy | Share of Companies (2025) |
|---|---|
| Raised product or service prices | 29% |
| Renegotiated supplier contracts | 21% |
| Discontinued tariff-affected SKUs | 18% |
| Shifted sourcing to domestic supply | 14% |
This cost management shows how companies are attempting to balance inflationary pressures with consumer retention — but as tariffs increase, many are running out of buffer room.
“We’re seeing the limits of cost absorption,” said Karen Webster, CEO of PYMNTS. “Retailers are passing more of the tariff burden to consumers, especially in categories like apparel, electronics, and household goods.”
How Consumers Are Reacting: Trade Down, Trade Off, Delay?
Tariffs are no longer just a business cost; they are changing how Americans shop and spend.
PYMNTS Intelligence research cited by Webster found that over 80% of consumers have modified their spending in anticipation of higher prices — making an average of five behavioral changes.
| Consumer Response to Tariff Pressure | Share of Consumers | Behavioral Change |
|---|---|---|
| Altered shopping habits due to tariffs | 44% | Switched brands, reduced discretionary spend |
| Shifted to lower-cost retailers | 42% | Moved from premium to discount stores |
| Cut nonessential purchases | 39% | Reduced dining out, apparel, entertainment |
| Bought more store-brand/generic goods | 37% | Substituted branded with lower-cost options |
Across grocery, dining, and retail categories, many households have begun “trading down” — switching to generics or budget retailers — while others are delaying durable goods purchases such as appliances or electronics.
“Consumers are now treating tariffs as a built-in cost of living,” said Amanda Liu, senior economist at RBC Capital Markets. “They’ve internalized the expectation that prices won’t normalize quickly.”
The Balancing Act for Businesses
The fundamental challenge for firms, Goldman’s report suggests, is determining how much cost can be passed through to consumers without eroding demand.
While large retailers have the scale to hedge or reprice gradually, middle-market and small businesses are facing more acute margin pressure.
The Federal Reserve Bank of Minneapolis noted last week that the tariff pass-through process is unlikely to be instantaneous or uniform, as pricing power and cost elasticity vary by sector.
| Sector | Pricing Flexibility | Consumer Sensitivity |
|---|---|---|
| Apparel & Retail | High | High |
| Electronics & Appliances | Moderate | High |
| Food & Grocery | Low | Moderate |
| Construction & Manufacturing | Moderate | Low |
Some companies have opted to absorb short-term losses to protect brand loyalty, while others have repositioned product lines or adjusted sourcing to offset input cost volatility.
“The path firms choose — absorb, pass, redesign, or reposition — will define who adapts successfully to this new tariff era,” said Liu.
Policy Shifts and the Consumer Burden
The return of steep tariffs has altered the inflation landscape.
Economists warn that while tariffs may protect select domestic industries, they also compound price pressures across consumer categories, adding hidden inflation even as headline CPI moderates.
The 50% pass-through estimate from Goldman Sachs highlights how trade policy is now functioning as an indirect tax on consumers — shaping not only prices but also behavioral and psychological expectations.
“Tariffs have become a stealth component of U.S. inflation,” said Paul Donovan, chief economist at UBS Global Wealth Management. “They’re embedded into everyday pricing logic — from logistics to retail margins.”
Why It Matters?
The new data suggests the U.S. consumer — long the backbone of economic resilience — is quietly absorbing a majority of the trade war’s cost load.
For policymakers, the findings underscore how tariffs are transmitting inflation through the household channel rather than merely affecting corporate profits.
For businesses and fintech leaders, the implications extend beyond pricing:
- Payments and commerce platforms must prepare for shifts in spending categories.
- Retail banks and lenders could see credit risk rise as households cut back or delay purchases.
- Supply chain finance players will need to factor in cost pass-through patterns in their credit models.
In short, tariffs are no longer just a Washington policy lever — they’re a real-time market variable shaping how consumers, merchants, and investors behave.
FAQs
How much of tariff costs will U.S. consumers pay?
Goldman Sachs estimates consumers will ultimately bear over 50% of the total tariff burden, up from 22% earlier this year.
What’s driving this shift?
Companies are increasingly passing costs to customers amid sustained tariff hikes, supply uncertainty, and sourcing realignments.
How are consumers responding?
Over 80% have modified their spending, often trading down, switching brands, or cutting nonessential purchases.
Which industries are most affected?
Retail, consumer electronics, and imported goods sectors face the most direct pricing pressures.
What’s the outlook?
Goldman expects tariffs to remain elevated, keeping inflation sticky and shifting more cost pressure to consumers through 2026.