As Trump Criticizes Goldman, Economists Warn of Rising Inflation from Higher Tariffs

Goldman Sachs is under political fire from President Donald Trump after projecting that heavier tariffs will drive consumer inflation higher through the rest of 2025. Despite this criticism, many Wall Street economists share the same outlook.

Investors had welcomed a mild U.S. consumer price index (CPI) report, but economists warn the largest tariff impact on inflation is yet to appear. With pre-tariff inventories running out, effective tariff rates rising toward 18% from about 3% earlier in the year, and companies less willing to absorb extra costs, consumers are expected to feel more price pressure over the coming months.

Michael Feroli, chief U.S. economist at JPMorgan Chase, noted tariffs could cut GDP by around 1% and raise inflation by 1–1.5%, some of which has already happened. He added that this year’s tariff hikes are unprecedented in the post-war U.S., making the pass-through to consumer prices uncertain.

Trump attacked Goldman Sachs on Truth Social, suggesting CEO David Solomon should either fire the economist behind the report, David Mericle, or resign himself. Mericle defended the forecast on CNBC, saying the firm stood by its analysis. However, firing all economists who share Goldman’s view would leave many empty desks on Wall Street.

Most analysts anticipate a slow but steady rise in inflation as higher tariffs take hold. UBS’s Brian Rose said the downward trend in core inflation appears broken and expects a gradual rise as companies pass on higher costs. However, slower shelter inflation and resistance from financially strained consumers could offset some tariff effects. No one is forecasting runaway inflation, but monthly gains of 0.3–0.5% could lift the Fed’s preferred core measure into the low-to-mid 3% range.

Despite higher prices, most economists still expect the Federal Reserve to start cutting interest rates later in 2025, given a weakening labor market and the belief that tariff-driven inflation will be temporary. In the short term, however, inflation could curb consumer spending and slow economic growth. JPMorgan forecasts GDP will take a hit of just under 1%. The August Blue Chip Economic Indicators report projects GDP growth averaging 0.85% in the second half of 2025, slightly better than July’s 0.75% forecast, as some pessimists have turned more optimistic, expecting tariff effects to fade and growth to rebound next year.

Short-term concerns include the Aug. 29 expiry of de minimis tariff exceptions, which had allowed goods under $800 to enter the U.S. duty-free. This could especially impact retail goods. Pantheon Macroeconomics predicts core inflation will rise by 1 percentage point to reach 3.5% by year-end, with only a quarter of that increase already passed on to consumers. BNP Paribas warns that service sector prices could also face upward pressure, noting that the Fed’s greater worry is inflation “stickiness” rather than the absolute level.

The Cleveland Fed’s sticky-price CPI, covering items like rent, dining out, insurance, and furnishings, has risen to 3.8%, the highest since May 2024, while flexible-price inflation for goods like food and energy remains much lower. PNC’s Gus Faucher expects tariffs to push core PCE inflation further above the Fed’s 2% target, potentially making policymakers more cautious, even with a softer labor market.