Goldman Sachs Says Tariffs Will Temporarily Lift US Inflation

Economists at Goldman Sachs, led by chief U.S. economist David Mericle, predict that the recent round of U.S. tariffs will cause a temporary increase in core PCE inflation, potentially rising to 3.6% by the end of 2025, before easing in 2026. This tariff-driven inflation surge differs from the pandemic-era spike as it results from a one-time price level boost rather than sustained economic overheating, with slower GDP growth and a cooling labor market providing the Federal Reserve room to eventually cut rates. Despite the short-term inflation rise, Goldman emphasizes risks if tariffs escalate to prohibitive levels or persist into 2026, which could prolong elevated inflation and constrain monetary policy. The current economic environment is weaker, with slower wage growth and cautious consumer behavior limiting businesses' ability to pass on costs, reducing the likelihood of entrenched inflation. Goldman’s outlook serves as a cautious message to policymakers to avoid escalating tariffs further, as the economy can absorb symbolic tariff measures but may suffer if trade tensions intensify. Financial markets, including cryptocurrency sectors, have shown subdued reactions so far, as investors watch for regulatory updates and potential shifts in Federal Reserve policies based on evolving inflation trends.