Don’t Worry, Be Happy: Goldman Sachs Says Tariff Spikes Won’t Lead to Inflation Surge

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Goldman Sachs says American investors shouldn’t fear an inflation surge despite rising import costs from the Trump administration’s tariff policy. While prices will go up, the firm argues that the U.S. economy lacks the fuel needed to ignite prolonged inflation. In their view, slower growth will act as a natural brake.

In a recent note, economist David Mericle projected that core personal consumption expenditures (PCE) inflation will rise to 3.6% by year-end. That’s up from 2.6% in March. The increase stems from higher import costs, rising domestic production expenses, and companies opportunistically hiking prices in response to tariff headlines.

Why Goldman Sachs Sees Only a Temporary Rebound

While Goldman Sachs acknowledges a temporary inflation bump, it doesn’t expect anything close to the 2021–2022 spike. That surge was powered by tight labor conditions, aggressive household spending, and pandemic-era fiscal transfers. Today’s conditions look much different.

The labor market is looser, so employers face less pressure to raise wages. Fewer job changes, fewer pay raises, and fewer hiring frenzies mean the wage-price feedback loop is weaker. Meanwhile, consumers no longer have the cash reserves they once did. Without stimulus checks or paused payments, spending has slowed and discretionary budgets are tighter.

This limits how far companies can push prices without losing customers. Even if input costs rise due to tariffs, most businesses won’t have the leverage to raise prices broadly.

Some inflation watchers point to consumer expectations as a risk. The University of Michigan’s survey shows that more Americans now expect prices to rise. But Goldman compares this with other indicators from the New York Fed and Conference Board, which reflect more restrained expectations. Their conclusion: unless inflation is high, widespread, and persistent, expectations won’t stick.

On top of that, Goldman expects U.S. GDP growth to drop to 1%—about half its long-term average. A sluggish economy lacks the demand pressure to support runaway inflation. Businesses and households alike are pulling back, and that will weigh down any upward price momentum.

Does What Goldman Sachs Think Make Sense?

There are risks, though. A broader or steeper tariff expansion could jolt prices more than expected. If companies take advantage of tariff headlines to raise prices under the radar, consumer psychology could shift faster. But for now, those are outside scenarios, not base-case projections.

What this means for investors is clear: don’t confuse a temporary increase in inflation with a full-blown inflation surge. Goldman sees price pressures ahead, but not a return to the chaos of 2022. That suggests less urgency for defensive plays and more room to evaluate opportunities based on margin resilience, input-cost exposure, and pricing power.

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