In the face of blistering criticism from President Donald Trump, Goldman Sachs economist David Mericle on Wednesday stood by a controversial forecast that tariffs will begin to hit consumer wallets.
Trump lashed out at the bank in a Tuesday post on Truth Social, suggesting that CEO David Solomon “get a new Economist” or consider resigning.
Mericle, though, said in a CNBC interview that the firm is confident in its research, the president’s objections notwithstanding.
“We stand by the results of this study,” he said on “Squawk on the Street.” “If the most recent tariffs, like the April tariff, follow the same pattern that we’ve seen with those earliest February tariffs, then eventually, by the fall, we estimate that consumers would bear about two thirds of the cost.”
The source of the president’s ire was a Goldman note over the weekend, authored by economist Elsie Peng, asserting that while exporters and businesses thus far have absorbed most of Trump’s tariffs, that burden will switch in the months ahead to consumers.
In fact, Peng wrote that Goldman’s models indicate consumers will take on about two-thirds of all the costs. If that’s the case, it will push the personal consumption expenditures price index, the Federal Reserve’s main inflation forecasting gauge, to 3.2% by the end of the year, excluding food and energy. Core PCE inflation for June was at 2.8%, while the Fed targets inflation at 2%.
“If you are a company producing in the U.S. who is now protected from foreign competition, you can raise your prices and benefit,” Mericle said. “So those are our estimates, and I think actually, they’re quite consistent with what many other economists have found.”
Of note, Mericle said Trump likely still will get at least some of the interest rate cuts he’s been demanding of the Fed.
“I do think most of the impact is still ahead of us. I’m not worried about it. I think, like the White House, like Fed officials, we would see this as a one-time price level effect,” he said. “I don’t think this will matter a whole lot to the Fed, because now they have a labor market to worry about, and I think that’s going to be the dominant concern.”
Following modest gains reported this week for the consumer price index, and a weak July nonfarm payrolls report that featured sharp downward revisions to the prior two months, markets are pricing in cuts from the Fed at each of its three remaining meetings this year.
