Faced with fierce criticism from President Donald Trump, Goldman Sachs economist David Mericle on Friday supported a controversial forecast that tariffs will start to collide with consumer wallets.
Trump surged at the bank in Tuesday’s post on True Social, suggesting that CEO David Solomon would either “get a new economist” or consider resigning.
However, Mericle said in an interview with CNBC that the company is confident in its research.
“We support the findings of this study,” he said in “Scoke on the Street.” “If the latest tariffs, like the April tariffs, follow the same pattern we saw with these early tariffs, then we estimate that by autumn, consumers will ultimately bear about two-thirds of their costs.”
The source of the president’s anger was a Goldman Written by economist Elsie Penn, the weekend claims that exporters and businesses have absorbed most of Trump’s tariffs up until now, while the burden will switch ahead of consumers.
In fact, Peng writes that Goldman’s model shows that consumers take on about two-thirds of all costs. In that case, it will push the Federal Reserve’s main inflation forecast gauge, the Personal Consumption Expense Price Index, to 3.2% by the end of the year, excluding food and energy. Core PCE inflation was 2.8% in June, but the Fed is targeting 2% inflation.
“If you’re a company that’s currently a US-producing company that’s protected from foreign competition, you can raise your prices and profits,” Merrill said. “So these are our estimates and I think in reality they are very consistent with what many other economists have found.”
Notably, Merrill said Trump is likely to get at least some of the interest rate cuts he had requested from the Fed.
“I think most of the impact is still ahead of us. I’m not worried about it. I think we’ll see this as a one-off price level effect, like the White House, or Fed officials,” he said. “I don’t think this is that important to the Fed because there’s a labor market that I’m worried about now. I think that’s the dominant concern.”
After a modest profit was reported on the consumer price index this week, the weak non-farm salary report in July, featuring a sharp downward revision over the past two months, is priced for cuts from the Fed at each of the three meetings this year.
