Goldman Sachs: Cost Of Donald Trump’s Tariffs Have Fallen ‘Entirely’ On U.S. Business And Households

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Goldman Sachs said that the cost of President Donald Trump’s tariffs on Chinese goods has fallen “entirely” on American households and businesses, CNBC reports. The bank also pointed out that the overall impact on consumer prices has been larger than previously predicted.

The analysis comes in the face of repeated incorrect statements by Trump that claim China pays for tariffs imposed by the United States.

“One might have expected that Chinese exporters of tariff-affected goods would have to lower their prices somewhat to compete in the US market, sharing in the cost of the tariffs,” Goldman said in a note.

“However, analysis at the extremely detailed item level in the two new studies shows no decline in the prices (exclusive of tariffs) of imported goods from China that faced tariffs.”

Making matters worse, many American manufacturers have taken the opportunity to raise their own prices in response to China maintaining their own price levels, creating additional costs for American buyers.

Goldman did, however, express optimism that the long-simmering trade war between China and the United States may be nearing its conclusion. The bank set an expectation that a deal would be struck one-way or another later this year, likely manifesting in the form of “a gradual, staggered reduction” in tariffs, rolled off in the reverse order that they were levied.

“There is, however, a risk of further escalation,” Goldman said, pointing to the remaining likelihood that a deal would not be struck before further tariffs are imposed. The risk of such an event, they say, currently sits at 30 percent.

The most recent round of trade talks between the two counties ended this week, with no agreement reached. Contributing to the tension was Trump’s announcement of a decision to more than double tariffs on approximately $200 billion in Chinese goods, lifting the percentage from 10 percent to 25 percent.

Larry Kudlow, the White House economic advisor, said on Sunday said that Trump and Chinese President Xi Jinping will probably meet again at the upcoming G-20 summit in Japan. That event takes place in June of this year.

Kudlow also said that he expects China to retaliate in response to Trump’s latest action. He also correctly acknowledged that it is the United States, not China, which ultimately pays the cost of Chinese tariffs.

Meanwhile, investors have remained skittish in the face of the ongoing uncertainty, with substantial hope placed on the ability of the two leaders to connect and resolve the ongoing trade dispute.