Tariffs drive up costs for businesses and households as inflation pressures mount, analysts warn
A new analysis from S&P Global warns that US President Donald Trump’s tariffs are set to cost global businesses upwards of US$1.2tn in 2025, with the majority of this burden ultimately falling on consumers rather than companies themselves, according to CNBC.
The analysis, based on data from 15,000 analysts across 9,000 companies, suggests that only about one-third of the tariff costs will be absorbed by businesses, while consumers will shoulder the remaining two-thirds.
S&P Global’s Daniel Sandberg notes that this represents a “systemic transfer of wealth from corporate profits to workers, suppliers, governments, and infrastructure investors,” with the impact compounded by logistics delays and increased freight costs.
The Federal Reserve’s latest Beige Book report, as reported by CNBC, confirms that prices have continued to rise across many sectors due to tariff-induced input cost increases.
While some firms have attempted to absorb these costs to remain competitive, others have passed them on to customers, resulting in higher consumer prices.
The report also highlights that, despite stable labour markets and muted demand, consumer spending has nudged lower, with lower- and middle-income earners seeking discounts and promotions.
Goldman Sachs analysts, as cited by NBC News, estimate that US consumers are already shouldering as much as 55 percent of the tariff costs, a figure that could rise to 70 percent if additional tariffs are implemented on products such as furniture and kitchen cabinets.
The analysts also point out that the tariffs have contributed an additional 0.44 percent to the Federal Reserve’s preferred inflation measure, with the potential to increase further if new duties are imposed.
The White House maintains that the long-term burden of tariffs will fall on foreign exporters, asserting that companies are already diversifying supply chains and onshoring production in response.
However, S&P Global’s research indicates that, at least in the short term, consumers are paying more for less, and the true extent of their burden may be even higher than current estimates suggest.
The ongoing trade tensions, particularly with China, and the removal of the “de minimis” exception for low-priced goods have intensified the effects of the tariffs, sending ripples through shipping data, earnings reports, and executive commentary.
As S&P Global’s Sandberg observes, the coming years will test whether markets’ optimism about a return to pre-tariff profit margins is justified, with much depending on how firms adapt through technology, cost discipline, and supply chain realignment.
