Tariffs to Impact End Demand: Goldman Sachs Analyst Expects Drag on Corporate Spending, Hiring

Ladies and gentlemen, buckle up! We're in for a wild ride as President Trump's tariffs are set to shake up the market like never before. Goldman Sachs analyst Eric Sheridan has sounded the alarm, warning that these tariffs could send shockwaves through the economy, impacting end demand trends and economic activity for the rest of 2025. Let's dive in and see what this means for your portfolio!



First things first, let's talk about the tariffs. Trump's latest move includes a weighted average tariff of 18.2%, with a 10% baseline tariff and varying levels by individual country. This is a game-changer, folks! Sheridan expects heightened uncertainty to slow corporate decisions between the second and fourth quarters of 2025. That means we could see a pullback in real-time investment areas like brand advertising and hiring. Companies will be treading carefully, and that's bad news for growth stocks.

But wait, there's more! Sheridan also notes that the visibility into AI CapEx’s return profile remains unclear. With broad enterprise adoption rates and consumer behavior shifts likely playing out over multiple years, this uncertainty could lead to a significant slowdown in AI-related investments. Companies will be hesitant to invest in AI-related capital expenditures due to the uncertain return on investment and the evolving nature of consumer behavior.

Now, let's talk about the sectors that will be most affected. Sheridan predicts that the tariffs could push the US consumer away from goods toward more services. This could be a boon for service sectors like experiences, travel, and mobility, but it's too early to tell. The tariffs are also expected to impact advertising spending, with companies weighing both lower potential end demand and higher input cost inflation. Digital advertising, in particular, is likely to see some impact due to its programmatic nature, making certain digital channels and platforms more volatile and subject to real-time pullbacks.

In the eCommerce sector, the impact of tariffs will largely depend on the volume and cost of goods sold (COGS) exposure by geography, how much price can be passed on to consumers, the resulting decrease in units (elasticity), how much margin can be extracted from suppliers, and the level of substitution of suppliers and geographies. Amazon.com Inc’s 1P business, for example, will be significantly affected by these factors. The closing of the de minimis exemption for China is also expected to remove competitive pressures from the broader US eCommerce industry, as China-based exporters like PDD Holdings Inc, Temu, and TikTok Shop now face sizable tariffs.

So, what does this all mean for your portfolio? Well, it's time to get defensive, folks! With heightened uncertainty and a potential slowdown in corporate spending and hiring, it's crucial to focus on stocks that can weather the storm. Look for companies with strong balance sheets, steady cash flows, and a history of weathering economic downturns. And stay away from high-growth, high-risk stocks that could be hit hard by a slowdown in corporate spending.

In conclusion, Trump's tariffs are a game-changer, and it's time to act! Stay defensive, focus on quality stocks, and be prepared for a bumpy ride ahead. The market hates uncertainty, and these tariffs are sure to shake things up. But with the right strategy, you can navigate these choppy waters and come out on top. So, buckle up and get ready for the ride of your life!