Tariffs' Impact on U.S. Prices Delayed by 7.2%

Despite the implementation of tariffs by the Trump administration since February, their impact on U.S. consumer prices has not been strongly evident. The delay in the "tariff effect" can be attributed to three main factors: the largest tariff increases only took effect in early April, the customs allowing importers to defer tariff payments, and the strategic stockpiling by enterprises. These factors have collectively delayed the transmission of tariff costs to consumer prices.

Additionally, the chief economist's team found that foreign exporters have borne approximately 20% of the tariff costs. However, they emphasized that the impact of tariffs on inflation is merely delayed, not eliminated. They maintained the prediction that the core PCE inflation rate will rise to 3.3% by the end of the year, with tariffs contributing approximately 1%.

The delayed transmission of inflation can be attributed to three buffering mechanisms. The Trump administration's announced tariff measures are expected to increase the effective U.S. tariff rate by about 9 percentage points, with additional industry tariffs bringing the total increase to approximately 14 percentage points. However, U.S. customs data shows that by May, the effective U.S. tariff rate had only increased by 7.2 percentage points.

This delay is primarily due to three factors. First, the largest tariff increases did not take effect until early April, and goods already in transit were exempt. Considering that imported goods take about a month to reach the U.S., the actual impact of many tariffs did not begin to show until early May. Second, the U.S. Customs and Border Protection allows importers using the automatic payment transfer system to defer tariff payments for up to 1.5 months, meaning that goods arriving in May may not be charged the new tariff fees until June. Third, enterprises' strategic stockpiling has delayed price transmission. The report shows that imports of automobiles, steel, and aluminum in the first three months of 2025 were 400 billion higher than the trend, but after the relevant tariffs were implemented, they fell below the trend by 100 billion. This stockpiling behavior reduced the impact of the 25% statutory tariff rate on the U.S. effective tariff rate from 3 percentage points to an annual average of 2.3 percentage points.

Foreign exporters have borne approximately 20% of the tariff costs by lowering their export prices. This proportion is significantly higher than the near-zero level during the 2018-2019 trade conflict and exceeds the 4-12% shown in recent regional Federal Reserve business surveys. During the 2018-2019 trade conflict, the tariff burden was entirely borne by U.S. enterprises and consumers.

The transmission of tariff costs to consumer prices has been slower than expected. By analyzing the components of PCE (Personal Consumption Expenditures), it was found that if the tariff increase were fully passed on to consumers in the first month of implementation, the core PCE price should have risen by approximately 0.9%. However, the actual situation is that a 1% expected tariff-driven price increase only raised consumer prices by 0.3%. The transmission of tariff costs to consumers shows an increasing trend: almost 0% in the first month, 10% in the second month, and 40% in the third month. In contrast, during the 2018-2019 trade conflict, enterprises passed on tariff costs to consumers more quickly, reaching 50% after one month, 60% after two months, and over 70% after three months. The Federal Reserve survey and the Goldman Sachs Analyst Index (GSAI) indicate that enterprises ultimately plan to pass on 50-60% of the tariff costs, suggesting that there is still room for further transmission in the future.

Despite the delay, Goldman Sachs maintains its key conclusion on inflation predictions. Based on the current analysis, the announced tariff measures since January have raised the core PCE price by approximately 6 basis points. This means that excluding the impact of tariffs, the current 2.7% year-on-year core PCE inflation rate should be 2.6%. However, there is a risk of inflation surging by the end of the year, with all tariff impacts expected to raise the core PCE by approximately 1 percentage point by December, bringing the annual inflation rate to 3.3% (excluding tariff impacts, it would be 2.3%). Although initial evidence suggests some downside risk to inflation predictions, Goldman Sachs has decided to maintain its inflation predictions unchanged, considering the potential risk of tariff escalation from ongoing trade negotiations.