Goldman Sachs Exchanges How tariffs will impact the US economy
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Mar 11, 2025 
David Mericle, chief US economist at Goldman Sachs Research, delves into the intricate world of tariffs and their effects on the US economy. He discusses how these policies influence inflation, projecting shifts in core PCE inflation rates. The conversation highlights rising recession risks linked to current policies and what it means for GDP forecasts. Mericle also addresses the uncertainties surrounding trade relations with Canada and Mexico, examining their repercussions on business confidence and Federal Reserve strategy.
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Tariff Impact Increase
- Tariffs enacted since the election have increased the effective US tariff rate by 3 percentage points.
- This increase is higher than initially predicted, with expectations now at a 10 percentage point rise.
Inflation Concerns
- Inflation is now expected to approach 3% due to tariffs, rather than falling to 2.1% as previously forecasted.
- Public awareness of tariff increases has contributed to a rise in inflation expectations.
Stagflation Risk
- Larger tariffs will likely lead to higher inflation and lower growth, a phenomenon some call "stagflation."
- This differs significantly from the 1970s stagflation, which involved a weak labor market and double-digit inflation.