Fears of long-term economic volatility have eased with Goldman Sachs now predicting a one-time rise in prices rather than a sustained surge. The markets’ calm attitude towards the Aug. 1 deadline has raised concerns that investor confidence may embolden the White House to follow through on its tariff hikes, especially if economic data remains strong.
In April, President Trump declared “Liberation Day,” marking a shift in his approach to tariffs. Since then, analysts have cooled their fears of businesses passing on hikes to consumers and inflation increasing. Goldman Sachs has revised its trade policy assumptions, with chief economist Jan Hatzius predicting an increase in the reciprocal tariff rate from 10% to 15%. The threatened pharmacy tariffs are likely to be delayed until after the 2026 midterms.
The expected hike is seen as a one-off impact on inflation, rather than a sustained trickle. Goldman estimates that 60% of the initial tariffs’ ramifications had worked through the economy by June, raising core inflation by 0.2%. A further 1.2% raise is yet to come, putting PCE (personal consumption expenditures) over 3%.
The impact on real disposable income will be significant, but Goldman expects it to exhibit as a “one-time price level shift akin to a VAT hike” rather than a continual erosion of spending power.
Market analysts warn that investor calm could embolden the White House to follow through with its tariff hikes, especially if economic data remains strong. The Aug. 1 deadline is seen as critical in proving whether President Trump will “chicken out,” but it is not considered a point of no return, and negotiations are likely to continue beyond that date.
Source: https://fortune.com/2025/07/23/tariffs-dog-that-didnt-bark-wall-street-inflation-trump