Who pays for tariffs? You do.

Stocks rallied today as the market turned its attention to earnings and hoped that the government shutdown was nearing its finale.

Oh, how quickly investors forget.

Just a few months ago, all their focus was on a single story: tariffs. But after the S&P 500 plummeted the week after Liberation Day to a low on April 8, the index has soared 35%. That rally has pushed tariff fears out of investors’ minds, while a global trade war hasn’t had nearly the devastating effect on the US economy that analysts predicted.

But a pair of reports late last week made it clear that even though Americans have moved past tariffs, high levies are still going to take a big bite out of their wallets.

Paying the price

Last Sunday, Goldman Sachs Chief Economist Jan Hatzius wrote that his team had analyzed imports, customs duties, and consumer prices to figure out who is paying the biggest price for these new tariffs. Turns out, the average US citizen is footing over half of the trade war bill.

“Our analysis implies that if recently implemented and future tariffs have the same eventual impact on prices as the tariffs implemented earlier this year, then US consumers would eventually absorb 55% of tariff costs, US businesses would absorb 22%, foreign exporters would absorb 18%, and 5% would be evaded,” Hatzius wrote. “At the moment, however, US businesses are likely bearing a larger share of the costs because some tariffs have just gone into effect and it takes time to raise prices on consumers and negotiate lower import prices with foreign suppliers.”

He isn’t the only one warning that Americans will see prices rise this year. A white paper from S&P Global published last Thursday noted that the company pored over forecasts from 15,000 sell-side analysts across 9,000 public companies and found that tariffs will cost companies over $1.2 trillion in lost profits.

Of course, companies aren’t going to stand idly by and eat all those losses. “Roughly two-thirds ($592 billion) of the incremental cost burden is being passed to consumers via higher prices, while one-third ($315 billion) is absorbed internally through lower earnings,” the report reads. “With real output declining, consumers are paying more for less, suggesting that this two-thirds share represents a lower bound on their true burden.”

Tariffs take their toll

While tariffed goods will naturally get more expensive, higher prices for some items will translate to higher inflation for all. Hatzius warned that tariffs have raised core personal consumption expenditure prices by 0.44% this year, and will push core PCE to 3% year over year by December.

And it’s not just big, publicly traded companies taking a hit from higher tariffs: Small companies that aren’t able to pass higher costs on to customers are eating the increased expenses, putting them at risk of bankruptcy.

In short: Tariffs are still going to do serious damage to the economy, even if they’re not front page news these days.—MR