Trump's tariffs weigh on the dollar Goldman Sachs raised US inflation expectations for this year and next two years

The Zhitong Finance App learned that Goldman Sachs Group economists raised their forecasts for US inflation this year and next, partly due to the weakening of the US dollar after the Trump administration announced tariffs. Goldman Sachs economists Ronnie Walker and Elsie Peng said on Wednesday that a key indicator of potential inflation will rise to 3.8% by the end of 2025 and then fall to 2.7% by the end of 2026, higher than previous forecasts of 3.5% and 2.3%. In March, the indicator — the personal consumption expenditure (PCE) price index excluding food and energy — was 2.6%.

Goldman Sachs economists said, “First, the dollar weakened rather than strengthened due to tariff news, which amplified rather than offset the direct impact of tariffs on prices. Second, imposing excessive tariffs on Chinese imports will cause import demand to shift from China to countries with higher production costs but lower US tariffs.”

Trump's tariffs weigh on the dollar, in stark contrast to 2018

Since US President Donald Trump announced broad tariffs on US trading partners on April 2, the Bloomberg dollar index has fallen by about 4%. This is in stark contrast to 2018, when tariffs imposed during Trump's first term boosted the dollar.

US officials will travel to Switzerland to conduct trade negotiations with Chinese officials later this week. Goldman Sachs economists expect the tariff rate on Chinese goods to eventually be reduced to 54% from the current 145%.

Walker and Peng said, “We expect the core PCE monthly inflation rate to accelerate in the next few months, with an average month-on-month increase of 0.36% in May-August. Our own predictions are slightly higher than the market's implied inflation expectations.”