Note: The following is a redacted version of the original report published February 26, 2025 [31 pgs].

Global Macro ISSUE 136 | February 26, 2025 | 5:35 PM EST

Research
%%%%%%R%%%%%

%%%% % % % %

TOPof TRUMP TARIFFS:

MIND MOSTLY TALK, OR BIG ACTION?
President Trump’s tariff actions since his inauguration have been nothing short of
striking. While markets have begun to react to these developments, deep tariff risks
are still being underpriced. Whether that will continue to be the case largely depends
on if Trump tariffs end up as mostly talk, or action. Trump’s former Deputy USTR Jeff
Gerrish believes the latter is more likely when it comes to broad tariff action given
the President’s long-held goal of correcting global trade imbalances. And Wiley Rein
LLP’s Tim Brightbill argues that Trump likely has the legal authority to implement
such a bold reshaping of trade policy. So, GS’ Alec Phillips and Joseph Briggs assess
the economic implications of a range of potential tariffs and the significant
uncertainty surrounding them. And GS’ Kamakshya Trivedi assesses the market implications, envisioning even more
Dollar strength, further declines in US equities, and an even flatter Treasury curve ahead if Trump indeed walks the
walk on bigger and broad tariffs.

“
The tariffs President Trump has announced so far—the
10% tariff on imports from China that took effect on
February 4 and the 25% tariffs on steel and aluminum set
to take effect on March 12—are roughly equivalent to all
of the tariff hikes from the first Trump Administration.
WHAT’S INSIDE
INTERVIEWS WITH:
Jeff Gerrish, former Deputy US Trade Representative for Asia, Europe,
the Middle East, and Industrial Competitiveness, Partner, Schagrin
Associates

Timothy C. Brightbill, Co-Chair of the International Trade practice,

- Alec Phillips Wiley Rein LLP, Adjunct Professor, Georgetown University Law Center

Everyone needs to buckle up, because the President is just Alec Phillips, Chief US Political Economist, Goldman Sachs
getting started [on tariffs] and what lies ahead will likely
be even more unpredictable than during his first term. Q&A: EX-US IMPACTS OF TRUMP TARIFFS
Sven Jari Stehn, Alberto Ramos, Hui Shan, Joseph Briggs, GS
- Jeff Gerrish Economics Research

The tariffs announced so far are aggressive but arguably UNCERTAINTY IS THE ONLY CERTAINTY
Joseph Briggs, GS Global Economics Research
within the president’s authority. So, while I expect
challenges, the recent tariff actions are unlikely to be
halted by the courts.
“ TARIFFS & MARKETS: LESSONS LEARNED SO FAR
Kamakshya Trivedi, GS Markets Research
- Tim Brightbill TARIFFS AND COMMODITY DOMINANCE
Daan Struyven, GS Commodity Research ...AND MORE
Allison Nathan | [email protected] Jenny Grimberg | [email protected] Ashley Rhodes | [email protected]

Investors should consider this report as only a single factor in making their investment decision. For
Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html.

The Goldman Sachs Group, Inc.

Top of Mind Issue 136

Macro news and views

hEl

We provide a brief snapshot on the most important economies for the global markets
US Japan
Latest GS proprietary datapoints/major changes in views Latest GS proprietary datapoints/major changes in views
• We now expect the Fed to slow the pace of balance sheet • We raised our 2025 Japan new core CPI forecast to 2.2%
runoff in May (vs. June before) as the Jan FOMC meeting yoy (from 2.1%), mainly to reflect sharply rising rice prices.
minutes indicated a desire to slow the pace of runoff soon. Datapoints/trends we’re focused on
Datapoints/trends we’re focused on • BoJ policy; we expect the BoJ to continue hiking rates at a
• US tariffs; we estimate the tariffs we expect in our baseline pace of two hikes per year, with the next hike in July,
will raise the effective tariff rate by ~4pp, translating into a though increased political uncertainty after the upcoming
0.4pp boost to yoy core PCE that would leave it at 2.5% in Upper House elections could delay the next hike.
Dec, though the tariff-induced rise should drop out after a year. • Shunto wage negotiations, which we expect to result in a
• Fed rate cuts, which we still expect in June and December, base pay increase above 3% this year.
though we view further cuts this year as a very close call. • Japan’s labor shortage, which is expected to worsen ahead,
• US net immigration, which we expect will continue to slow. although the continued inflow of foreign workers could keep
• US consumer confidence, which declined in February. the aggregate labor force broadly flat.
Trump tariff frenzy Japan labor shortage: a foreign worker offset
Estimated impact of tariff increases on the effective tariff rate, pp Japanese labor force, millions of people
12 70
10
8 68
Likely
6 Announced
66
4
2 Additional Risks 64
0
exemption on China

& aluminum

tariffs on China

Full EU 25%
10% Critical imports

Reciprocal tariff

Global auto 25%

60% China
25% Canada /

Universal 10%

62
10% oil & gas
25% Mexico
10% China

25% EU autos
25% Steel
End of de minimis

Extra 10%

Total labor force

60 Japanese only
GS / JILPT estimates

58
1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Source: Goldman Sachs GIR. Source: Ministry of Internal Affairs and Communications, JILPT, GS GIR.

Europe Emerging Markets (EM)

Latest GS proprietary datapoints/major changes in views Latest GS proprietary datapoints/major changes in views
• We recently raised our 2026/2027 Euro area real GDP • No major changes in views.
forecasts to 1.1%/1.3% (from 1.0%/1.1%) to account for likely Datapoints/trends we’re focused on
higher military spending in Europe. • China GDP growth, which we expect to slow to 4.5% this
• We raised our 2025 UK real GDP growth forecast to 1% yoy year vs. the “around 5%” target that policymakers will likely
set at the upcoming “Two Sessions”, though the downside
(from 0.9%) after stronger-than-expected 4Q24 GDP data.
risks have abated somewhat given more-muted-than-
Datapoints/trends we’re focused on
expected US tariffs and DeepSeek-induced AI excitement.
• ECB policy; we expect the ECB to continue delivering • China policy rate cuts, which remain constrained by
sequential 25bp rate cuts to a 1.75% terminal rate in July. policymakers’ FX stability concerns.
• Potential Russia-Ukraine war ceasefire, which we think would • CEEMEA growth, which faces downside risk from potential
result in a limited Euro area GDP boost (+0.2%), unless it US tariffs and Middle East uncertainty, but upside risk from
entails a comprehensive resolution (+0.5%). a potential ceasefire in the Russia-Ukraine war.
Europe: a (potential) peacetime growth boost China’s AI upside
Estimated effect of Russia-Ukraine ceasefire on real GDP, % AI boost to China’s trend real GDP growth, %
1.0 0.6
Energy Confidence Trade Rebuilding FCI Immigration Total
0.8 Baseline
0.6 0.5 Faster adoption

0.4
0.2 0.4
0.0
-0.2 0.3

-0.4
-0.6 0.2
Limited

Upside

Limited

Upside
Limited

Upside

Limited

Limited
Upside

Upside

0.1

Euro area Germany France Italy Spain

0.0
Note: “Limited ceasefire” scenario entails a de facto resolution to the war over time. 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
“Upside” scenario entails a comprehensive and credible resolution.
Source: Haver Analytics, Goldman Sachs GIR. Source: Goldman Sachs GIR.

Goldman Sachs Global Investment Research 2

Top of Mind Issue 136

Trump tariffs: mostly talk, or big action?

hEl

Tariff action since President Trump’s inauguration just over one only a few tenths of a percentage point while boosting year-
month ago has been nothing short of striking: the 10% tariff on over-year US core PCE inflation by roughly 0.4pp. This, he says,
imports from China that took effect on February 4 and the 25% would still leave the door open for Fed cuts this year—indeed,
tariffs on steel and aluminum set to take effect on March 12 we continue to forecast rate cuts in June and December—but
are already roughly equivalent to the entirety of tariff action would “make a close call even closer”. And he notes that a
during the first Trump Administration, and many other tariffs more extreme tariff scenario with larger inflation and growth
have been announced or proposed but not yet implemented. effects could further complicate the outlook for rate cuts as the
While markets have begun to react to the trade developments, Fed would need to weigh potentially higher inflation against a
they are still underpricing deep tariff risks. Whether that will potential growth hit from much tighter financial conditions.
remain the case depends largely on whether these tariffs—
GS senior economists Jari Stehn, Alberto Ramos, Hui Shan,
especially the steep tariffs on Mexico and Canada or, even
and Joseph Briggs then explore the implications for the US’
more importantly, a sweeping reciprocal or universal tariff that
four largest trading partners—Europe, Mexico, China, and
would represent a seismic shift in US trade policy—end up as
Canada—finding that the inclusion of foreign value-added taxes
mostly talk, or action.
(VATs) in a reciprocal tariff policy would hit Europe’s economy
To help answer this question, we speak with Jeff Gerrish, the particularly hard, US tariffs would likely substantially weigh on
President’s former Deputy US Trade Representative for Asia, growth but be deflationary rather than inflationary in China, and
Europe, the Middle East, and Industrial Competitiveness. Mexico and Canada could suffer significant growth hits if the
Gerrish argues that Trump’s current trade policy goals largely threatened tariffs on them ultimately come to pass.
overlap with those of his first term, including using tariffs to
Briggs and the Global Economics team also dive into the
gain negotiating leverage, protect national security, and address
broader global impacts of various tariff proposals, finding that a
unfair trade practices and deep trade imbalances—which
global auto tariff would create larger growth headwinds in
Trump has long bemoaned (see pg. 24)—though the goals of
Korea, Canada, and Mexico while reciprocal tariffs would have
addressing non-trade issues and raising revenue via tariffs have
the largest incremental growth impact on Vietnam and Hungary
taken on greater importance.
relative to our baseline, though tariffs of any nature would have
With this in mind, Gerrish argues that the threatened Mexico relatively muted impacts on prices outside of the US.
and Canada tariffs, as well as broad auto tariffs, likely fall into
But even if Trump ultimately implements a more benign tariff
the realm of negotiating tactics and therefore seem likely to be
package than expected, Briggs expects the significant
avoided if US trading partners make admittedly still-unclear
uncertainty around the President’s trade agenda in and of itself
concessions. Steel and aluminum tariffs, however, likely fall on
to weigh on global growth, as was the case during the 2018/19
the opposite end of the spectrum, given Trump’s deep-seated
trade war. This is especially important to note as Gerrish sees
view that protecting these domestic industries is vital to
no end to the uncertainty in sight, arguing that the Trump
national security, making implementation quite likely.
Administration welcomes—rather than eschews—such
But most noteworthy is Gerrish’s view that President Trump’s uncertainty, which they view as helpful for achieving their goals
long-held goal of correcting global trading imbalances means of bringing back manufacturing and jobs to the US.
that he is “no doubt looking to go bold and broad with respect
So, what could this all mean for markets? GS Co-head of Global
to tariffs”. Whether Trump ultimately chooses to do so through
Commodities Research Daan Struyven argues that Trump’s
an expansive reciprocal tariff or a universal tariff is not yet clear,
pursuit of “US commodity dominance” via the use of tariffs and
Gerrish says, but he warns that the market should not interpret
other policy actions will likely have only limited near-term
the delay in implementing a broader tariff as a lack of resolve to
impacts on commodity markets. And Kamakshya Trivedi, GS
do so. So, Gerrish believes the global trading system is poised
Head of Global FX, Rates, and EM Strategy, argues that the still-
for a major shift ahead and advises everyone to “buckle up,
benign macro backdrop and the relatively moderate tariffs
because the President is just getting started”.
Phillips assumes in his base case point in the direction of a
But even if Trump wants to reshape trade policy in such bold stronger Dollar and higher equities. But he also notes that, with
fashion, can he legally do so? Tim Brightbill, Co-Chair of Wiley markets still underpricing deep tariff tail risks, scope exists for a
Rein LLP’s International Trade practice, believes so, noting that stronger move in the Dollar, US equities to fall further, and the
the US president has wide-ranging authorities to impose tariffs, Treasury curve to flatten more significantly if Trump indeed
with the courts generally upholding such authorities in the past. walks the walk on bigger and broader tariffs.
So, what might be the economic implications of Trump’s tariff
Allison Nathan, Editor
plans? Alec Phillips, GS Chief US Political Economist, estimates
Email: [email protected]
that a base case tariff scenario of an additional 10pp tariff on Tel: 212-357-7504
imports from China, sectoral tariffs covering several critical Goldman Sachs & Co. LLC
imports, and tariffs on EU autos would weigh on US growth by

Goldman Sachs Global Investment Research 3

Top of Mind Issue 136

Interview with Jeff Gerrish

hEl

Jeff Gerrish is the former Deputy US Trade Representative for Asia, Europe, the Middle East,
and Industrial Competitiveness (2018-2020). Currently, he is Partner at Schagrin Associates.
Below, he argues that the bulk of President Trump’s tariff actions still lie ahead and will likely
be even more unpredictable than during his first term.
The views stated herein are those of the interviewee and do not necessarily reflect those of Goldman Sachs.

Allison Nathan: You played a key related to border security, which was a defining issue in the
role in trade policy during President election. So, the President feels the need to take strong action
Trump’s first term. What are his quickly out of the gate to better secure our borders, and the
goals regarding tariffs/trade policy use of tariffs has been a way to achieve this. Trump took
and to what extent have these similar actions during his first term, when he threatened tariffs
goals shifted from his first term? on Mexico related to border security issues and ultimately
secured actions by Mexico to address his concerns, which
Jeff Gerrish: Most of President
enabled him to avoid the actual implementation of tariffs. This
Trump’s current goals with respect to
experience served as a trial run for the current developments,
his trade and tariff policies are
and I ultimately expect them to resolve in a similar way. The
consistent with his first term. These goals include the use of
Canadians and Mexicans appear to be trying to do enough to
tariffs to address unfair trade practices and correct significant
allow Trump to declare victory without actually having to
trade imbalances with other countries, to rebuild the US
implement tariffs.
manufacturing sector and bring back US manufacturing jobs, to
protect national security by reducing strategic vulnerabilities That said, the actions Canada and Mexico will need to take to
related to the US’ reliance on imports, and to gain leverage for ultimately satisfy the President and avoid tariffs are not entirely
negotiations with our trading partners. clear. I assume those objectives are being more clearly set out
in the course of ongoing discussions between the US and
Two of Trump’s trade policy goals, however, have taken on
these countries, but this remains uncertain for now, which
greater importance. The first is the use of tariffs to address
leaves the ultimate resolution uncertain as well.
non-trade, non-economic foreign policy and geopolitical issues.
So far this includes the use of tariffs against Mexico, Canada, Allison Nathan: What about the proposed 25% tariff on US
and China relating to border security and fentanyl trafficking, as auto imports? Is that also just a negotiating tactic?
well as the threat of tariffs against Colombia on immigration
Jeff Gerrish: I think proposed auto tariffs also likely fall into the
issues and against Denmark relating to Greenland. The second
camp of a negotiating tactic. Trump used similar tactics very
is the use of tariffs to raise revenues to offset some of Trump’s
effectively in his first term to increase investment in US auto
proposed tax cuts.
manufacturing and manufacturing more broadly. So, I can see
Allison Nathan: While Trump’s goals vis-à-vis tariffs seem him doing the same in this context when it comes to the threat
clear, the plan to achieve them seems less so given the of blanket tariffs on auto imports, as well as renewed USMCA
recent back-and-forth on tariff announcements and negotiations, where the focus will likely be on keeping as much
implementation. Does Trump have an overarching auto manufacturing as possible in North America, but
plan/strategy with regard to his trade agenda? particularly in the US. To that end, tightening up the rules of
Jeff Gerrish: The idea that Trump is shooting from the hip on origin will likely be a key focus of those negotiations. Of course,
trade and tariff policy is a misperception. Even though the if the President feels he is not getting the traction and results
Administration’s tariff actions may appear erratic or haphazard that he's seeking, he would not hesitate to move forward on
at times, Trump has a plan and a strategy to achieve his goals. tariffs, just as he did in his first term.
The President’s actions since the inauguration are a testament Allison Nathan: What about the steel and aluminum tariffs?
to his willingness to move forward with tough trade action if
Jeff Gerrish: In contrast to the other tariffs we’ve been
concessions aren’t made, just as he did with the China tariffs
discussing, the President is clearly committed to taking strong
during his first term. And when he pulls back at the last minute,
action on steel and aluminum. During his first term, Trump
as he did with the 25% tariffs on Mexico and Canada, it’s not
recognized the importance of the US steel and aluminum
because he has changed his mind, but because he has secured
industries to national security and implemented tariffs to stop
adequate concessions. If such concessions are not made, it’s
the flood of imports that were severely harming our domestic
clear he’ll ultimately move forward with trade action.
industries, as evidenced by low capacity utilization and losses.
Allison Nathan: So, are the tariffs on Canada and Mexico Those tariffs substantially aided our industries, leading to
just a negotiating tactic then, and, if so, what is Trump additional investments in domestic capacity, and Trump will
aiming to achieve through these negotiations that would almost certainly view such measures as paramount ahead.
prevent those tariffs from going into effect?
Although the Section 232 tariffs on steel and aluminum that
Jeff Gerrish: I would say that the 25% tariffs on Mexico and Trump originally implemented remain in place, numerous
Canada are more likely in the realm of negotiating tactics. While exclusions and country exemptions have significantly
US trade deficits with both countries, but especially Mexico, weakened them, leading to renewed industry losses. So,
have risen significantly, these tariff actions are clearly more Trump is committed to putting the bite back into these
Goldman Sachs Global Investment Research 4
Top of Mind Issue 136

hEl

measures by removing such exclusions and exemptions and that's a miscalculation because Trump, especially with regard
raising the aluminum tariff to match the higher steel tariff. Such to trade and tariffs, tends to do what he says he's going to do,
actions will likely provoke pushback from downstream and hawks in his administration will want to take bold action
industries and their representatives on Capitol Hill, but, right with him. Of course, like his first term, the Administration has a
now, the President is very focused on strengthening the range of perspectives on trade. I would put Jamieson Greer,
implementation of these tariffs and extending them to Peter Navarro, and probably Howard Lutnick in the trade hawk
derivative products. camp while Treasury Secretary Scott Bessent and other
economic officials are somewhat less hawkish on trade issues.
Allison Nathan: The million-dollar question is whether the
But even Bessent tends to lean more in favor of tariffs than
President will implement more sweeping tariffs in the form
many past Treasury secretaries.
of a reciprocal or universal tariff. What’s your view?
Allison Nathan: With that in mind, where do you think
Jeff Gerrish: The President is no doubt looking to go bold and
tariffs and trade policy more generally is headed with
broad with respect to tariffs to address the overall problem of
regard to China?
the global trade imbalance. Although the US trade deficit with
China has declined since the imposition of the Section 301 Jeff Gerrish: What the President and some of his trade team
tariffs during Trump’s first term, our trade deficits with many may be seeking on the US-China trade front might differ. The
other economies have exploded. So, Trump seems committed trade team seems more inclined to continue strong action and
to taking expansive actions to address this imbalance. Whether selective decoupling from China using tariffs and other policies
he does so through a global baseline tariff, which would be a given the existential threat they believe China presents due to
minimum across-the-board tariff on all products from all its investment- and export-led economy and its efforts to use
countries, or a reciprocal tariff, which would match the tariff unfair trade practices and industrial policies to dominate
rates other countries impose on us, remains unclear; Trump strategic industries around the world. Trump shares these
spoke about the former quite a lot during the campaign, but the concerns, but still seems open to doing a deal with China, and
Administration is currently studying the latter. It’s also unclear with President Xi in particular, as he did successfully during his
whether reciprocal tariffs would take the place of a global first term. Whether another deal is possible is a big unknown,
baseline tariff, which they very well might. But both would be a but it seems unlikely because China has not complied with the
major, fundamental change to the global trading system. That’s Phase 1 trade agreement and likely won’t be willing to make
especially the case as a reciprocal tariff would likely attempt to concessions on the issues that will be important for the US in
reflect not only the different tariff rates set by countries around the areas of industrial subsidies, overcapacity, disciplines on
the world but also value-added taxes (VATs) and non-tariff state-owned enterprises and many others. But, with Trump,
barriers, which can be as big of a problem as the tariffs you never know what might be possible.
themselves. Determining tariff levels that reflect tariff and non-
I would also note that China is not the only country with which
tariff barriers, particularly in countries with relatively opaque
Trump may try to pursue a deal; in his recent meeting with
systems, will be challenging. But I do think the Administration
Indian Prime Minister Modi, Trump also raised the prospect of a
will attempt to do so if they go the reciprocal tariff route.
deal with India. Trump is keen on developing his relationships
Allison Nathan: The market seemed relieved that Trump’s with world leaders like Xi and Modi, and those sorts of
reciprocal tariffs announcement did not include more direct relationships can drive action in the trade and tariff space.
action. Was the delay more likely another negotiating
Allison Nathan: Given all we’ve discussed, are the bulk of
tactic, or rather an acknowledgement that the
tariff actions now most likely behind us, or still ahead?
Administration will need more time to figure out the
correct implementation given the complexity? Jeff Gerrish: I am confident that the bulk of tariff actions still lie
ahead. We’ll see what happens with the 25% tariffs on Canada
Jeff Gerrish: It’s more likely the latter. Again, implementing a
and Mexico in early March. But I am most closely watching the
reciprocal tariff that captures both tariff and non-tariff barriers is
outcomes of the comprehensive reviews of several different
exceptionally complicated, and Trump will want the full
trade and tariff actions that will be issued on April 1 pursuant to
complement of his trade and economics team in place before
the America First Trade Policy Memo that Trump issued on
he takes this on. Howard Lutnick was recently confirmed as the
Inauguration Day, which could lead to a whole host of tariff
Commerce Secretary and doesn't yet have his full team in
actions. Everyone needs to buckle up, because the President is
place, and Jamieson Greer was just confirmed as the US Trade
just getting started and what lies ahead will likely be even more
Representative. These and other teams need to be in place to
unpredictable than during his first term.
conduct the necessary analyses and to ensure that the
Administration has the legal authority required to implement Allison Nathan: Trump presumably understands that
these tariffs. So, the market should not take the delay as a businesses don’t like uncertainty, but he seems to be
reason to believe that these tariffs won’t happen. stoking and even embracing it. What do you make of that?
Allison Nathan: So, it sounds like you think Trump will do Jeff Gerrish: The President and his Administration are indeed
something very big on tariffs, but the market doesn't really embracing uncertainty because they can use it to help them
seem to believe that. Why do you think that is? achieve their goals. In their view, such uncertainty will help
bring back manufacturing and jobs to the US, where the
Jeff Gerrish: Perhaps it’s because the market doesn’t believe
operating climate is more certain. So, I wouldn’t expect an end
that the President will ultimately take such bold action. But
to uncertainty anytime soon.
Goldman Sachs Global Investment Research 5
Top of Mind Issue 136

A chronology of a new era of tariffs

hEl

Goldman Sachs Global Investment Research 6

Top of Mind Issue 136

The who, what, where of US tariffs

hEl

Many of the tariff actions so far have targeted the US’ largest …with Canada in particular also highly exposed to a critical goods
trading partners, including Mexico, Mainland China, and Canada… tariff if one materializes as we expect…
2024 US imports by major trade partner, % of GDP Exports of critical goods to the US, 20 largest exporters, $bn
140
European Union North America
Mexico 120 Western Europe
Mainland China
Canada 100 Asia Pacific
Japan CEEMEA
South Korea 80
Vietnam LatAm
Taiwan 60
India
United Kingdom 40
Switzerland
Malaysia 20
Singapore
Brazil 0
Israel

Canada

Mexico

Singapore
Japan

Netherlands

Saudi Arabia
Brazil
Belgium
Germany

Korea

France
UK

Italy
China

India
Ireland

Switzerland

Malaysia

Denmark
Iraq
Australia
Saudi Arabia
0% 5% 10% 15% 20%
Source: US Bureau of Economic Analysis, Goldman Sachs GIR. Source: United Nations Comtrade Database, Goldman Sachs GIR.
…largely through oil exports, while Europe faces exposure A global auto tariff also remains a risk, but we think more
through pharma exports, and Asia through electronics exports targeted tariffs on EU autos are more likely, which would affect
Contribution to US imports of key critical import categories, only a modest share of US vehicle consumption
% Where US-consumed vehicles and parts are produced, %
North America Western Europe Asia Pacific CEEMEA LatAm Other
Japan and
100
South Korea
90
80
70
60 Mexico
50
40
30
20
10 Canada
0
Articles of iron/steel

Copper

Rubber

Explosives
Mineral fuels

Organic chemicals

Zinc

Tanning, dyeing
Soaps
Ores
Electrical equipment

Aluminum

Lead
Pharmaceuticals

Precious stones

Minerals
Iron, steel

Chemicals

Nickel
Other base metals
Misc. chemicals

Tin

EU

China
US

Source: United Nations Comtrade Database, Goldman Sachs GIR. Source: US Dept of Commerce, International Trade Administration, GS GIR.
The scope of reciprocal tariffs remains uncertain, and while economies with large tariff differentials account for a small share of US
imports, the Administration could consider value-added taxes (VATs), which nearly every economy has, in reciprocal tariff calculations
US trading partners by tariff differential scaled by US import share, %
30
Tariff differential accounting for the economy's VAT minus US sales tax*
25 Tariff differential (avg. foreign minus US product-level tariff, weighted by US imports from the economy)

20

15

10

0
Mexico^ (15.5)

LatAm FTA^ (2.5)

Canada^ (12.6)

India (2.7)

Brazil (1.3)

South Africa (0.4)

Switzerland (1.9)
Thailand (1.9)
EU (18.5)

Korea^ (4)

Taiwan (2.7)

Malaysia (1.6)
Vietnam (4.2)
Mainland China**

Japan (4.5)

UK (2.1)

Singapore^ (1.3)
Indonesia (0.9)
Turkey (0.5)
(13.4)

Note: Width of the bars represents share of US imports from each economy; share of US import figures in parentheses.
*We assume an average 5% US sales tax. **As a result of the Sec. 301 tariffs, US tariffs on Mainland Chinese exports exceed Mainland China's tariffs on US
exports. ^Economies with free trade agreements with the US impose no tariff on nearly every import category; for simplicity, we assume no tariff differential.
Source: World Bank, OECD, Goldman Sachs GIR.
Special thanks to the US and Global Economics Research teams for charts.
Goldman Sachs Global Investment Research 7
Top of Mind Issue 136

Interview with Alec Phillips

hEl

Alec Phillips is Chief US Political Economist at Goldman Sachs. Below, he argues that the
tariffs so far represent only a fraction of the tariffs that will ultimately be implemented.
Allison Nathan: How does the like pharmaceuticals, semiconductors, and other electronic
recent trade policy action compare components, and possibly the auto sector and oil/gas imports.
to that of President Trump’s first A tariff on critical imports would probably affect a smaller share
term? of imports than some of the other tariffs mentioned—the
categories Trump has mentioned frequently account for
Alec Phillips: The tariffs President
imports of around $600bn/year, or around 20% of total imports,
Trump has announced so far—the
but this is still more than imports from China, for example.
10% tariff on imports from China that
took effect on February 4 and the 25% Allison Nathan: Are the bulk of tariff developments most
tariffs on steel and aluminum set to likely now behind us, or still ahead?
take effect on March 12—are roughly equivalent to all of the
Alec Phillips: We’ve likely only seen a fraction of the tariffs
tariff hikes from the first Trump Administration. At that time,
that will ultimately be implemented—we’re only about 5 weeks
the effective tariff rate on goods from China increased by
into a four-year term, after all. And the tariffs seem likely to
roughly 10pp, and smaller tariffs on steel/aluminum (there were
come in stages. The earliest tariffs Trump threatened on
many exceptions to the steel tariffs, and the aluminum tariff
Canada and Mexico were likely proposed to create leverage in
was set at 10% rather than 25%). But two big differences exist
negotiations on immigration policy and in the upcoming
between that experience and today. First, those tariff increases
USMCA review. It also seems likely that the tariffs Trump has
came over a year after Trump took office—and the passage of
mentioned in a less detailed way related to the EU and other
an important tax cut—and were spread over a couple of years.
trading partners fall in the same category.
Second, during Trump’s first term, financial markets treated
relatively small tariff increases—compared to the tariffs A second set of tariffs relate to protecting domestic industry
proposed now—as big news. This time around, despite a and economic or national security. The main example would be
similar tariff increase, the market reaction has been much the steel and aluminum tariffs. Sectoral tariffs more generally
smoother, perhaps because the economic fallout from the prior fall into this group, as do China-focused tariffs, though in both
tariffs proved manageable and because market participants cases one could argue that they straddle the line between the
have been anticipating higher tariffs since the election. negotiation and security categories, as we might see
negotiated exceptions to sectoral tariffs and Trump might have
Allison Nathan: How would you rank the recent trade
an eventual deal with China in mind.
actions in terms of their potential importance/impact?
The third category, which Trump has discussed but we have
Alec Phillips: The proposed 25% tariff on Canada and Mexico
not yet seen, is tariffs that are aimed at rebalancing trade more
is probably the most important single tariff action that President
generally or raising revenue. During the campaign, Trump called
Trump has threatened so far, in that it would affect two
for a “universal baseline” tariff of 10-20%, though the
countries where the US accounts for 75-80% of exports and a
reciprocal tariff seems to have supplanted this more recently.
meaningful share of GDP, and where US production is more
Tariffs in this third category could have the greatest impact, as
integrated than with any other trading partner. It would also
they would likely apply broadly across trading partners but at
represent a substantial departure from existing US policy, as
somewhat lower levels that make them more credible.
the United States-Mexico-Canada Agreement (USMCA) is by
far the US’ most important free trade agreement. Like the So far, Trump seems to be operating mainly in the first and
China-focused tariffs and steel and aluminum tariffs, these second categories, which are more familiar territory from his
tariffs are also a throwback to the first Trump Administration first term. He has opened the door to the third, but has not
(Trump threatened Mexico with tariffs over immigration issues gotten there yet.
in 2019, but not Canada). Similar to that experience, these
Allison Nathan: So, what does the range of possible
tariffs don’t look likely to take effect and, if they do, they likely
outcomes for tariffs look like from here, and what are you
would not last very long.
assuming in your macro forecasts?
The most important proposed tariff action in terms of potential
Alec Phillips: The most extreme tariff scenario is that Trump
economic impact is the broad-based tariffs Trump has
simply follows through on what he promised during the
mentioned. A reciprocal tariff might raise the average effective
presidential campaign: steep tariffs of up to 60% on imports
tariff rate by 1-2pp if it only takes tariffs into account, as high-
from China, reciprocal tariffs, and a 10-20% baseline tariff. The
tariff trading partners supply a small share of US imports.
most benign scenario is that Trump focuses on using tariffs to
However, if a reciprocal policy also accounted for value-added
win other concessions, leading to the opposite outcome—a
taxes (VATs), as Trump has said it would, the rise in the US
decline in trade barriers over time. Neither of these scenarios
effective tariff rate could top 10pp. And accounting for non-tariff
seem particularly likely, as the hit to growth, inflation, and
barriers (NTBs) to trade could increase tariffs further.
financial markets might dissuade Trump from the most
Trump has also talked about sectoral tariffs on several aggressive approach, while it is unclear what a second trade
occasions, which would likely target various “critical imports” deal with China, for example, would look like.

Goldman Sachs Global Investment Research 8

Top of Mind Issue 136

hEl

We’re assuming an outcome in the middle: another 10pp tariff financial conditions from tariff announcements thus far has
on imports from China and sectoral tariffs, which include the been smaller than expected, that is less likely to be the case in
upcoming steel and aluminum tariffs, as well as tariffs on EU the event of a more extreme tariff scenario that goes well
autos. Trump’s proposed reciprocal tariff also appears to be a beyond what market participants are expecting, and could still
serious proposal with a good chance of implementation in allow for additional cuts this year.
some form, but it is far from clear at this point what form it
Allison Nathan: What could the USMCA review and
would take so, for now, we don’t include it in our assumptions.
renegotiations in 2026 look like? Are there any other trade
Allison Nathan: What would be the growth, inflation, and deals that we should pay attention to ahead?
Fed policy impacts under those baseline assumptions?
Alec Phillips: The near-term tariff threat facing Canada and
Alec Phillips: The tariffs we assume would raise the average Mexico suggests that President Trump is apt to push for more
effective tariff rate by 4-5pp, roughly triple the 1.5pp rise in the substantial changes in the USMCA during the review due by
first Trump Administration, and modestly higher than the 3pp July 2026. Two of the most important issues are likely to be the
we assumed soon after the election. As a rough rule of thumb, auto sector, where the first Trump Administration pushed for
each 1pp rise in the tariff rate is worth ~0.1pp on the core PCE tighter regional content and labor rules, and treatment of goods
price level, so these baseline tariff assumptions would boost manufactured by Chinese companies in Mexico. The auto
core year-over-year inflation by ~0.4pp later this year, assuming sector, in particular, presents challenges as some Mexican-
they are implemented within a few months of each other. produced vehicles are imported outside of USMCA rules,
paying the standard 2.5% tariff instead, making it hard to
The GDP impact would be somewhat smaller. We expect these
tighten rules further while the standard auto tariff remains low.
tariffs would weigh on growth by a few tenths of a point later
this year and in early 2026, although this depends in part on Outside of USMCA, President Trump appears interested in
how much financial conditions tighten in response. Equity revisiting a deal with China, though it is far from clear at this
market reactions to tariff announcement so far this year early stage what might be achievable. Another interesting
suggest the reaction could be smaller than in the 2018-2019 question will be whether a reciprocal trade policy, if it occurs,
experience. But while the more benign reaction might reflect would lead to renegotiation of tariffs with some high-tariff
less concern about the fundamental impact of tariffs, it might trading partners. Trump has focused on India in this regard.
also simply suggest that market participants have already
Allison Nathan: What should investors be watching most
discounted some of this (e.g., China-focused tariffs) and still
closely over the coming weeks and months?
view others (e.g., Canada and Mexico tariffs) as a negotiation
tactic, even when they are only hours from implementation. Alec Phillips: In the very near term, the main question is how
Trump deals with the Canada/Mexico deadline on March 4. We
Even with the tariff increases in our baseline, the door is still
assume that he announces additional concessions from the
open for Fed cuts this year, though it would make a close call
two countries and that tariffs are not implemented at that point.
even closer. In 2018-2019, Fed officials appeared to be more
Trump has pushed the deadline multiple times, and the best
concerned about the hit to growth from tariff hikes than about
bet seems to be that he will do so again. The risk is that, to
the rise in prices, and it looks likely that the FOMC would
preserve credibility, he imposes the tariffs at least briefly. Also,
largely look through one-time price increases clearly linked to
steel and aluminum tariffs are due to take effect March 12. It
tariffs. That said, the further core inflation is from the Fed’s
would be surprising if they did not, but it will be worth watching
target, the more likely it is that the Fed postpones cuts until
whether the Trump Administration makes exceptions for
there is greater certainty. We continue to forecast two rate cuts
certain trading partners, which Trump recently ruled out.
this year, in June and December, and one more in 2026 to a
terminal rate range of 3.5%-3.75%. While trade policy uncertainty has already risen substantially
over the last several weeks, it seems likely to rise even further
Allison Nathan: How would the more extreme tariff
by early April. The presidential memo on trade policy that
scenarios impact growth, inflation, and Fed policy?
Trump signed on January 20 also calls on trade-related
Alec Phillips: The reciprocal tariff, which we don’t include in agencies (primarily Commerce, Treasury, and USTR) to make
our baseline at this point, would raise the tariff rate by 1-2pp recommendations by April 1 to deal with the trade deficit in
more, though more aggressive versions of such a tariff would general, potentially through a “global supplemental tariff”,
go much further. If the postponed tariffs on Mexico and Canada unfair trade practices of specific countries, currency policies,
are eventually implemented, they would raise the tariff rate by reevaluation of free trade agreements including but not limited
nearly the same amount as all of the tariffs in our baseline to USMCA, unfair foreign taxation of US businesses, China’s
combined, or nearly 6pp. Using the same rule of thumb as compliance with the Phase One trade agreement, an updated
before, this would add around another three-quarters of a point investigation on China’s economic policies and circumvention
to core PCE inflation, and a further hit to growth by a similar but of previously imposed tariffs, outbound investment restrictions,
slightly smaller amount. Fed policy becomes more uncertain in and export controls. The same agencies are due to make
such a scenario. Fed officials would likely still be inclined to recommendations regarding a reciprocal tariff around the same
look through a one-time price level shift driven by higher tariffs, time, and President Trump has mentioned that a global auto
but core inflation would be far enough from the Fed’s target tariff could also be imposed then.
that it could argue for delaying cuts. However, while the hit to

Goldman Sachs Global Investment Research 9

 hEl

US effective tariff rate (customs duties/imports)

Top of Mind

For most of the 19th century, the US maintains

a largely protectionist trade stance
20%
Beginning in 1989, free-trade agreements (FTAs) proliferate; as
The Reciprocal Trade multilateral talks stall, US trade negotiations shift toward bilateral and
Agreement Act of 1934 1971: President Nixon levies a blanket regional trade pacts
A long…

authorizes the US president 10% import surcharge to address

to negotiate like-for-like tariff perceived Dollar strength, as the US faces
reductions with major trading its first 20th century trade deficit; the

Goldman Sachs Global Investment Research

partners. measure is lifted four months later, as G10
nations agree to revalue vs. the USD.
Begnning in the mid-1930s, the US
significantly reduces tariffs while
15%
attempting to secure reciprocal
market access 1980s: President
Reagan imposes trade
restrictions on steel and
textiles, among other 1995: The World Trade
industries; Japan is Organization (WTO) is
pressured to adopt established as a
1930: voluntary export successor to the GATT.
Smoot–Hawley The Trade Expansion Act of 1962 restraints on autos.
Tariff Act: The US grants the US president significant 2002: President Bush imposes
levies import tariffs leverage to negotiate tariff tariffs on steel; the measure is
on more than 20,000 reductions (with the aim of
supporting allies, such as the rolled back one year later as trading
10% goods, triggering emergent European Economic partners threaten to retaliate.
retaliation abroad Community); Section 232 allows for
and a reduction in trade restrictions on the basis of
trade volumes. national security. 2013: T-TIP
1985: G5 officials negotiations
sign the Plaza begin
Accord to reduce between the
the value of the US and EU.
USD in response to
a widening US
trade deficit.

2012:
5% 1947: 23 countries including The US-
the US sign the General Korea FTA
Agreement on Tariffs and 2001: China (KORUS)
Trade (GATT)—the primary is signed.
joins the WTO.
framework for 20th century trade
negotiations.
1987: Donald Trump
Trade Act of 1974: The US attempts to reduce places a full-page ad in 1994:
non-tariff barriers, while establishing new retaliatory major US newspapers NAFTA is
tools (including Section 301); "fast track authority" for calling for a reduction in
trade deficits. signed.
negotiating trade agreements is established.
2004: The Australia-US FTA is signed.
0%
1929 1934 1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014

10
Issue 136
 hEl

US effective tariff rate (customs duties/imports)

Top of Mind

US effective tariff rate (customs duties/imports)

2024:
President Biden
announces the
2022:
20% 2018: imposition of
2020: President Biden extends
President Trump tariffs on Chinese
Section 201 tariffs on solar
announces tariffs on President Trump imposes electric vehicles,
panels and cells, but
washing machines, solar new tariffs on steel and solar cells, and
aluminum products; tariffs on subsequently suspends such
panels, steel, and aluminum some steel and
tariffs on Southeast Asian
and imposes tariffs on Canadian aluminum are later aluminum
countries temporarily.

Goldman Sachs Global Investment Research

$250bn of Chinese goods. lifted. products, with
three-year
The US eases tariffs on
All three countries sign the Trump and China Vice phase-in.
steel from Japan, the UK,
US-Mexico-Canada 2019: Premier Liu He sign the
US-China Phase One deal. and Ukraine.
Agreement (USMCA), President Trump lifts steel Three weeks after
15% which replaces NAFTA. and aluminum tariffs on The US and China his reelection,
President Biden reinstates
Canada and Mexico. subsequently reduce tariffs Trump
on each other and grant hundreds of product
The Export Control Reform 2021: announces that
exclusions from the Section
Act becomes law in the The US and China ramp up exemptions. President Trump extends he will impose an
301 tariffs imposed by the
US. The Act provides the trade war, but ultimately 2018 tariffs on washing additional 10%
Trump Administration.
president with broad reach 'Phase One' trade machines days before tariff on all
authority to control the deal in December, under leaving office. Chinese imports.
export of certain which the US agrees to
technologies. significantly modify its President Biden lifts tariffs
on some aluminum and steel 2023:
Section 301 tariff actions and President Biden further
China commits to substantial products from the EU but
reinstates Section 232 tariffs raises tariffs on steel and
additional purchases of US aluminum products from
10% on aluminum from the UAE.
goods and services. Russia first levied in
2017: The US response to the Russia-
withdraws from the Ukraine war.
Trans-Pacific
Partnership (TPP); the
11 remaining nations US tariffs on washing
sign the deal less than machines end.
a year later.

5%

0%
…and short history of US trade policy

2017 2018 2019 2020 2021 2022 2023 2024

11
Source: US International Trade Commission, US Department of Commerce, WTO, Irwin, Douglas A., “Clashing over Commerce”, Peterson Institute for International Economics, Goldman Sachs GIR.
Issue 136
Top of Mind Issue 136

Interview with Timothy C. Brightbill

hEl

Timothy C. Brightbill is Co-Chair of Wiley Rein LLP’s International Trade practice and an
Adjunct Professor at Georgetown University Law Center. Below, he discusses the legal
authorities that the US president has to impose tariffs and argues that President Trump’s
recent tariff actions fall within these authorities.
The views stated herein are those of the interviewee and do not necessarily reflect those of Goldman Sachs.

Jenny Grimberg: What specific United States v. Yoshida International. So, some legal basis
authorities does the US president exists for such use of IEEPA.
have to impose tariffs?
Jenny Grimberg: But can the president just declare
Tim Brightbill: The president has a anything a “national emergency” to justify tariffs?
wide variety of tools at his disposal to
Tim Brightbill: That’s the key question. Trump has declared
impose tariffs, three of which
several national emergencies, including the fentanyl crisis and
President Trump has utilized across
the immigration issues at our borders, and used these to justify
his two terms. One, the International
the China, Mexico, and Canada tariffs. But he has also talked at
Emergency Economic Powers Act
length about dumping, subsidies, and other unfair trade
(IEEPA), which was the basis for Trump’s February 1 Executive
practices. Whether the courts will uphold Trump’s tariff actions
Order that imposed additional 10% tariffs on China and the
because a genuine economic emergency exists that would
25% tariffs on Canada and Mexico that were ultimately
justify tariffs, or find that the president is just using IEEPA to
postponed. IEEPA gives the president broad power to regulate
address trade problems that should be covered under other
commerce during a national emergency, has almost-immediate
laws, is an open question.
effects on international trade, and doesn’t require an agency
investigation to invoke. During the first Trump Administration, the courts were
generally deferential to the president’s ability to decide what
Two, Section 232 of the Trade Expansion Act, which allows the
constituted a national security threat or economic emergency.
president to impose tariffs on imported products deemed a
But even in those cases, some judges raised different opinions
threat to national security and was the basis for Trump’s
and doubts as to whether the president had overreached his
original and expanded steel and aluminum tariffs. And three,
authority. The courts have also indicated that the president’s
Section 301 of the US Trade Act of 1974, which the current
power to act during national security or economic emergencies
administration hasn’t invoked but was the basis for the 25%
is not without limits. Eventually, the president may cross the
tariffs on hundreds of billions of dollars of Chinese goods in
line, or the remedy offered of tariffs might not align with the
2018 that kicked off the US-China trade war. Section 122 of the
alleged problem. So, any court challenges on the president’s
same 1974 Act, which is the president’s balance-of-payments
IEEPA authority will be important to watch.
authority, has never been used by Trump but would allow him
to impose an additional 15% tariff on imports for up to 150
days, unless extended by Congress. And Section 338 of the
Tariff Act of 1930, which hasn’t been used in over 70 years,
During the first Trump Administration,
allows the president to impose tariffs of up to 50% on any the courts were generally deferential to the
country discriminating against US producers. So, President president’s ability to decide what constituted
Trump could conceivably use this to impose reciprocal tariffs. a national security threat or economic
Jenny Grimberg: Whether IEEPA can be used to impose emergency."
tariffs seems to be a matter of debate. Is there historical
precedent for such use of IEEPA, and what have the courts
Jenny Grimberg: Who might file such court challenges, and
had to say in this regard?
what court(s) would hear any challenges to tariff actions?
Tim Brightbill: IEEPA has never before been used to impose
Tim Brightbill: Trade associations, companies, or importers
tariffs, although both the first Trump Administration and the
paying the increased tariffs might bring a lawsuit; hundreds of
Biden Administration used IEEPA to sanction countries and
importers filed the ultimately unsuccessful lawsuit to overturn
individuals, and the courts repeatedly upheld these actions. So,
the Section 301 China tariffs. These cases would be heard by
this is new territory for IEEPA. However, the courts have
the US Court of International Trade in New York, followed by
generally upheld the president’s power to declare an
the Court of Appeals for the Federal Circuit in Washington and
international economic emergency, and tend to be deferential
then possibly the US Supreme Court, though few trade cases
on matters of national security. And while the use of IEEPA to
ever make it to the Supreme Court. The Court of International
impose tariffs is novel, the Nixon Administration invoked
Trade heard the Section 232 disputes on steel and aluminum as
IEEPA’s predecessor—the 1917 Trading with the Enemy Act—
well as the challenges to the Section 301 tariffs on China during
to justify a 10% import tariff in 1971 due to a balance-of-
the first Trump Administration. And in both of those cases, the
payments crisis. The Court of Customs and Patent Appeals,
Court upheld the president’s power to act.
which was the appellate court at the time, upheld this action in

Goldman Sachs Global Investment Research 12

Top of Mind Issue 136

hEl

Jenny Grimberg: If court cases are filed against tariff push the boundaries of his authorities, Congress may again try
actions, do the tariffs in question still take effect? to restrict the president’s trade authority, which would require
passing a law. However, it’s hard to envision that the president
Tim Brightbill: Whether the parties that bring a lawsuit against
would sign a law to restrict his own power, complicating any
the Administration’s tariff actions can also obtain an injunction
such legislative effort.
to stop the tariffs is an important question, which is already
playing out in the legal challenges to some of the President’s Congress could more easily influence trade policy by
other recent executive actions. Such injunctions are difficult to withholding agreement on key legislation. Congress has the
obtain because they require the plaintiffs to show evidence of power to appropriate money and therefore has substantial
“irreparable harm”, and financial losses due to tariffs often leverage as the March 14 deadline to enact a fiscal year 2025
don’t cut it—a higher showing of financial harm, such as a spending agreement and prevent a government shutdown
significant likelihood that the company or importer could go out approaches. Congress could pass a temporary stopgap
of business altogether as a result of the tariffs, would be measure in the form of a continuing resolution, and lawmakers
required. So, injunctions, and trade lawsuits in general, tend to could potentially threaten to vote ‘no’ or withhold their vote on
be an arduous process for the plaintiffs, and oftentimes a the resolution—which requires a majority vote in both the
lengthy one. A case filed before the Court of International Trade Senate and the House—unless the Executive Branch agrees to
and then any appeal to the Federal Circuit could each take six a deal on tariffs. The reconciliation bills currently making their
months to a year to resolve. So, even if the arguments may be way through Congress also give it leverage, as they include
on their side, companies cannot rely on court challenges to funding for many of the administration’s priorities. Lawmakers
address the impact of tariffs; they have to think carefully about concerned about tariffs could similarly oppose these bills or
how to minimize the impacts to their businesses through other hold out for an agreement on tariffs. So, Congress has a few
means, perhaps by shifting their supply chains closer to home. tools to potentially push back on the president’s tariff plans, if it
so desires.
Jenny Grimberg: Which, if any, of the tariffs that Trump
has announced/floated will likely invite challenges?
Tim Brightbill: Many, if not all, of Trump’s tariff actions will Bottom line: neither the WTO nor the
likely face legal challenges despite the fact that the courts USMCA will likely be an impediment to
upheld such actions during the first administration. That said,
the Trump Administration has come into office more prepared
Trump’s tariff plans."
for such challenges than it was eight years ago—it is more
well-versed in the legal authorities at its disposal and how to Jenny Grimberg: How much power would targeted
utilize them, and is more willing to test previously-unused countries have to challenge tariffs through the World Trade
authorities like IEEPA or Section 122 of the 1974 Trade Act to Organization (WTO) and the US-Mexico-Canada
impose tariffs. In my view, the tariffs announced so far are Agreement (USMCA)?
aggressive but arguably within the president’s authority. So, Tim Brightbill: The WTO has limited power to police the
while I expect challenges, the recent tariff actions are unlikely Trump Administration’s actions. The WTO ruled that Trump’s
to be halted by the courts. first-term steel and aluminum tariffs and Section 301 China
tariffs violated WTO agreements, and a panel on the recently-
announced tariffs would probably make the same finding.
In my view, the tariffs announced so far However, the WTO Appellate Body—which hears appeals in
are aggressive but arguably within the disputes brought by the organization’s members—has been
president’s authority. So, while I expect shut down for several years as the US has blocked the
appointment of the new members necessary to form a
challenges, the recent tariff actions are
quorum. This prevents a WTO ruling from taking effect, as the
unlikely to be halted by the courts." US can simply appeal any losing decision to the now-defunct
Appellate Body in a process known as “appealing into the
Jenny Grimberg: If not the courts, what role could void”, which is what the US previously did.
Congress potentially play in curbing Trump’s tariff plans?
Mexico and Canada would also face an uphill battle challenging
Tim Brightbill: Article 1, Section 8 of the Constitution gives Trump’s tariffs under the USMCA. The Agreement includes a
Congress the power to regulate commerce with foreign nations national security provision—a standard feature of the US’ free
and to lay and collect taxes and duties. But, over time, trade agreements—that allows members to take actions
Congress has delegated that power as well as the power to necessary to protect their security interests as they themselves
declare national emergencies and security risks to the define them. So, the US could invoke this provision if Mexico
Executive Branch through the authorities we’ve discussed. and Canada pursue a challenge. In addition, the USMCA will be
Now, Congress could try to reclaim some of this power. renegotiated next year, and the Trump Administration is likely
Legislative proposals to do so were floated during the first counting on being able to reach a deal with Canada and Mexico
Trump Administration when Trump initiated an investigation on before any dispute panel would rule on the new tariffs. So,
automobile imports on US national security grounds, which bottom line: neither the WTO nor the USMCA will likely be an
several senators and members of Congress claimed was an impediment to Trump’s tariff plans.
overreach of presidential authority. If the president continues to
Goldman Sachs Global Investment Research 13
Top of Mind Issue 136

Q&A: ex-US impacts of Trump tariffs

hEl

We ask our economists about the potential implications of Trump tariffs for the US’ largest trading partners

Europe Sven Jari Stehn

Q: What is the state of play of US tariffs in your region, and what will they mean for growth/inflation/monetary policy?
A: President Trump has floated several tariff proposals that would affect Europe, and we expect tariffs on imports of EU cars, critical
goods, and steel/aluminum in our baseline (see pgs. 8-9). We find that the direct trade effects of these tariffs on Euro area growth
will likely be modest, especially if the EU retaliates. More importantly, we have found that elevated trade policy uncertainty will have
notably negative effects on European investment, confidence, and growth. As a result, we estimate that the trade tensions will lower
Euro area real GDP by 0.5% this year, with more substantial effects in Germany than southern Europe given Germany’s more export-
oriented economy. By contrast, we see limited inflation effects from the trade tensions. We would expect EU tariff retaliation and a
weaker Euro to push up European inflation. But weaker growth and trade diversion effects (with China selling goods to Europe at a
lower price) should push the other way. On net, we expect a 0.05% increase in consumer prices owing to the tariffs in our baseline.
Given weaker growth and only marginally higher inflation, we believe that the trade tensions will reinforce the ECB’s resolve to
normalize interest rates, and, accordingly, expect continued rate cuts to a 1.75% terminal rate.
Q: What might such retaliation look like?
A: We expect the EU to retaliate—but avoid a sharp escalation—by raising tariffs on a few key products equivalent to ~50% of the
value of EU exports affected by US tariffs. We would expect the EU to start with metals, agricultural products, and some transport
equipment (boats and vehicles), and possibly extend to chemicals and aircraft. Consistent with the 2018 precedent, we expect the
European Commission would publish a list of additional US goods that would be subject to EU tariffs at a later stage whose value
would match the full amount of EU exports affected by US tariffs should the US not show any cooperation on tariff policy.
Q: What would a more extreme tariff scenario than your base case look like for Europe, and what would it mean for
growth/inflation/monetary policy?
A: We would expect more meaningful growth downside from US tariffs that target all EU goods. We estimate an incremental 0.5%
GDP hit relative to our baseline in the event of a 10% US tariff on all EU goods and an incremental 0.7% hit if US tariffs matched
Europe’s value-added tax (VAT) rates, reflecting a growth hit from a larger net trade hit and higher uncertainty that is only partly offset
by more aggressive policy. We estimate such tariffs would boost inflation by 0.1-0.2pp relative to our baseline. Faced with sharply
weaker growth in the case of such an across-the-board tariff, we would expect the ECB to cut rates further than in our baseline.

Mexico Alberto Ramos

Q: What is the state of play of US tariffs in your country, and what will they mean for growth/inflation/monetary policy?
A: The Trump Administration issued an Executive Order on February 1 levying a 25% tariff on all imports from Mexico, though the
tariffs were put on hold until March 4 in light of the Mexican authorities’ “cooperative stance” and commitment to reinforce the
northern border. Meanwhile, bilateral teams are working on security and trade issues with a view to achieve a “deal”. As such, we
see it as more likely than not that the 25% tariff will ultimately not be implemented. This led us to leave our Mexico real GDP
forecasts—which already incorporate the 0.5-1% growth drag we expect from trade policy uncertainty—as well our inflation and
monetary policy forecasts unchanged. Trump also signed an Executive Order levying a 25% tariff on all steel and aluminum imports,
effective March 12. While these tariffs have a higher likelihood of implementation, Mexico’s steel/aluminum exports account for only
a small share of its total exports and GDP, limiting the growth, inflation, and policy impacts.
Q: What retaliatory measures might Mexico enact if the US were to impose tariffs?
A: The Mexican authorities have stated that the country would retaliate with tariff and non-tariff measures if the US were to levy
tariffs on Mexico. We are of the view that the Mexican authorities will remain cooperative and would likely avoid a tit-for-tat tariff
response and/or actions that would escalate trade frictions with its main trading partner. But we anticipate that authorities would
levy targeted tariffs on a limited but politically-sensitive set of goods (such as meat, dairy products, fruit and vegetables, beverages,
etc.), as they did during the 2018/19 trade war, should the Trump Administration follow through on its tariff threats.
Q: What would a more extreme tariff scenario than your base case look like for Mexico, and what would it mean for
growth/inflation/monetary policy?
A: We view the potential implementation of the postponed 25% tariff on Mexico as a significant risk. If such tariffs were
implemented, we would expect a growth hit from the drag on real income and reduction in exports to the US that is only partially
offset by currency depreciation and the domestic monetary policy response. In a scenario with tit-for-tat retaliation, the combined
impact of the trade policy uncertainty drag and the across-the board 25pp tariff increase would lower Mexico GDP by an estimated
3.5% and raise prices by 250bp, with the impact on domestic prices a smaller—but still significant—100bp if Mexico elected not to
retaliate. In such an environment, we would expect the central bank to initially assume a conservative posture to preserve financial
stability and anchor the currency, but to ultimately adopt a more accommodative/dovish stance to counteract the recessionary forces
triggered by the tariff-driven negative supply shock. Broader Mexico retaliation than we expect would have a larger impact on
domestic growth and inflation, presenting the central bank with more difficult tradeoffs to manage.

Goldman Sachs Global Investment Research 14

Top of Mind Issue 136

hEl

China Hui Shan

Q: What is the state of play of US tariffs in your country, and what will they mean for growth/inflation/monetary policy?
A: President Trump implemented an additional 10% tariff on all Chinese goods on February 4, which we estimate will lower China’s
real GDP by 0.5pp in 2025. By contrast, the inflation impact will likely be limited—with the 10% tariff reducing CPI inflation by only
an estimated 0.1pp—primarily because the linkage between the output gap and inflation is weak in China. Unlike other countries,
tariffs are deflationary in China as the country imports only a limited amount from the US and, as the world’s largest exporter, would
have to see domestic prices fall for domestic buyers and/or importing countries to absorb Chinese products if the US imposes heavy
tariffs. As tariff uncertainties linger and the CNY remains under pressure, the PBOC has kept the daily USDCNY fixing unchanged as
it prioritizes FX stability, another reason why tariffs will be deflationary. In this environment, US tariffs are constraining the PBOC’s
ability to cut policy rates and ease policy. We continue to expect the US to increase the effective tariff rate on China by an additional
10pp this year, which, all else equal, would reduce Chinese growth by an estimated 0.7pp and CPI inflation by 0.1pp as expected FX
depreciation would likely raise import prices on the margin and offset the negative inflation effect of a slightly larger growth drag.
Q: What retaliatory measures might China enact, and to what extent could these measures offset the impacts of US tariffs?
A: On February 4, the Chinese government announced a combination of retaliatory measures in response to the additional 10% US
tariff, which were noteworthy in two respects. First, the retaliatory tariffs were much less than proportional: China levied 12% tariffs
on $14bn of US goods compared to the US’ imposition of 10% tariffs on over $400bn of Chinese goods. Second, the responses
were coordinated, with various Chinese government agencies simultaneously announcing export controls of critical minerals, adding
US companies to the “Unreliable Entity List”, and launching antitrust probes on Google. Taken together, these demonstrate that,
compared to the 2018/19 trade war, the Chinese government is relying less on retaliatory tariffs and FX depreciation and more on
other instruments such as export controls and even geopolitical levers to retaliate this time around. As such, we believe that only
0.2pp of the 0.7pp growth hit under our baseline tariff assumptions will be offset through FX depreciation, with another 0.3pp offset
coming from fiscal stimulus, leaving the net growth drag at 0.2pp.
Q: What would a more extreme tariff scenario than your base case look like for China, and what would it mean for growth/
inflation/monetary policy?
A: In early 2024, Trump threatened to levy an additional 60% tariff on China, which remains a risk. We have found that the growth
impact of such a tariff would be significant at an estimated 2pp of real GDP. The Chinese government may allow for meaningful FX
deprecation to partially offset this growth headwind, though probably not quite as much as implied by the 2018/19 experience given
larger capital outflow pressures today. Once the currency stabilizes at a weaker level, the PBOC could cut policy rates to ease policy
and facilitate fiscal stimulus. This combination of slower growth and a weaker currency could leave China’s CPI inflation 0.3pp lower
than if no further US tariffs are imposed. But the net CPI inflation impact may be smaller if the government implemented substantial
fiscal stimulus to counter the effects of the large tariff increase, which we view as likely given the government’s growth target.

Canada Joseph Briggs

Q: What is the state of play of US tariffs in your country, and what will they mean for growth/inflation/monetary policy?
A: President Trump issued an Executive Order on February 1 levying a 25% tariff on all imports from Canada. These tariffs were put
on hold until March 4 and we ultimately don’t expect implementation. However, Canada is highly exposed to the 25% tariffs on steel
and aluminum scheduled to go into effect on March 12 and the tariffs on critical exports we expect, which together accounted for
over 7% of Canada’s GDP in 2024. Factoring in an expected drag from trade policy uncertainty and some fiscal and monetary policy
offsets, we expect Canada’s GDP will take a roughly 1% hit from these tariffs. The inflation impacts of the tariffs will largely depend
on the extent of retaliation. If Canada retaliates by raising the tariff rate on US imports by a third of the amount that the US raises
tariffs on Canadian imports, we would anticipate a modest boost of 0.2pp to prices. The price impact would be larger if Canada fully
retaliates, on the order of 0.5%. We see US tariffs as dovish for the BoC since the large growth drag will likely amplify the BoC’s
concerns around weak activity, consistent with our forecast for two more 25bp cuts in 2025 to 2.5%.
Q: What might such retaliation look like?
A: The Canadian government has yet to announce retaliatory measures for the steel and aluminum tariffs, but when threatened with
25% blanket tariffs in January, Prime Minister Trudeau promised a “robust response” while noting that “everything is on the table”,
including a “dollar-for-dollar response”. Canada subsequently provided a list of C$30bn in goods—largely food, apparel, and
household products—that it would initially retaliate with 25% tariffs of its own and announced plans to retaliate on an additional
$C125bn in goods—largely motor vehicles, aerospace products, and steel and aluminum—in mid-February. While these retaliatory
tariffs were delayed in early February, we would expect any future retaliation package to look similar to these proposals.
Q: What would a more extreme tariff scenario than your base case look like for Canada, and what would it mean for
growth/inflation/monetary policy?
A: If Trump ultimately implements a 25% tariff on most Canadian exports (with oil and gas tariffs increasing by a less severe 10%)
and leaves it in place permanently (or at least until a new USMCA agreement is reached ahead of the mid-2026 deadline), we estimate
that the hit to Canada’s GDP would likely rise to over 2%, while the boost to prices would likely rise to over 0.5% (and to well over
1% if Canada were to fully retaliate). We expect that the BoC would cut rates by an incremental 25-50bp relative to our baseline
forecast if these tariffs were delivered, consistent with recent comments from Governor Macklem that the BoC would likely ease
policy to offset an initial loss in demand and help the economy adjust to a trade shock.

Goldman Sachs Global Investment Research 15

Top of Mind Issue 136

A look at the global growth…

hEl

While our baseline forecasts assume a meaningful but narrower set of tariffs than the full range that Trump has floated, the large
number of potential policy changes raises significant uncertainty around the global growth and inflation impacts of the
Administration’s trade agenda. On the growth front, our Global Economics team finds moderate downside risk to global growth in
most tariff scenarios, with larger drags in non-US economies, though the distribution of effects depends on the nature of the tariff.
Under our baseline tariff scenario, we estimate that tariffs will A 25% North America tariff would weigh more significantly on
lower US GDP by 0.2%, with larger but still modest growth Mexican and Canadian growth, with Mexico in particular
impacts on non-US economies experiencing a significant growth hit
Est effect of GS baseline tariff expectations on GDP, % Est effect of a 25% North America tariff on GDP, %
0.0 0.0

-0.5
-0.2
-1.0
-0.4
-1.5
-0.6 -2.0

-0.8 -2.5

-3.0
-1.0
US Other DMs EMs Global -3.5 US Other DMs EMs Global
-1.2 -4.0
Canada

Mexico

Chile

Singapore
Sweden

Mainland China

Norway

Japan

New Zealand

Colombia
South Korea

Euro Area

Australia

Brazil
Turkey

Czech Republic

Indonesia

Poland
Hungary

UK
US
Switzerland

Vietnam

Malaysia

India
Global

Russia

Mexico
Canada

Chile

Singapore
Sweden
Mainland China

Norway

Japan

New Zealand

Colombia
South Korea

Euro Area

Australia

Brazil
Turkey

Czech Republic

Indonesia

Poland
Hungary

Global

UK
US
Switzerland

Vietnam

Malaysia

India

Russia
Similarly, a 25% tariff on the EU would create larger growth Mexico, Canada, and Korea are particularly exposed to a 25%
headwinds for the Euro area and central Europe global auto tariff, and as such, would see larger growth hits
Est effect of a 25% EU tariff on GDP, % Est effect of a 25% global auto tariff on GDP, %
0.0 0.0

-0.2 -0.2

-0.4 -0.4
-0.6
-0.6
-0.8
-0.8
-1.0
-1.0
-1.2
-1.2
-1.4 US Other DMs EMs Global
-1.4 -1.6
US Other DMs EMs Global
-1.6 -1.8
Canada

Mexico

Singapore

Chile
Sweden

Mainland China

Norway

Japan

New Zealand

Colombia
South Korea
Czech Republic

Euro Area

Australia

Brazil
Turkey

Indonesia

Poland
Hungary

Global

UK
US
Switzerland

Vietnam

Malaysia
India

Russia

Mexico
Canada

Chile

Singapore

New Zealand

Colombia
Sweden
Mainland China

Japan
Norway

Brazil
South Korea

Turkey

Czech Republic

Euro Area

Australia
Indonesia

Poland
Hungary

Global

UK
US
Switzerland

Vietnam

Malaysia

India

Russia

Reciprocal tariffs would have the largest incremental growth A 10% universal tariff would have the most significant impact on
impact on Vietnam and Hungary relative to our baseline global growth, roughly doubling the overall hit to global GDP
Est effect of reciprocal tariffs on GDP, % relative to our baseline
0.0 Est effect of a 10% universal tariff on GDP, %
-0.2 0.0

-0.4
-0.5
-0.6

-0.8 -1.0

-1.0
-1.5
-1.2

-1.4 -2.0
US Other DMs EMs Global
US Other DMs EMs Global
-1.6
-2.5
Canada

Mexico

Chile

Singapore
Mainland China
Sweden

Norway

Japan

New Zealand

Colombia
South Korea

Euro Area

Australia

Brazil
Turkey

Czech Republic
Indonesia

Poland
Hungary

Global

UK
US
Vietnam

Switzerland

Malaysia

India

Russia

Mexico

Canada

Singapore
Chile
Mainland China

Norway

Japan

New Zealand
Colombia

Brazil
South Korea

Turkey
Czech Republic
Sweden

Euro Area

Australia
Indonesia

Poland
Global

UK
US
Vietnam

Switzerland
Hungary

Malaysia

India

Russia

Goldman Sachs Global Investment Research 16

Top of Mind Issue 136

…and inflation impacts of tariffs

hEl

However, the inflation impacts of US tariffs will likely be more significant in the US, with more muted price impacts in non-US
economies. In most tariff scenarios, our Global Economics team estimates that the boost to prices outside the US would generally
be less than 0.2% and average to near-zero on a global ex-US basis. And tariffs would actually weigh marginally on prices in China.
Under our baseline tariff scenario, we estimate that tariffs will However, a 25% North America tariff would result in moderate
raise US prices by around 0.4pp, with much more muted inflation prices increases in Canada and Mexico
impacts outside the US Est effect of a 25% North America tariff on prices, %
Est effect of GS baseline tariff expectations on prices, % 1.2
0.5 US Other DMs EMs Global
1.0
US Other DMs EMs Global
0.4
0.8
0.3
0.6

0.2 0.4

0.1 0.2

0.0 0.0

-0.1 -0.2

Chile

Singapore

Canada
Mainland China

Mexico
Norway
New Zealand

Colombia
Brazil

Japan
Euro Area
Sweden
Australia

Czech Republic
Indonesia

South Korea
UK

Poland

Turkey
Russia

India

Hungary

Global

US
Vietnam

Switzerland

Malaysia
Chile
Mainland China

Norway
New Zealand

Colombia

Singapore

Mexico
Canada
Brazil

Japan
Euro Area
Sweden
Australia

Czech Republic
Indonesia

South Korea
UK

Poland

Turkey
Russia

India

Hungary

Global

US
Vietnam

Switzerland

Malaysia

A 25% EU tariff would not have material price implications for Mexico, Canada, and Korea are, again, particularly exposed to an
the region, with the US, again, seeing a larger inflation effect auto tariff, and so would see somewhat larger price impacts
Est effect of a 25% EU tariff on prices, % Est effect of a 25% global auto tariff on prices, %
1.0 0.8
US Other DMs EMs Global 0.7 US Other DMs EMs Global
0.8
0.6

0.6 0.5
0.4
0.4 0.3
0.2
0.2
0.1

0.0 0.0
-0.1
-0.2 -0.2
Chile
Mainland China

Norway
New Zealand

Colombia

Singapore

Mexico
Canada
Japan
Australia
Sweden

Brazil
Euro Area

Czech Republic
Indonesia

South Korea
UK

Poland
Turkey

US
Russia

India

Hungary

Global
Vietnam

Switzerland

Malaysia

Chile
Singapore

Canada
Mainland China

Mexico
Norway
New Zealand

Colombia
Brazil

Japan
Euro Area
Sweden
Australia

Czech Republic
Indonesia
UK

Poland

Turkey

South Korea
Russia

India

Hungary

Global

US
Vietnam

Switzerland

Malaysia

The inflationary impacts of reciprocal tariffs would follow a A 10% universal tariff would have the largest impact on US
similar pattern, although the effects would be slightly larger inflation, with a >1% boost to prices, although the global average
than in our base case would remain relatively small
Est effect of reciprocal tariffs on prices, % Est effect of a 10% universal tariff on prices, %
0.8 1.2
0.7 US Other DMs EMs Global US Other DMs EMs Global
1.0
0.6
0.5 0.8
0.4 0.6
0.3
0.4
0.2
0.1 0.2
0.0
0.0
-0.1
-0.2
Chile

Singapore
Mainland China

Mexico
Canada
Norway
New Zealand

Colombia
Brazil

Japan
Euro Area
Sweden
Australia

Czech Republic
Indonesia

South Korea
UK

Poland

Turkey
Russia

India

Hungary

Global

US
Vietnam

Switzerland

Malaysia

Chile

Singapore

Canada
Mainland China

Mexico
Norway

New Zealand

Colombia

Japan
Euro Area
Sweden

Australia

Brazil
Czech Republic
Indonesia

Turkey

South Korea
UK

Poland

US
Russia

India

Hungary

Global
Vietnam

Switzerland

Malaysia

Note: Our baseline assumes the already-implemented 10pp tariff rate increase on Chinese imports, announced tariffs on aluminum and steel, an additional 10pp
tariff rate increase on China, a 25pp tariff rate increase on EU autos, and a 10pp tariff rate increase on critical imports.
Source for all charts: Goldman Sachs GIR.

Goldman Sachs Global Investment Research 17

Top of Mind Issue 136

Uncertainty is the only certainty

hEl

During the 2018-2019 trade war, we found that mentions of

Joseph Briggs argues that the sharp rise in trade uncertainty on public company earning calls as well as
trade policy uncertainty from Trump’s tariff moves in stock prices around tariff announcements predicted a
drag on investment. And, looking across countries prior to the
volley could damage global growth 2018-2019 trade war, we also found that a rise in the Fed’s
global trade policy uncertainty index has predicted an
In addition to implementing tariffs on China and announcing
investment drag in export-oriented economies. Taken together,
steel and aluminum tariffs, President Trump has floated a broad
we estimate that a rise in trade policy uncertainty as large as
range of tariff policies, including reciprocal tariffs and tariffs on
the increase observed during the 2018-2019 trade war could
“critical” goods, global autos, Canada, Mexico, and the EU, as
lower GDP growth by around 0.3pp in the US and by a more
well as further China tariffs and a 10% “global” tariff on all US
significant 0.9pp in the Euro area, with other major exporters
imports. While we think it is unlikely that all of these proposals
likely experiencing similarly large drags.
will be implemented and include a narrower—albeit still
meaningful—set of tariffs in our baseline, the large number of …suggest a trade uncertainty growth drag
potential policy changes raises significant uncertainty around
Given the rise in trade policy uncertainty over last few months,
President Trump’s trade agenda. Trade policy uncertainty
it seems likely that a similar dynamic will repeat in 2025-2026.
indices have therefore unsurprisingly risen sharply in recent
In fact, a drag on investment from trade policy uncertainty
weeks. But even if Trump delivers a more benign set of tariffs
accounts for most of the negative growth impact that we
than his recent proposals imply, history suggests that the sharp
expect from Trump’s tariff proposals.
rise in trade policy uncertainty could damage global growth.
Trade policy uncertainty has risen sharply However, the good news is that any growth hit from trade
Trade policy uncertainty based on indices, % of 2018 peak policy uncertainty is likely capped at a certain level. This reflects
140 the fact that uncertainty mostly delays investment—rather than
STOXX 600* Russell 3000*
Federal Reserve** deters it, as an actual policy change would—and the marginal
120
hit to investment from increased uncertainty diminishes sharply
100 as uncertainty rises to very high levels. Investment by export-
focused manufacturers also accounts for only 0.5-1.5% of GDP
80
in most DM countries, which should contain the growth hit
60
even if trade policy uncertainty increases significantly.

But the bad news is that a drag from uncertainty could

40
materialize even if Trump delivers a more benign set of tariff
20 increases than his recent proposals would suggest.

0 Limited early evidence of a growth drag

2016 2018 2020 2022 2024
Note: Indices are normalized so that 0 corresponds to the sample minimum and So far, little concrete evidence exists of trade policy uncertainty
100 to the 2018 peak; data through 4Q24. weighing on investment and growth. Business sentiment and
*Share of companies mentioning tariffs or trade policy in their earnings calls.
manufacturing business surveys have improved since the US
**Fed index created by Caldara, Iacoviello, Molligo, Prestipino, Raffo (2020).
Source: Bloomberg, Federal Reserve, Haver Analytics, Goldman Sachs GIR. election, particularly in the US, where our manufacturing survey
tracker rose by four points to 53.5 in January. These dynamics
Lessons from history…
likely reflect the growth positive aspects of Trump’s agenda—
Much of the growth hit from trade uncertainty arises from its namely, deregulation—as well as some frontloading of imports
impact on investment as companies delay investments until the and investment before tariffs materialize.
policy outlook becomes clearer.
However, while sentiment and survey data have yet to reflect
Trade uncertainty weighed on growth in 2018-2019, particularly much evidence of an uncertainty drag, some early signs of tariff
in the Euro area impacts on investment have emerged elsewhere. As recently
Implied real GDP hit from trade uncertainty due to lower investment , pp
0.0
noted by our US economists, equity analyst expectations for
2025 capex were revised up 5% for S&P 1500 companies in
-0.2 aggregate over the last quarter but were only revised up by 2%
-0.4 US average: -0.3pp for a basket of companies with broad exposure to tariffs, and
were revised down by 1% for companies with a high exposure
-0.6
to Canada, Mexico, and China. These patterns provide early
-0.8 evidence that trade policy uncertainty will likely create a
Earnings call mentions Euro area average: -0.9pp headwind to global growth in 2025, particularly if tariff
-1.0
proposals continue at the same pace as in recent weeks.
Stock returns around tariff
-1.2
announcements
Joseph Briggs, Senior Global Economist
-1.4 Cross country panel
Email: [email protected] Goldman Sachs & Co. LLC
-1.6 Tel: 212-902-2163
US Euro Area
Source: Goldman Sachs GIR.

Goldman Sachs Global Investment Research 18

 Index % hEl
800 50
Share among companies
Index A longer look back at trade policy uncertainty reporting after the Canada,
Top of Mind

800 Trump Mexico, and China tariffs were

2.0 tariffs
announced
700 45
700 2018-2019
600 NAFTA
negotiations Trump trade
war Trump is reelected
500 US-Japan and, following his
inauguration, he 40
Nixon 10% semiconductor US Trans- US-China trade war
400 import trade war Pacific ramps up, but the announces a slew of
600 surcharge Partnership countries ultimately new tariff measures

Goldman Sachs Global Investment Research

300 withdrawal reach a trade deal
Trump announces
tariffs on Chinese later in the year 35
200
goods, kicking off a
100
tit-for-tat trade war
500 with China
0
30
1960 1965 1971 1976 1982 1987 1993 1998 2004 2009 2015 2020

400 The US withdraws 25

from the Trans-
Pacific Partnership

Trump continues to 20
300 crack down on China
during his last few weeks
in office, adding more
Chinese companies to
15
Transatlantic Trade and the US trade blacklist
Investment Partnership and restricting US
200 investment into China
negotiations between
the US and EU begin
10

100
5
Trade policy (uncertainty) in focus

0 0
1/1/2010 2/1/2011 3/1/2012 4/1/2013 5/1/2014 6/1/2015 7/1/2016 8/1/2017 9/1/2018 10/1/2019 11/1/2020 12/1/2021 1/1/2023 2/1/2024
Trade policy uncertainty index (lhs)
Share of management teams mentioning tariffs on Russell 3000 quarterly conference calls (rhs)
Source: Caldara, Iacoviello, and Molligo, GS Dataworks, Goldman Sachs GIR.

19
Issue 136

Special thanks to GS US Senior Economist Ronnie Walker for chart.

Top of Mind Issue 136

What are companies saying about tariffs?

hEl

Management commentary on tariffs,

2024Q4 earnings season
Company Comment

Some companies may delay capex until there is greater certainty about potential tariffs

General Motors What we won't do is spend a large amount of capital without clarity [about potential tariffs].
Three Part Some of these projects are dependent on both the cost of the capital, but also tariffs could impact supply cost
Advisors of steel. So you now have some projects [where] the escalator clauses are being negotiated.
We believe it's prudent to include additional conservatism for North American vehicle production in our current
Aptiv outlook for 2025 …. [Tariffs] introduce a certain amount of uncertainty into the system, which, in our view, will
affect supply chains and when it affects supply chains, it will affect production.
There's still some concern out there from the customer base on, one, what you're seeing from tariffs and
Ryder System uncertainty around that and then still uncertainty in the general economic environment, which I think is still
continuing to cause delays.
So I think there's going to be a potential barrier to growth for some of the smaller scale miners…but we'll see
CleanSpark
what happens with the tariffs, and we'll react accordingly.
I think there's still a lot of uncertainty about if, when and where the tariffs will be in place. And also what would
Pilgrim's Pride
be the answer from the trading partners?
W.W. Grainger The uncertainty of the tariffs is still pretty strong.
In this varying macro environment, [which includes] potential tariff wars...we think that it is no longer prudent to
Coty
put specific sales growth targets.
Zebra This uncertainty is not helping because our customers are focused, as we are, on things like, "what happens if"
Technologies and "how do I go mitigate tariffs" and other [things] as opposed to finalizing projects specifically with us.

Companies plan to pass along costs to consumers to the extent possible

We plan to pass on the cost impact of the tariffs, if the tariffs get enacted, to our customers, as we have done
AMETEK
previously.
If there are widespread tariffs, anywhere from the 10% to 25% range, I anticipate there will be corresponding
Cardinal Health price increases. We will do what we can to minimize those, but with 1% to 2% margins, we will not absorb
whatever impacts are left.
Corning We certainly have the ability to raise price if that is something that is required to do.

Depending on what happens in the marketplace, the competitive environment, we would typically try to pass on
W.W. Grainger
and keep the same margins in what we pass on.

While tariffs impact end customer demand, any changes in tariff costs have historically been largely a pass-
Jabil
through cost for Jabil.
Marathon We think it's likely if tariffs will be put in place...that we would see cost increases. We believe that the majority of
Petroleum that will ultimately be borne by the producer and then, frankly, to a lesser extent, the consumer.
Limited plans to reshore production but many examples of frontloading imports ahead of tariffs
Our teams continue to analyze multiple tariff scenarios, are qualifying alternative suppliers, and are evaluating
Leggett & Platt
potential geographic shifts in production.
Taylor Morrison Given the steps we have taken to...reshore products and strengthen our supply chain resiliency in recent years,
Home we believe we are prepared for any potential disruptions.
Fastenal We accelerated some inventory ceded for future delivery into current periods ahead of potential new tariffs.
We've taken a series of actions including stocking inventory of our highest turned products that would be
MSC Industrial
impacted by tariffs.
Costco We have a plan [to mitigate the impact of tariffs] and typically we'll look where we can to pull forward inventory
Wholesale buying.
3M We...saw modest front loading from an anticipated change in tariffs.
Zebra Our teams are doing everything they can to pull volume in from a purchasing perspective and get that inventory
Technologies into the US as early as possible ahead of potential tariff impact.
Source: Company data, Data compiled by Goldman Sachs GIR.
Special thanks to GS US Senior Economist Ronnie Walker for table, which originally appeared in a Feb 17 US Economics Analyst.

Goldman Sachs Global Investment Research 20

Top of Mind Issue 136

Tariffs & markets: lessons learned so far

hEl

3. Tariff risk premium in currencies has ebbed, creating

Kamakshya Trivedi discusses four lessons opportunities to reset Dollar hedges... The repeated delays
from market responses to the tariff in the implementation of threatened tariffs means that the risk
of a repeat of the 2017 experience is rising. The first year of the
developments of the past month previous Trump Administration saw little actual change in trade
policy despite similar threats, leading to one of the most
In the short time since his inauguration, President Trump has
significant Dollar drawdowns in the post-Global Financial Crisis
implemented an additional 10% tariff on China, threatened
period. Market pricing has moved in the same direction this
several other tariffs (on Mexico, Canada, and autos), and floated
time around: the pullback in key Dollar crosses and the broad
a variety of tariff proposals (universal, reciprocal, and critical
Dollar itself since early February now suggests little or no
imports tariffs). Asset markets’ response to these
embedded tariff tail risk premium. Tariffs did ultimately
developments provides four key lessons on how markets are
materialize in the second year of the first Trump Administration
thinking about tariff risks and where opportunities may lie.
in 2018 and went on to boost the Dollar. And despite the false
1. Tariffs have meaningful market impacts... Currencies are starts, our economists still expect additional 10% tariffs on
the most obvious place to see this, because tariffs have a China plus tariffs on critical imports and European autos ahead
strong, direct, and unambiguous impact on exchange rates, (see pgs. 8-9). Should these or bigger tariffs—including
unlike other asset classes. While several channels are at work, reciprocal or universal tariffs—materialize in coming months,
flexible exchange rates essentially help offset the tariff-driven we would expect the Dollar to march higher again. Since that
shift in the relative cost of doing business. Consistent with this, tariff tail risk now looks underpriced and is a key risk to multi-
and despite a highly overvalued Dollar coming into the year, the asset or long equity risk portfolios, we see good opportunities
Dollar immediately and significantly strengthened when 25% to reset hedges in EUR/USD downside or USD/CAD upside.
tariffs on Canada and Mexico—two of the US’ most important FX markets are now embedding little to no tariff tail risk premium
trading partners—were perceived as imminent. Beyond the %
Dollar strengthening on a broad basis, including versus the Euro 6 USD/CAD misvaluation
as Europe was perceived as next in line as a tariff target, the 5 EUR/USD misvaluation (inverted)

yield curve also flattened as markets priced in a higher initial 4

USD TWI misvaluation

inflation shock and lower growth down the line, and US and 3
global equities fell sharply. 2

1
2. …but if deep tails don’t materialize, scope exists for
relief, especially in non-US assets. Equity markets recovered 0

swiftly once it became evident that deep tariff tail risks were -1

not imminent, although have given back some gains as US -2

growth concerns have emerged. But the market response to -3

recent threats of reciprocal and critical imports tariffs and -4

Jan-24 Apr-24 Jul-24 Oct-24 Jan-25
upcoming deadlines has also been more muted than to the
Source: Goldman Sachs FICC and Equities, Goldman Sachs GIR.
earlier Canada and Mexico tariffs, partly because of the long
lead time on any action and skepticism about implementation 4. ...but inflation risk is still embedded in front-end rates. In
owing to the Canada and Mexico postponement experience. contrast to currencies, rates markets have continued to reflect
The still broadly benign global macro backdrop of moderate the risk of somewhat higher inflation than our forecasts in the
growth and slowly cooling inflation points to higher equities, front-end of rate curves, even as we too have moderately
especially if the worst tariff tail risks are avoided. That is raised our inflation forecasts on tariff developments. That said,
particularly true for non-US equities (Europe and China), as well we don’t view market pricing as unreasonable given the
as currencies where deep tariff risks are more priced in and significant uncertainty about trade policy, which also makes it
starting valuations are less challenging, such as the Mexican easy to envision that the Fed could continue to delay rate cuts
Peso and (to a more limited extent) the Chinese Renminbi. in the coming months. As such, we think more attractive
Equity markets recovered swiftly when deep tariff tail risks didn’t opportunities lie further out the curve. Despite the recent
immediately materialize, but have since given back some gains shifts, the market could move further to price rate cuts beyond
% (lhs), bp (rhs) late 2025. By then, the inflation impacts of tariffs will likely have
10
Left axis Right axis
20 dampened, ceding prominence to any downside growth
15 effects, while a new Trump-appointed Fed chair will likely be an
5 10
increasingly imminent reality. Valuation considerations and high
5
0 0
Treasury term premia also still support the case for US (and
-5 European) duration as a hedge, even if our benign growth
-5 -10 baseline does not argue for a very deep rally from current levels.
-15
-10
Friday Jan 31 close to Monday Feb 3 7am
-20
Kamakshya Trivedi, Head of Global FX, Rates, and EM
Feb 3-Feb 18
Feb 3-Feb 25 -25 Strategy
-15 -30 Email: [email protected] Goldman Sachs International
S&P 500 Russell MSCI EM CAD/USD MXN/USD EUR/USD UST 2y UST 10y Tel: 44-20-7051-4005
2000
Source: Bloomberg, Goldman Sachs GIR.

Goldman Sachs Global Investment Research 21

Top of Mind Issue 136

Tariffs and commodity dominance

hEl

price substantial tariff risk premia across copper, Canadian

Daan Struyven assesses how President crude oil, and US refined oil products.
Trump’s quest for US commodity dominance The copper market…
could impact commodity markets Market-implied probability of a 10% tariff on copper, %
120
Commodities are front and center in Trump's trade and foreign
policies as his Administration pursues US commodity 100
dominance, spurred in large part by economic and geopolitical
competition with China. Such a paradigm envisions affordable 80
US energy prices, higher US output in the old (e.g., oil and
manufacturing) and new economy (e.g., power, metals, and AI), 60
and US military and geopolitical dominance. Trump has already
taken several steps toward this goal, with tariffs in particular 40
playing a central role. While we don’t expect a significant near-
term impact on commodity prices or supply from this 20
commodity dominance agenda, we believe it has the potential
to boost US energy/metals production over the longer run. 0

China competition in the driver’s seat -20

Dec-24 Jan-25 Feb-25 Mar-25
Economic and geopolitical competition with China is likely a
Source: Goldman Sachs GIR.
major driver of Trump’s US commodity dominance agenda as
the Administration aims to expand the US’ oil and gas trade …and Canadian crude market are pricing substantial tariff premia
Market-implied probability of a 10% tariff on Canadian oil, %
surplus—a source of geopolitical power—while reducing its
reliance on imports of several critical metals for which China 140

often dominates the supply chain.

120
The US Is a dominant net oil and natural gas exporter, but relies on
imports for several critical metals 100
Higher Tariff
US net import reliance, % of apparent consumption* in 2023 Pricing
80
100

60
80

40
60

20
40

0
20 Nov-24 Dec-24 Jan-25 Feb-25

Source: Goldman Sachs GIR.

0
Trump has also sought deals with US trading partners to
-20 increase US energy exports as well as to expand the US’
access to critical minerals supplies. On the energy exports
front, Trump has urged Europe to buy more US oil and gas as a
way to avoid tariffs, signaled a deal with India to buy more US
*Net imports plus production.
energy and military equipment, and said he’s “taking back” the
Source: Haver Analytics, EIA, Goldman Sachs GIR.
Panama Canal—a key transit point for US liquefied natural
Off to the (commodity) races (LNG) and petroleum (LPG) gas. On the critical minerals front,
As part of this agenda, Trump recently signed an Executive Trump recently secured a deal with Ukraine granting the US
Order establishing a National Energy Dominance Council within access to a share of the country’s mineral deposits, although
the Executive Branch to advise him on the best policies for the final details of the deal have yet to be released. Trump has
making the US energy dominant. Trump has also raised the also expressed interest in gaining control of Greenland, which
tariff on aluminum imports from 10% to 25%, removed all has some critical minerals reserves, and Canadian Prime
exemptions to the 25% tariff on steel imports that he imposed Minister Justin Trudeau has also suggested that Trump’s
during his first term, and, more recently, directed his staff to interest in Canada is related to the country’s supply of critical
launch an investigation into copper imports, which could minerals.
ultimately lead to tariffs on the metal. The Administration has
also floated tariffs on other critical imports—including energy—
as well as a universal tariff on all oil and gas imports. While
such tariffs remain uncertain, commodity markets continue to
Goldman Sachs Global Investment Research 22
Top of Mind Issue 136

hEl

Three takeaways Brent prices in the $70-85 range are conducive to solid US supply
growth and prevent elevated public focus on high gasoline prices
We see three main implications from policy shifts toward US
US shale production (lhs, mb/d) and US TV mentions of gasoline prices (rhs, %
commodity dominance: of transcripts) vs. breakeven Brent prices
3.5 Shale volumes (lhs) 25
First, tariffs should raise US metals prices, as we expect TV gasoline mentions (rhs)
significant pass-through from the 25% tariff on steel and 3.0
aluminum to US end-prices, assuming no significant 20
exemptions are put in place. Specifically, we estimate that the 2.5 GS
$70-85
US Midwest aluminum premium—a delivery premium paid on Range 15
top of the LME price—will rise to 50c/lb ($1,036/t) by the end of 2.0

Q1 from an average of 24c/lb ($529/t) in January 2025.

1.5
10
Second, oil price impacts should remain limited. While
Trump has also floated a 10% oil tariff, we expect the price 1.0

impact of such a tariff to be more muted as US refiners’ 5

0.5
preference for heavy oil limits any increase in demand for these
light crude products, with WTI and Brent crude prices rising by 0.0 0
only $0.5/bbl. And while the cost of refined oil products would 20s 30s 40s 50s 60s 70s 80s 90s100s 110s 120s
Breakeven Brent Price ($/bbl) .
rise, the magnitude would be modest at around $170 per
Note: We derive implied Brent prices from our US retail gasoline pricing model
household per year. which assumes taxes and marketing margins are fixed but that refining margins
scale linearly with Brent crude prices.
The oil price impact of a 10% tariffs on all US oil imports should Source: Woodmac, IEA, Cummings et al (2024), Goldman Sachs GIR.
remain limited
Third, we estimate a limited boost to US energy and metals
2026 average energy prices under tariff scenarios, $/bbl
supply from tariff policies in the short run, but a potentially
80 20 bigger boost to supply from dominance policies over the
No Tariffs
10% tariff on all US oil imports longer run. On the energy front, we find that market prices
19
75 Forwards
and capital availability drive US oil and gas production in the
18
70 short and medium run with limited effects from greater federal
17
land/water availability for drilling or from the restart of the
65
16 approval process of proposed US LNG export projects. 1 And
60 15 given the likely modest effect on WTI crude prices as well as
many US refiners’ preference for heavy oil over the light oil the
14
55 US produces, we find that a 10% tariff on oil imports would not
13 significantly boost US oil production.
50
12
Similarly, on the metals front, we don’t expect large boosts to
45
11 US production from the 25% steel and aluminum tariffs. While
40 10 the imposition of a 25% tariff on steel imports and a 10% tariff
WTI (lhs) WCS Hardisty (lhs) NYH RBOB Gasoline on aluminum imports in early 2018 was associated with the
Margins (rhs)
largest annual increase in US steel production since 2011 and in
Source: EIA, Kpler, Goldman Sachs GIR.
primary aluminum production since 2012, the difficultly in
On net, the US Administration’s dual goals of commodity securing long-term competitive power contracts will likely keep
dominance and energy affordability reinforce our Brent $70-85 the two idle US aluminum smelters offline.
range baseline. We find that Brent prices above $70/bbl support That said, many of the Administration’s commodity-related
solid growth in marginal US supply as it exceeds most US shale measures are infrastructure related, which suggests longer-
producers’ breakeven price while Brent prices below $85/bbl term support to commodity supply, including from faster
keep gasoline prices below $3.50/gallon, the level at which permitting for pipeline buildouts as well as reduced mining
public concern about prices begins to rise. regulatory restrictions. 2 The Administration could also
undertake more significant and sustained policy shifts,
especially in certain sectors that China has traditionally
dominated—including processing critical minerals, solar panels,
and electric vehicles (EVs)—which would also suggest upside
risk to US production over the long run.
Daan Struyven, Co-head of Global Commodities
Research
Email: [email protected] Goldman Sachs & Co. LLC
Tel: 212-357-4172

1
We have not changed our US LNG exports through 2027 view as financing often requires long-term contracting in addition to approval, the lead time required in
construction is long, and we don’t view the approval pause as a long run restriction.
2
While the Trump Administration may permit the Rio Tinto Resolution mine, the large 500kt per year operation would likely not be operational until the early 2030s.
Goldman Sachs Global Investment Research 23
Top of Mind Issue 136

Four decades of Trump on trade

hEl

Goldman Sachs Global Investment Research 24

Top of Mind Issue 136

Summary of our key forecasts

hEl

Goldman Sachs Global Investment Research 25

Top of Mind Issue 136

Glossary of GS proprietary indices

hEl

Current Activity Indicator (CAI)

GS CAIs measure the growth signal in a broad range of weekly and monthly indicators, offering an alternative to Gross
Domestic Product (GDP). GDP is an imperfect guide to current activity: In most countries, it is only available quarterly and is
released with a substantial delay, and its initial estimates are often heavily revised. GDP also ignores important measures of real
activity, such as employment and the purchasing managers’ indexes (PMIs). All of these problems reduce the effectiveness of
GDP for investment and policy decisions. Our CAIs aim to address GDP’s shortcomings and provide a timelier read on the pace
of growth.
For more, see our CAI page and Global Economics Analyst: Trackin’ All Over the World – Our New Global CAI, 25 February
2017.

Dynamic Equilibrium Exchange Rates (DEER)

The GSDEER framework establishes an equilibrium (or “fair”) value of the real exchange rate based on relative productivity and
terms-of-trade differentials.
For more, see our GSDEER page, Global Economics Paper No. 227: Finding Fair Value in EM FX, 26 January 2016, and Global
Markets Analyst: A Look at Valuation Across G10 FX, 29 June 2017.

Financial Conditions Index (FCI)

GS FCIs gauge the “looseness” or “tightness” of financial conditions across the world’s major economies, incorporating
variables that directly affect spending on domestically produced goods and services. FCIs can provide valuable information
about the economic growth outlook and the direct and indirect effects of monetary policy on real economic activity.
FCIs for the G10 economies are calculated as a weighted average of a policy rate, a long-term risk-free bond yield, a corporate
credit spread, an equity price variable, and a trade-weighted exchange rate; the Euro area FCI also includes a sovereign credit
spread. The weights mirror the effects of the financial variables on real GDP growth in our models over a one-year horizon. FCIs
for emerging markets are calculated as a weighted average of a short-term interest rate, a long-term swap rate, a CDS spread,
an equity price variable, a trade-weighted exchange rate, and—in economies with large foreign-currency-denominated debt
stocks—a debt-weighted exchange rate index.
For more, see our FCI page, Global Economics Analyst: Our New G10 Financial Conditions Indices, 20 April 2017, and Global
Economics Analyst: Tracking EM Financial Conditions – Our New FCIs, 6 October 2017.

Goldman Sachs Analyst Index (GSAI)

The US GSAI is based on a monthly survey of GS equity analysts to obtain their assessments of business conditions in the
industries they follow. The results provide timely “bottom-up” information about US economic activity to supplement and cross-
check our analysis of “top-down” data. Based on analysts’ responses, we create a diffusion index for economic activity
comparable to the ISM’s indexes for activity in the manufacturing and nonmanufacturing sectors.

Macro-Data Assessment Platform (MAP)

GS MAP scores facilitate rapid interpretation of new data releases for economic indicators worldwide. MAP summarizes the
importance of a specific data release (i.e., its historical correlation with GDP) and the degree of surprise relative to the
consensus forecast. The sign on the degree of surprise characterizes underperformance with a negative number and
outperformance with a positive number. Each of these two components is ranked on a scale from 0 to 5, with the MAP score
being the product of the two, i.e., from -25 to +25. For example, a MAP score of +20 (5;+4) would indicate that the data has a
very high correlation to GDP (5) and that it came out well above consensus expectations (+4), for a total MAP value of +20.

Goldman Sachs Global Investment Research 26

Top of Mind Issue 136

Top of Mind archive

hEl

Issue 135 Issue 119

High bond yields: here to stay? Daunting debt limit dynamics
February 5, 2025 May 22, 2023

Special Issue Issue 118

2024: 4 themes in charts US-China: more decoupling ahead?
December 18, 2024 May 1, 2023

Issue 134 Issue 117

Will China's policy stimulus be enough? All about bank(panic)s
December 11, 2024 April 3, 2023

Issue 133 Issue 116

Market concentration: how big a worry? (Japanese) Bonds, Bonds, Bonds
November 25, 2024 February 23, 2023

Issue 132 Issue 115

Post-election economic policies The Bigger Worry: Growth or Inflation?
October 21, 2024 January 27, 2023

Issue 131 Special Issue

Is the Fed behind the curve? 2022: 3 themes in charts
September 3, 2024 December 15, 2022

Issue 130 Issue 114

How investable is Europe? The Winter of Crypto’s Discontents
August 1, 2024 December 9, 2022

Issue 129 Issue 113

Gen AI: too much spend, too little benefit? Central Bank Tightening: what could break?
June 25, 2024 November 11, 2022

Issue 128 Issue 112

Central bank divergence room to run? China’s Congress: an inflection point?
May 21, 2024 October 11, 2022

Issue 127 Issue 111

Weighing the GLP-1 market Will slaying inflation require recession?
April 12, 2024 September 13, 2022

Issue 126 Issue 110

Global transit & trade: in rough waters Food, Fuel, and the Cost-of-Living Crisis
March 12, 2024 July 28, 2022

Issue 125 Issue 109

2024: The year of elections Equity bear market: a paradigm shift?
February 1, 2024 June 14, 2022

Issue 124 Issue 108

Middle East risks (De)Globalization Ahead?
December 5, 2023 April 28, 2022

Issue 123 Issue 107

US outperformance: at a turning point? Stagflation Risk
October 30, 2023 March 14, 2022

Issue 122 Issue 106

Commercial real estate risks Russia Risk
October 9, 2023 February 24, 2022

Issue 121 Issue 105

Corporate credit concerns 2022: The endemic year?
August 10, 2023 January 24, 2022

Issue 120 Special Issue

Generative AI: hype, or truly transformative? 2021: 4 themes in charts
July 5, 2023 December 17, 2021

Source of photos: www.gettyimages.com, www.istockphoto.com, www.shutterstock.com, US Department of State/Wikimedia Commons/Public Domain.

Goldman Sachs Global Investment Research 27

Top of Mind Issue 136

hEl

Disclosure Appendix
Reg AC
We, Allison Nathan, Jenny Grimberg, Ashley Rhodes, Joseph Briggs, Alec Phillips, Alberto Ramos, Hui Shan, Sven Jari Stehn, Daan
Struyven, and Kamakshya Trivedi, hereby certify that all of the views expressed in this report accurately reflect our personal views,
which have not been influenced by considerations of the firm’s business or client relationships.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment
Research division.

Disclosures

Regulatory disclosures

Disclosures required by United States laws and regulations

See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this
report: manager or co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client
relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or
specialist role. Goldman Sachs trades or may trade as a principal in debt securities (or in related derivatives) of issuers discussed in
this report.

The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits
its analysts, professionals reporting to analysts and members of their households from owning securities of any company in the
analyst's area of coverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which
includes investment banking revenues. Analyst as officer or director: Goldman Sachs policy generally prohibits its analysts,
persons reporting to analysts or members of their households from serving as an officer, director or advisor of any company in the
analyst's area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of Goldman Sachs & Co. LLC
and therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with subject company,
public appearances and trading securities held by the analysts.

Additional disclosures required under the laws and regulations of jurisdictions other than the United States
The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to
United States laws and regulations. Australia: Goldman Sachs Australia Pty Ltd and its affiliates are not authorised deposit-taking
institutions (as that term is defined in the Banking Act 1959 (Cth)) in Australia and do not provide banking services, nor carry on a
banking business, in Australia. This research, and any access to it, is intended only for "wholesale clients" within the meaning of the
Australian Corporations Act, unless otherwise agreed by Goldman Sachs. In producing research reports, members of Global
Investment Research of Goldman Sachs Australia may attend site visits and other meetings hosted by the companies and other
entities which are the subject of its research reports. In some instances the costs of such site visits or meetings may be met in
part or in whole by the issuers concerned if Goldman Sachs Australia considers it is appropriate and reasonable in the specific
circumstances relating to the site visit or meeting. To the extent that the contents of this document contains any financial product
advice, it is general advice only and has been prepared by Goldman Sachs without taking into account a client's objectives, financial
situation or needs. A client should, before acting on any such advice, consider the appropriateness of the advice having regard to
the client's own objectives, financial situation and needs. A copy of certain Goldman Sachs Australia and New Zealand disclosure
of interests and a copy of Goldman Sachs’ Australian Sell-Side Research Independence Policy Statement are available
at: https://www.goldmansachs.com/disclosures/australia-new-zealand/index.html. Brazil: Disclosure information in relation to CVM
Resolution n. 20 is available at https://www.gs.com/worldwide/brazil/area/gir/index.html. Where applicable, the Brazil-registered
analyst primarily responsible for the content of this research report, as defined in Article 20 of CVM Resolution n. 20, is the first
author named at the beginning of this report, unless indicated otherwise at the end of the text. Canada: This information is being
provided to you for information purposes only and is not, and under no circumstances should be construed as, an advertisement,
offering or solicitation by Goldman Sachs & Co. LLC for purchasers of securities in Canada to trade in any Canadian security.
Goldman Sachs & Co. LLC is not registered as a dealer in any jurisdiction in Canada under applicable Canadian securities laws and
generally is not permitted to trade in Canadian securities and may be prohibited from selling certain securities and products in
certain jurisdictions in Canada. If you wish to trade in any Canadian securities or other products in Canada please contact Goldman
Sachs Canada Inc., an affiliate of The Goldman Sachs Group Inc., or another registered Canadian dealer. Hong Kong: Further
information on the securities of covered companies referred to in this research may be obtained on request from Goldman Sachs
(Asia) L.L.C. India: Further information on the subject company or companies referred to in this research may be obtained from
Goldman Sachs (India) Securities Private Limited, Research Analyst - SEBI Registration Number INH000001493, 951-A, Rational
House, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India, Corporate Identity Number U74140MH2006FTC160634,
Phone +91 22 6616 9000, Fax +91 22 6616 9001. Goldman Sachs may beneficially own 1% or more of the securities (as such
term is defined in clause 2 (h) the Indian Securities Contracts (Regulation) Act, 1956) of the subject company or companies referred

Goldman Sachs Global Investment Research 28

Top of Mind Issue 136

hEl

to in this research report. Investment in securities market are subject to market risks. Read all the related documents carefully
before investing. Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or
provide any assurance of returns to investors. Goldman Sachs (India) Securities Private Limited compliance officer and investor
grievance contact details can be found at this link: https://publishing.gs.com/disclosures/hedge.html - /general/equity. Japan: See
below. Korea: This research, and any access to it, is intended only for "professional investors" within the meaning of the Financial
Services and Capital Markets Act, unless otherwise agreed by Goldman Sachs. Further information on the subject company or
companies referred to in this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. New Zealand: Goldman
Sachs New Zealand Limited and its affiliates are neither "registered banks" nor "deposit takers" (as defined in the Reserve Bank of
New Zealand Act 1989) in New Zealand. This research, and any access to it, is intended for "wholesale clients" (as defined in the
Financial Advisers Act 2008) unless otherwise agreed by Goldman Sachs. A copy of certain Goldman Sachs Australia and New
Zealand disclosure of interests is available at: https://www.goldmansachs.com/disclosures/australia-new-
zealand/index.html. Russia: Research reports distributed in the Russian Federation are not advertising as defined in the Russian
legislation, but are information and analysis not having product promotion as their main purpose and do not provide appraisal within
the meaning of the Russian legislation on appraisal activity. Research reports do not constitute a personalized investment
recommendation as defined in Russian laws and regulations, are not addressed to a specific client, and are prepared without
analyzing the financial circumstances, investment profiles or risk profiles of clients. Goldman Sachs assumes no responsibility for
any investment decisions that may be taken by a client or any other person based on this research report. Singapore: Goldman
Sachs (Singapore) Pte. (Company Number: 198602165W), which is regulated by the Monetary Authority of Singapore, accepts
legal responsibility for this research, and should be contacted with respect to any matters arising from, or in connection with, this
research. Taiwan: This material is for reference only and must not be reprinted without permission. Investors should carefully
consider their own investment risk. Investment results are the responsibility of the individual investor. United Kingdom: Persons
who would be categorized as retail clients in the United Kingdom, as such term is defined in the rules of the Financial Conduct
Authority, should read this research in conjunction with prior Goldman Sachs research on the covered companies referred to herein
and should refer to the risk warnings that have been sent to them by Goldman Sachs International. A copy of these risks warnings,
and a glossary of certain financial terms used in this report, are available from Goldman Sachs International on request.

European Union and United Kingdom: Disclosure information in relation to Article 6 (2) of the European Commission Delegated
Regulation (EU) (2016/958) supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council (including
as that Delegated Regulation is implemented into United Kingdom domestic law and regulation following the United Kingdom’s
departure from the European Union and the European Economic Area) with regard to regulatory technical standards for the
technical arrangements for objective presentation of investment recommendations or other information recommending or
suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest is available
at https://www.gs.com/disclosures/europeanpolicy.html which states the European Policy for Managing Conflicts of Interest in
Connection with Investment Research.

Japan: Goldman Sachs Japan Co., Ltd. is a Financial Instrument Dealer registered with the Kanto Financial Bureau under
registration number Kinsho 69, and a member of Japan Securities Dealers Association, Financial Futures Association of Japan Type
II Financial Instruments Firms Association, The Investment Trusts Association, Japan, and Japan Investment Advisers Association.
Sales and purchase of equities are subject to commission pre-determined with clients plus consumption tax. See company-specific
disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or
the Japanese Securities Finance Company.

Global product; distributing entities

Goldman Sachs Global Investment Research produces and distributes research products for clients of Goldman Sachs on a global
basis. Analysts based in Goldman Sachs offices around the world produce research on industries and companies, and research on
macroeconomics, currencies, commodities and portfolio strategy. This research is disseminated in Australia by Goldman Sachs
Australia Pty Ltd (ABN 21 006 797 897); in Brazil by Goldman Sachs do Brasil Corretora de Títulos e Valores Mobiliários S.A.; Public
Communication Channel Goldman Sachs Brazil: 0800 727 5764 and / or [email protected]. Available Weekdays
(except holidays), from 9am to 6pm. Canal de Comunicação com o Público Goldman Sachs Brasil: 0800 727 5764 e/ou
[email protected]. Horário de funcionamento: segunda-feira à sexta-feira (exceto feriados), das 9h às 18h; in Canada
by Goldman Sachs & Co. LLC; in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by Goldman Sachs (India) Securities Private
Ltd.; in Japan by Goldman Sachs Japan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in New
Zealand by Goldman Sachs New Zealand Limited; in Russia by OOO Goldman Sachs; in Singapore by Goldman Sachs (Singapore)
Pte. (Company Number: 198602165W); and in the United States of America by Goldman Sachs & Co. LLC. Goldman Sachs
International has approved this research in connection with its distribution in the United Kingdom.

Goldman Sachs International (“GSI”), authorised by the Prudential Regulation Authority (“PRA”) and regulated by the Financial
Conduct Authority (“FCA”) and the PRA, has approved this research in connection with its distribution in the United Kingdom.

Goldman Sachs Global Investment Research 29

Top of Mind Issue 136

hEl

European Economic Area: GSI, authorised by the PRA and regulated by the FCA and the PRA, disseminates research in the
following jurisdictions within the European Economic Area: the Grand Duchy of Luxembourg, Italy, the Kingdom of Belgium, the
Kingdom of Denmark, the Kingdom of Norway, the Republic of Finland and the Republic of Ireland; GSI - Succursale de Paris (Paris
branch) which is authorised by the French Autorité de contrôle prudentiel et de resolution (“ACPR”) and regulated by the Autorité
de contrôle prudentiel et de resolution and the Autorité des marches financiers (“AMF”) disseminates research in France; GSI -
Sucursal en España (Madrid branch) authorized in Spain by the Comisión Nacional del Mercado de Valores disseminates research in
the Kingdom of Spain; GSI - Sweden Bankfilial (Stockholm branch) is authorized by the SFSA as a “third country branch” in
accordance with Chapter 4, Section 4 of the Swedish Securities and Market Act (Sw. lag (2007:528) om värdepappersmarknaden)
disseminates research in the Kingdom of Sweden; Goldman Sachs Bank Europe SE (“GSBE”) is a credit institution incorporated in
Germany and, within the Single Supervisory Mechanism, subject to direct prudential supervision by the European Central Bank and
in other respects supervised by German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht,
BaFin) and Deutsche Bundesbank and disseminates research in the Federal Republic of Germany and those jurisdictions within the
European Economic Area where GSI is not authorised to disseminate research and additionally, GSBE, Copenhagen Branch filial af
GSBE, Tyskland, supervised by the Danish Financial Authority disseminates research in the Kingdom of Denmark; GSBE - Sucursal
en España (Madrid branch) subject (to a limited extent) to local supervision by the Bank of Spain disseminates research in the
Kingdom of Spain; GSBE - Succursale Italia (Milan branch) to the relevant applicable extent, subject to local supervision by the Bank
of Italy (Banca d’Italia) and the Italian Companies and Exchange Commission (Commissione Nazionale per le Società e la Borsa
“Consob”) disseminates research in Italy; GSBE - Succursale de Paris (Paris branch), supervised by the AMF and by the ACPR
disseminates research in France; and GSBE - Sweden Bankfilial (Stockholm branch), to a limited extent, subject to local supervision
by the Swedish Financial Supervisory Authority (Finansinpektionen) disseminates research in the Kingdom of Sweden.

General disclosures
This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public
information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such.
The information, opinions, estimates and forecasts contained herein are as of the date hereof and are subject to change without
prior notification. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Other than
certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate
in the analyst's judgment.

Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business.
We have investment banking and other business relationships with a substantial percentage of the companies covered by Global
Investment Research. Goldman Sachs & Co. LLC, the United States broker dealer, is a member of SIPC (https://www.sipc.org).

Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our
clients and principal trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset
management area, principal trading desks and investing businesses may make investment decisions that are inconsistent with the
recommendations or views expressed in this research.

We and our affiliates, officers, directors, and employees will from time to time have long or short positions in, act as principal in,
and buy or sell, the securities or derivatives, if any, referred to in this research, unless otherwise prohibited by regulation or
Goldman Sachs policy.

The views attributed to third party presenters at Goldman Sachs arranged conferences, including individuals from other parts of
Goldman Sachs, do not necessarily reflect those of Global Investment Research and are not an official view of Goldman Sachs.

Any third party referenced herein, including any salespeople, traders and other professionals or members of their household, may
have positions in the products mentioned that are inconsistent with the views expressed by analysts named in this report.

This research is focused on investment themes across markets, industries and sectors. It does not attempt to distinguish between
the prospects or performance of, or provide analysis of, individual companies within any industry or sector we describe.

Any trading recommendation in this research relating to an equity or credit security or securities within an industry or sector is
reflective of the investment theme being discussed and is not a recommendation of any such security in isolation.

This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or
solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment
objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this
research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price
and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to
Goldman Sachs Global Investment Research 30
Top of Mind Issue 136

hEl

future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could
have adverse effects on the value or price of, or income derived from, certain investments.

Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not
suitable for all investors. Investors should review current options and futures disclosure documents which are available from
Goldman Sachs sales representatives or at https://www.theocc.com/about/publications/character-
risks.jsp and https://www.fiadocumentation.org/fia/regulatory-disclosures_1/fia-uniform-futures-and-options-on-futures-risk-
disclosures-booklet-pdf-version-2018. Transaction costs may be significant in option strategies calling for multiple purchase and
sales of options such as spreads. Supporting documentation will be supplied upon request..

Differing Levels of Service provided by Global Investment Research: The level and types of services provided to you by
Goldman Sachs Global Investment Research may vary as compared to that provided to internal and other external clients of GS,
depending on various factors including your individual preferences as to the frequency and manner of receiving communication,
your risk profile and investment focus and perspective (e.g., marketwide, sector specific, long term, short term), the size and scope
of your overall client relationship with GS, and legal and regulatory constraints. As an example, certain clients may request to
receive notifications when research on specific securities is published, and certain clients may request that specific data underlying
analysts’ fundamental analysis available on our internal client websites be delivered to them electronically through data feeds or
otherwise. No change to an analyst’s fundamental research views (e.g., ratings, price targets, or material changes to earnings
estimates for equity securities), will be communicated to any client prior to inclusion of such information in a research report
broadly disseminated through electronic publication to our internal client websites or through other means, as necessary, to all
clients who are entitled to receive such reports.

All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client
websites. Not all research content is redistributed to our clients or available to third-party aggregators, nor is Goldman Sachs
responsible for the redistribution of our research by third party aggregators. For research, models or other data related to one or
more securities, markets or asset classes (including related services) that may be available to you, please contact your GS
representative or go to https://research.gs.com.

Disclosure information is also available at https://www.gs.com/research/hedge.html or from Research Compliance, 200 West
Street, New York, NY 10282.

© 2025 Goldman Sachs.

You are permitted to store, display, analyze, modify, reformat, and print the information made available to you via this service only
for your own use. You may not resell or reverse engineer this information to calculate or develop any index for disclosure and/or
marketing or create any other derivative works or commercial product(s), data or offering(s) without the express written consent of
Goldman Sachs. You are not permitted to publish, transmit, or otherwise reproduce this information, in whole or in part, in any
format to any third party without the express written consent of Goldman Sachs. This foregoing restriction includes, without
limitation, using, extracting, downloading or retrieving this information, in whole or in part, to train or finetune a machine learning or
artificial intelligence system, or to provide or reproduce this information, in whole or in part, as a prompt or input to any such
system.

Goldman Sachs Global Investment Research 31