Core Viewpoint - The burden of tariffs will directly determine the pressure on the U.S. economy, with the average profit margin of sampled companies being dragged down by 1.2% due to tariff costs, placing greater pressure on producers [1][18]. Tariff Impact on Inflation - The actual effective tariff rate in the U.S. has risen to 10.6%, with theoretical effective rates potentially reaching 16-17% [2][6]. - Concerns about inflation due to increasing tariffs have not materialized as expected, with the Consumer Price Index (CPI) remaining below investor expectations for the past four months [4][6]. Corporate Responses to Tariff Pressures - Companies are adopting two main strategies to mitigate tariff pressures: price adjustments on products and supply chain negotiations [11][12]. - Price increases are more common for optional and high-end products, while essential goods see more cautious price adjustments due to lower price elasticity [13][14]. Supply Chain Adjustments - Companies are negotiating with suppliers and adjusting supply chains to reduce reliance on imports from China, with many shifting production to other countries [15][16]. - The import share from China has significantly decreased, from 13.4% in 2024 to 7.1% by June 2025, while imports from Taiwan and Vietnam have increased [17]. Sector-Specific Insights - In the automotive sector, manufacturers like General Motors and Tesla are absorbing significant tariff costs, with GM's tariff cost as a percentage of revenue reaching 2.3% [19]. - Retailers, particularly those focused on essential goods, are more cautious in passing on tariff costs due to their already low profit margins [20]. Demand Trends - There is a noted downward pressure on demand, particularly for durable goods, with some consumers making preemptive purchases to avoid future price increases due to tariffs [21].

Group 1 - Goldman Sachs analysis indicates that as of June, 64% of tariff costs are absorbed by U.S. companies, 22% by U.S. consumers, and 14% by foreign exporters [1] - Tariffs have caused the core Personal Consumption Expenditures (PCE) price index to rise by 0.2 percentage points as of June, with an expected additional increase of 0.66 percentage points for the remainder of the year [1] - The core PCE inflation rate is projected to reach 3.2% year-on-year, but would moderate to 2.4% when excluding tariff impacts [1] Group 2 - Early earnings reports convey mixed signals regarding profit margin outlook, with companies announcing only slight price increases so far [2] - Companies facing significant tariff impacts are raising prices more substantially, while those unable to pass on costs may experience pressure on profit margins [2] - Some companies are leveraging accumulated inventory to mitigate the impact of tariffs on their profit margins, with the inventory-to-sales ratio for S&P 500 constituents remaining stable [2]