Goldman Sachs’ Chief US Equity Strategist David J. Kostin warns that rising tariffs could weigh on 2025 earnings forecasts for S&P 500 companies. While Q4 2024 aggregate EPS grew by 12% YoY, surpassing expectations of 8% growth, the outlook for next year is clouded by potential tariff hikes and financial tightening.
How Will Tariffs Impact S&P 500 Earnings?
\ud83d\udd34 Projected Tariff Increases
- 10 percentage point (pp) hike on Chinese imports (on top of a prior 10 pp increase).
- 10 pp increase on global critical imports such as semiconductors and EV batteries.
- 25 pp rise on EU auto imports.
\ud83d\udd34 Estimated Market Impact
- These tariffs would raise the effective tariff rate by 4.7 pp.
- Every 5 pp increase in tariffs could cut S&P 500 EPS by 1-2%.
- Industries with global supply chains—Tech, Autos, and Retail—are at highest risk.
\ud83d\udd34 Policy Uncertainty & Consumer Response
- If companies absorb higher costs, profit margins could take a hit.
- If firms pass costs to consumers, demand may slow, especially with inflation already a concern.
- A higher equity risk premium (ERP) due to policy uncertainty could lower fair value estimates.
Goldman Sachs’ S&P 500 Outlook for 2025
\u2705 Despite tariff risks, GS maintains a bullish long-term stance.
\u2705 Year-end 2025 price target: 6,500 (+7% from current levels).
\u2705 Market to benefit from earnings resilience and potential Fed easing.
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