Goldman Sachs warns that rising tariffs could significantly impact the earnings forecast for S&P 500 companies in 2025. Following a strong Q4 2024, the investment bank remains cautious about the outlook for the coming year.

How Tariffs Might Affect S&P 500 Earnings

Projected Tariff Increases:

• 10 percentage point hike on Chinese imports.
• 10 percentage point hike on critical global imports like semiconductors.
• 25 percentage point increase on EU auto imports.

These measures could raise the effective tariff rate, negatively impacting earnings per share (EPS) for S&P 500 companies.

Market Impact and Policy Uncertainty

• If companies choose to absorb higher costs, they could see profit margins decline.
• Passing costs on to consumers may result in lower demand due to inflation worries.
• The tariff landscape could complicate investors’ risk assessments regarding equity valuations.

Goldman Sachs’ S&P 500 Outlook for 2025

While acknowledging these risks, Goldman Sachs maintains a long-term bullish outlook, forecasting a year-end 2025 price target of 6,500, about a 7% increase from current levels, driven by resilient earnings and potential Fed policy adjustments.

It’s essential to stay attuned to trends within tariff-sensitive sectors and continuously evaluate earnings projections.