Goldman Sachs Predicts 20% Tariff Could Cripple S&P 500 Earnings
- Trump's pro-business policies, including potential tax cuts, are expected to drive S&P 500 earnings higher.
- Goldman Sachs predicts negative earnings impact from proposed tariffs on Chinese imports.
- The overall outlook suggests that while tax cuts may boost profits, tariffs could present significant risks.
With Donald Trump poised to return to the White House, expectations are growing around possible tax cuts and deregulation that may boost S&P 500 earnings. Analysts, such as David Kostin from Goldman Sachs, believe that lowering the corporate tax rate from 21% to 15% could increase earnings per share significantly. Veteran investor Ed Yardeni is optimistic, projecting S&P 500 EPS for 2025 and 2026 at $290 and $320, driven by tax cuts and productivity gains. However, the looming risk of increased tariffs on Chinese imports could offset these gains, with Goldman Sachs estimating a potential 20% tariff that could significantly impact corporate profits if enacted. Should these tariffs be implemented, the adverse effects on consumer spending and market stability could lead to a notable decline in earnings that would negate the benefits of the proposed tax reforms.