One argument against the idea that Donald Trump’s tariffs will manifest in higher consumer prices for a lot of the good(ie)s lazy, spoiled Americans are accustomed to buying on the cheap says corporates have enough spare margin to absorb the cost of the levies.

On the face of it, that’s not so much an “argument” as it is a statement of fact. As I never tire of reminding readers, a measure of margins derived from BEA data shows corporates are doing better than ever.

In fact, that metric suggests corporates could lose ~200bps of margin and still be more profitable than they were at any other point looking back half a century.

There’s the chart again. I realize I use it a lot. That’s because it’s important.

The problem with arguing that the C-suite will be willing to essentially relinquish profitability gains had during the “greedflation” years is that… well, corporates are greedy. And they believe they exist to serve shareholders first and foremost. So no, their first instinct in the face of higher input costs tied to tariffs won’t be to simply eat those costs unless there’s a very (very) good reason to believe consumers will balk at price hikes.

But Trump’s not just any US president. Rather, he’s the type of guy who’ll bring the power of the presidency to bear upon anyone seen as inimical to his agenda. Raise prices if you want, but you better hope he doesn’t find out about it. Because if he does, you’ll be on the wrong end of an irritable TruthSocial screed, and if you don’t rectify the situation posthaste, you may face additional consequences, where that could be everything from a concerted smear campaign that ropes in JD Vance and the whole bunch to retaliatory measures against your business.

Given that, it’s perhaps not surprising that corporates have so far passed through less than half the cost of tariffs to customers, according to Goldman’s economics team. That’s much, much lower than their baseline assumption of 70% pass-through.

The figures above give you some context, both for analysts’ margin expectations (on the left) and for the distribution of the tariff cost burden (on the right).

Goldman expects that by the time it’s all said and done (if it’s ever done), corporates and foreign exporters will absorb just 30% of the costs between them, leaving the rest for US consumers to pay.

But what if that’s not how it turns out? “Consensus margin estimates show a contraction in S&P 500 net profit margins in Q2 but a sharp rebound in Q3 and Q4,” Goldman’s David Kostin remarked, editorializing around the chart on the left before reiterating that the bank expects to see more pass-through going forward.

If that doesn’t pan out — i.e., if the pass-through rate stays where it is currently — margins could disappoint. “If firms are forced to swallow a large share of tariff costs, investors will need to lower their expectations for profit margins and earnings,” Kostin went on, calling that — not valuations — the “main source of uncertainty” around the bank’s constructive call on the S&P.