As of July 30, the effective U.S. tariff rate was estimated at 18.4%, which — if fully implemented — would be the highest since 1933. Estimates of the effective rate have been fluid in recent months, ranging from a high of 28% in April to 15.8% in mid-June. The recent uptick from the mid-June low follows a wave of new trade measures announced in July, including a 25% tariff on Indian imports and expanded levies on Chinese goods.
For context, the effective tariff rate averaged just 2.5% in 2024, underscoring the magnitude of change to trade policy this year. Some domestic industries may benefit from increased protection, but the broader impact is mixed. If current policy holds, Yale Budget Lab projections suggest a 0.4% drag on GDP and potential job losses approaching 500,000 by year-end. Still, with negotiations with many trade partners ongoing, the range of potential outcomes remains wide.
For investors, the effective tariff rate represents more than just a shift in trade policy. Companies will have to adapt as they consider how to best position themselves to manage costs, retain market share, and optimize profitability. For some, the absorption of at least a portion of the additional cost associated with import levies will weigh on earnings. Consumer spending is also expected to be influenced in the near term as higher prices chew into household discretionary spending.
The combined effect will alter the outlook for growth and inflation. To what degree? That remains an open question.
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