Trump’s new levies could drive US tariff rates to their highest in over a century, economists say
Economists at Goldman Sachs and Yale’s Budget Lab warn that the effective US tariff rate could rise by nearly 20 percentage points.
President Trump’s newly unveiled “reciprocal” tariffs could lift the US tariff rate to levels not seen in more than a century, according to economists. Stock markets sold off around the world, and both the SPDR S&P 500 Trust and tech-heavy Nasdaq 100, tracked by ETFs like the Invesco QQQ Trust, have opened down sharply this morning.
The sweeping new measures target most major US trading partners (excluding Canada and Mexico) with rates ranging from 50% on the tiny French territory of Saint Pierre and Miquelon (population of ~6,000) to 20% on the European Union and 10% baseline on all countries.
Even a few uninhabited islands didn’t escape the import taxes.
In a note published last night, Goldman Sachs analysts, led by the firm’s Chief Economist Jan Hatzius, estimated that this year’s tariff actions could raise the US effective tariff rate by 18.8 percentage points, up from their earlier forecast of 15 percentage points. That would push the rate into the 21% to 22% range — the highest since 1909, according to data from Yale University’s Budget Lab.
While Canada and Mexico received “better treatment” than expected, spared from further hikes and remaining at the 25% level announced earlier this year, Asian exporters took a sharper hit: China now faces a 34% reciprocal tariff, bringing its total tariff burden to 54% when added to the earlier 20%. Vietnam was hit with a 46% rate, while Thailand and Taiwan face 36% and 32%, respectively.
Those numbers could climb even higher. Roughly one-third of imported goods — about $1.1 trillion worth — are excluded from yesterday’s tariffs, including steel, autos, semiconductors, pharmaceuticals, and lumber, which softened the immediate impact. Goldman warns that sectoral tariffs targeting these industries could come later this year with “high probability,” which would push the effective tariff rate up further. And that’s without considering the second-order effects of potential retaliation.
Other analysts have given similar estimates: Bloomberg Economics puts the average effective US tariff rate at 23%, while Yale’s Budget Lab puts it at 22.5%.
With markets falling this morning, Wall Street’s new strategy: hope that these tariffs aren’t real.
