The tariff rates imposed by the United States on imports have reached their highest levels since the 1930s, even as recent trade agreements with China and the United Kingdom have been finalized. This information comes from a report released by the Yale Budget Lab on Monday.
The overall average effective tariff rate in the U.S. currently stands at 17.8%, the highest figure since 1934. This figure remains elevated despite the recent adjustments in trade policy, according to the report.
This marks an increase of 15.4 percentage points compared to the average effective tariff rate prior to President Trump’s second term, as indicated by the findings.
Furthermore, current tariff policies are projected to impose an additional financial burden on households, with an estimated cost of $2,800 in the “short run,” although the report does not specify an exact timeframe for this projection.
Trade Agreements with China and the U.K.
On Monday, U.S. officials announced a temporary reduction in tariffs on Chinese imports, lowering them from at least 145% to a total of 30% for a 90-day period as they advance in economic and trade negotiations. Concurrently, China has reduced its tariff on U.S. exports from 125% to 10%.
In a separate development, President Trump also revealed a trade agreement with the United Kingdom on Thursday. Although details were scarce, he confirmed the continuation of a 10% tariff on certain goods, indicating that the first 100,000 imported vehicles from the U.K. will face a 10% tariff, rather than the previous rate of 25%.
Additional Insights on Personal Finance:
Key considerations in the Trump tax cut debate
Businesses prepare for declining sales as international tourists avoid the U.S.
Essential information regarding wage garnishment and student loan debt
Impact on Consumer Behavior
Before the agreements with China and the U.K., American consumers were confronted with a daunting average effective tariff rate of 28%, a figure not seen since 1901, according to a prior analysis conducted by the Yale Budget Lab.
The recent decline in average tariff rates is predominantly attributed to lower tariffs on imports from China, as the U.S.-UK trade deal has had minimal impact on the overall tariff rates, the latest report indicates.
Economists predict that both businesses and consumers will likely adjust their purchasing habits in response to the increased costs driven by tariffs, particularly those affecting Chinese products.
Should all substitution effects be taken into account, the adjusted average effective tariff rate would reflect a figure of 16.4%, representing the highest level since 1937, according to estimates from the Yale Budget Lab.
The timing for these shifts in consumer behavior remains uncertain, with some changes expected to occur swiftly within days or weeks, while others may require a longer adjustment period.
