On April 2, 2025, President Donald Trump unveiled a tariff strategy that could elevate U.S. import duties to their highest levels in over a century. The newly implemented tariffs feature a base rate of 10% on imports, coupled with significantly higher rates directed at specific countries, notably including China. This differentiated approach appears closely linked to the trade deficits the U.S. incurs with its various trading partners.
According to Sarah Bianchi, the chief strategist for international political affairs and public policy at Evercore ISI, the effective tariff rate may surpass the 20% threshold established by the Smoot-Hawley Tariff Act of the 1930s. Economists frequently cite this act as a factor contributing to the onset of the Great Depression. In her client note, Bianchi characterized the announcement as “very tough and bearish,” estimating that the overall U.S. weighted average tariff rate could reach as high as 24%—a level not seen in over a hundred years. She noted that it could increase to approximately 27%, especially with the potential introduction of more sector-specific tariffs known as “232s.”
JPMorgan’s chief U.S. economist, Michael Feroli, provided similar insights after reviewing the new tariff framework. He indicated that the average effective tariff rate would generally rise from about 10% to over 23%. Feroli mentioned that ongoing developments related to other sector-targeted tariffs, such as those applicable to technology, pharmaceuticals, and vital minerals, might push the effective rate even higher. He also pointed out concerns regarding retaliatory actions by U.S. trading partners that could lead to further increases in U.S. tariffs.
Fitch Ratings echoed these findings, estimating that the new tariff levels would mark the highest since 1909. In his remarks delivered in the Rose Garden, Trump made a reference to the Smoot-Hawley Act. He contended that the historical issue did not stem from the tariffs imposed in 1930, but rather from the earlier decision to reduce the higher tariffs previously in place throughout the early 20th century. Trump proclaimed that if the historical tariff policy had been maintained, the economic landscape would have been significantly different.
The broader economic implications of these new tariffs will depend on their duration and whether other nations choose to enact retaliatory measures. Both Trump and Treasury Secretary Scott Bessent hinted that these country-specific tariffs could be reduced if trading partners adjusted their own trade policies.
Concerns about the potential impact of these tariffs extend to their capability of pushing both the U.S. and the global economy into recession if they remain in effect for an extended period. Nora Szentivanyi, a global economist at JPMorgan, warned that the continuation of such tariffs could result in economic downturns both domestically and worldwide.
In summary, the tariffs proposed by the Trump administration signal a significant shift in U.S. trade policy, with the potential to create both immediate and long-lasting effects. The increases in tariff rates, reinforced by the administration’s trade strategies, could reshape relationships with various nations while altering the economic landscape in the U.S. and beyond. Understanding how these policies will evolve and their consequences will be crucial for businesses, policymakers, and economists as they navigate the complexities of international trade.
