U.S. Import Taxes Reach Over 20%, Approaching 1910s Peaks as Perceived by WTO and IMF
The United States has seen a significant increase in tariff rates, with the average rate now standing at 20.1%, the highest since the early 1910s, according to the World Trade Organization (WTO) and International Monetary Fund (IMF). This rise has had far-reaching effects on the US economy and its trading partners.
The tariffs, imposed on various countries including Brazil, Canada, and imports of semi-finished copper, have disrupted economic output and raised consumer prices. In the short run, consumer prices have risen by approximately 1.8%, translating to an average household income loss of around $2,400 annually. Prices for clothing and textiles, such as shoes and apparel, have seen significant increases, with shoe prices temporarily rising by 39% and apparel by 37%, before settling to long-run increases of about 18-19%.
The tariffs have also had a profound impact on the US economy. The U.S. economy faces a long-run contraction of about 0.5% in GDP due to these tariffs, with manufacturing sectors reallocating output. Non-advanced manufacturing expands while advanced manufacturing declines.
Internationally, Canada's economy is most negatively impacted, shrinking by about 2% due to tariffs and retaliation, followed by China with a 0.2% contraction. In contrast, the EU and UK experience slight growth, partly thanks to trade deals with the U.S.
The US administration has also imposed reciprocal tariffs averaging 15-20% on various countries, including a 20% tariff on most Taiwanese imports (with key exemptions), creating competitive disadvantages for Taiwan in comparison to regional neighbors such as Japan and South Korea. These tariff policies have triggered retaliatory measures by affected countries, contributing further to trade tensions and economic adjustments worldwide.
The tariffs are expected to generate significant federal revenue, estimated at $3 trillion over the coming decade. However, dynamic economic losses reduce expected net gains to around $2.5 trillion after accounting for output contraction and reduced tax bases.
It's important to note that the tariffs applied to Brazil, Canada, and semi-finished copper imports are part of the calculated average US tariff rate, but they are not part of the tariffs that briefly drove the average rate to 24.8% in May. This record high was due to Trump's tariff announcements on various goods, including those from China.
The trade truce between Washington and Beijing, which temporarily reduced the record tariff levels, is set to expire next week, potentially leading to increased tariff levels. The US has recently implemented trade agreements with the European Union, Japan, South Korea, and other nations, but these agreements have not been specified as to their exact impact on the average US tariff rate.
In summary, the current highest tariff rates since the 1910s have raised U.S. consumer prices, disrupted sectoral economic output, shrunk key trading partner economies (notably Canada and China), and intensified global trade frictions through reciprocal tariffs and retaliation measures, with complex fiscal and economic trade-offs for the U.S.
- The rise in US tariffs has disrupted industries relying on imported goods, such as clothing and textiles, with prices for shoes and apparel increasing by 39% and 37% respectively, before settling to long-run increases of about 18-19%.
- Financial repercussions of the tariffs extend beyond the United States, impacting trading partners like Canada, which faces an economic contraction of about 2% due to the imposed tariffs and retaliation.
- The US administration's tariff policies have contributed to political tensions and economic adjustments on a global scale, triggering retaliatory measures by affected countries and potentially leading to increased tariff levels when the trade truce between Washington and Beijing expires.
