Less than a month from now, it is likely that the United States will set what could be the final so-called reciprocal tariff rates on its major trading partners.
But a look at a schedule of tariff rates that have been either implemented or challenged suggests more uncertainty, not less, as the end of the 90-day pause in the tariffs approaches on July 9.
It’s all having an effect on consumer and business behavior, and, consequently, on the economy.
The tariffs imposed so far amount to an average rate of 16.8%. That would decrease the level of gross domestic product by 2.4% while increasing inflation, as measured by the core personal consumption expenditures index, by 1.4 percentage points over two to three years, according to calculations by Bloomberg.
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But just as damaging to growth is the pervasive uncertainty over trade policy that businesses and consumers are grappling with. Public and private sentiment surveys have soured, and the evidence of the tariffs’ impact is starting to show up in the hard economic data.
The result is a roadblock toward investment, hiring and overall economic activity.
The tariffs can be viewed in roughly four groups: Those implemented, those being investigated, those paused and, in a few cases, those suspended. The sheer number of tariffs is a reflection of the capricious nature of the decision-making that leaves businesses, and consumers, with little choice but to wait until they have further clarity.
The majority of the tariffs face court challenges…
Some tariffs have been implemented and are being enforced, while still more have been challenged in court, leaving the affected parties in limbo.
… while some are under investigation …
In these categories, like pharmaceutical products, timber and minerals, the administration has launched inquiries, known as Section 232 investigations, into the effects of these imports on national security.
… some have been paused…
After an initial announcement, these tariffs have been put on hold.
…while still others have been suspended outright.
Finally, some of the more extreme tariffs, like the added 125% levies on imported goods from China, have been suspended.
The takeaway
As the labor market begins to slow and businesses pull back on capital expenditures, the tariffs are starting to take their toll. But their impact won’t show up in full until this summer, when the hard economic data begins to catch up with declining sentiment. In the meantime, businesses are caught in a waiting game until a modicum of clarity on trade policy emerges.
