The effective tariff rate in the United States now stands at 23% following Wednesday’s announcements of new tariffs, with the trade-weighted average mean currently resting at 18%.
At a minimum, the trade shock can be translated into a $410 billion tax on American households and businesses at a cost of $3,585 per household. That minimum tax hit translates into 1.37% of gross domestic product.
The manner in which the 10% minimum trade tax on all goods has been constructed suggests that it will not be negotiated down and that this is the new baseline.
But these costs are just estimates and will change as retaliation by other nations and currency depreciation are factored in. In early trading on Thursday, the U.S. dollar was down against 15 of the 16 major currencies, which would imply greater costs.
Read more of RSM’s insights on the economy and the middle market.
The impact of the tariffs will result in an increase of between 1% to 1.5% on inflation over the next 12 months and create the conditions for a possible economic downturn.
We will revise our formal growth, inflation and employment forecasts after the March U.S. jobs report on Friday. We will update that growth forecast during the week of April 7.
