Tariff Monitor – The US economy has no more wiggle room

Based on the latest tariff announcements, we calculate that placing an additional 125% tariff on US imports from China, along with 10% tariffs on the rest of the world, has pushed the US’ average effective tariff rate up to 30% on a static basis.

We simulated the impact of the higher tariffs via the Oxford Economics Global Economic Model (GEM), incorporating the 145% tariff placed by the US on its imports from China, and 10% tariff on its imports from the rest of the world.

What you will learn:

• Our modeling suggests this will slow US GDP growth to 0.5% on a Q4/Q4 basis in 2025, less than the 1.7% growth rate in our March baseline and 2.5% in 2024. Inflation will rise to as much as 4.5% this year.
• However, our forecasts are crucially based on the assumption that the pause on most of the April 2 tariffs will be permanent. If the full April 2 tariffs are implemented alongside the additional 125% China tariff, this would push the US into a recession.
• To complement our top-down modeling, we also ran the tariff rates through our bottom-up framework to map where we are likely to see the biggest impacts. Based on current tariff levels, we calculate consumer prices will increase by around 1.5%, and the prices of some goods will rise by much more. We estimate the price of household appliances could jump by 12%.