The White House Is Sticking to a 10% Baseline Tariff

The headlines of trade deals and negotiations are spurring optimism in markets. The White House’s underlying trade strategy, however, remains the same.

President Donald Trump’s administration over the past week has negotiated a deal with the U.K. that gives it a break on sector tariffs and temporarily lowered 30% import taxes on Chinese goods. A 10% baseline tariff, however, remained in place in both cases, and White House officials say that will be the new normal for U.S. trade.

“We will not go below 10%,” Commerce Secretary Howard Lutnick told CNN in a Sunday interview, saying the baseline will be in place for all upcoming trade negotiations. “That is just not a place we’re going to go.”

Why a 10% Tariff Baseline Matters

A 10% tariff on most imported goods would be a step back from Trump’s most extreme trade proposals, but it’s higher than before he took office. At that time, the average tariff rate was around 3%.

Economists have broadly said that raising the average tariff rate will adversely affect the economy and increase consumer prices. After the agreement with China was reached over the weekend, many economists said a recession was less likely, but inflation was still expected to rise.

The White House disagrees. Lutnick rejected the notion that consumer prices will increase because of tariffs.

“The businesses and the countries primarily eat the tariffs,” Lutnick said.

The business importing the goods is legally required to pay tariffs to the federal government. The importer is usually a domestic retailer of finished products or a company that uses the imported goods in production.

Those tariffs are often at least partially passed on to consumers as companies try to maintain profit margins. Some U.S. businesses have said they will have to increase prices if Trump’s tariffs persist.

Lutnick said consumers did not see price increases from the far more minor and targeted tariffs from Trump’s first term. However, researchers have found that consumers paid higher prices stemming from those policies.