What Will the Average Tariff Be Under Trump’s New Policies?

President Donald Trump’s wide-ranging tariff policies will drastically ratchet up the effective tax rate it places on imports.

On Wednesday, Trump unveiled a policy that would charge a base tariff of 10% on all imports and additional import taxes on a country-by-country basis. This new broad-based tariff, plus his previously enacted policies, is expected to send the average effective tariff rate soaring.

The average effective tariff rate is a measure of the total tax rate on imports that includes all tariff policies that the country has in place. That rate was just 2.4% when Trump took office for the second time, a bit higher than earlier in the 2000s due to tariffs enacted in Trump’s first term that Biden didn’t abandon.

But now it could jump to as much as 27%, more than 10 times higher and around levels not seen since the early 1900s, according to Ryan Sweet, chief U.S. economist at Oxford Economics. That could make the country “dangerously vulnerable” to a recession, he wrote, with consumers’ wallets being hit and trade uncertainty “suffocating” businesses.

Trump says higher tariffs will incentivize companies to boost production in the United States and raise revenue for the government.

“These tariffs seek to address the injustices of global trade, re-shore manufacturing, and drive economic growth for the American people,” the White House said in a fact sheet on Wednesday.

Some tariffs may not ultimately stay in place, and Canada and Mexico were omitted from Wednesday’s actions as negotiations for a new North American trade deal continue. But U.S. tariffs may still go higher, particularly if other countries retaliate against Trump and spark a tit-for-tat tariff war.

Regardless of where the number ends up, the new effective tariff rates in the U.S. are higher than what markets had been expecting, ING economist James Knightley wrote in a note to clients. 

“In the long run, it may deliver positives for the U.S. economy, but the measures taken mean a painful transition period ahead,” Knightley wrote.