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President Trump’s ongoing revisions to U.S. tariff policies are causing confusion among investors and economists who are trying to ascertain the long-term effects of these changes on trade dynamics. While the specifics of the president’s proposals continue to evolve, one clear reality looms: a significant regression to earlier tariff levels seems imminent.
Currently, estimates suggest that the effective tariff rate for all imports into the United States ranges between 22% and 27%. If tariffs reach the upper limit, this would mark levels not seen since 1903. Even the lower estimate indicates the highest tariffs since 1910.
Read more: The latest news and updates on Trump’s tariffs
Recent developments included an announcement over the weekend regarding a temporary exemption for certain electronic products imported from China, a move that aligns with a broader trend of selective pauses or exceptions since Trump introduced comprehensive reciprocal tariffs on April 2.
Following this, Trump announced a halt on additional tariffs for nonretaliatory nations while intensifying the ongoing trade conflict with China. The tariff on imports from China has surged to 145%, resulting in an overall effective tariff rate of 27%, which represents the highest figure recorded since 1903, according to assessments from Yale’s Budget Lab.
However, just days later, exclusions were granted for various electronics, including smartphones and computers, which many economists interpreted as a sign of easing tensions between the U.S. and China.
Read more: What Trump’s tariffs mean for the economy and your wallet
Paul Ashworth, chief North America economist at Capital Economics, noted in a commentary that while the effective tariff rate on imports now stands at 22%, a stark increase from last year’s rate of 2.3%, it has declined from the maximum of 27% recorded recently. The specific rate on China remains at 145%, but once exemptions are considered, the effective increase is around 106%.
Yale’s Budget Lab has so far not adjusted its estimate of 27%. Meanwhile, the economic analysis team at Goldman Sachs, led by Jan Hatzius, maintained their outlook despite the latest changes, indicating that the effective U.S. tariff rate is projected to increase by 15 percentage points as part of Trump’s strategy to promote domestic manufacturing.
Wall Street estimates the current tariff rate remains within a range of 2% to 3%.
The mixed signals from the White House continue to add to the uncertainty surrounding U.S. trade policy. On Sunday, Trump claimed in a post that “there was no Tariff ‘exception’ announced on Friday,” contradicting official communications from his administration, which labeled the electronic exemptions as a “Clarification of Exceptions.” US Customs and Border Protection defined the announcement as a “Reciprocal Tariff Exclusion for Specified Products.”
On Monday, Trump described himself as “a very flexible person,” hinting at the possibility of further changes or discussions, mentioning his ongoing conversations with tech leaders like Tim Cook of Apple.
The volatility in trade policies has led to fluctuation in the markets. Though the delay in implementing certain tariffs represents a favorable development, it remains a cautious approach. Citi analyst Stuart Kaiser remarked that while the exclusion of specific electronics can be seen as a tentative advancement, substantial optimism hinges on achieving solid agreements with key partners. As it stands, “this is a case of tail risk reduced or delayed rather than eliminated.”
Kaiser further elaborated that positive news is a potential near-term risk, while the possibility of negative developments may build in the medium term.
Source
finance.yahoo.com