US Tariff Monitor – China deal slightly lowers effective rate

A recent agreement to lower tariffs on Chinese imports by 10 percentage points has nudged the US effective tariff rate down to 13.4% from 14.6%. This supports our view that the tariff-related drag on US activity and inflation is nearing its peak for the year. While a possible Supreme Court ruling could reduce tariffs further, the likelihood of sustained relief remains limited given alternative legal avenues available to reimpose tariffs.

• The China deal lowered the effective tariff rate on Chinese imports to 29.3% from 37.1%, cutting the overall US tariff rate to 13.4%.
• A potential Supreme Court decision against President Trump’s use of the IEEPA could reduce the effective tariff rate to 7.8%, offering a short-term boost to 2026 GDP growth.
• Despite these developments, the long-term outlook for tariff policy remains uncertain as the administration retains multiple tools to raise rates again.