US Tariff Monitor: Metals and pharma tariffs won’t sting as much as feared

Our estimate of the US effective tariff rate fell to 9.2% in our April baseline forecast, down from 10.3%. This incorporates recent updates to metal and pharmaceutical tariffs. Most importantly, the April baseline removes our earlier assumption that the administration would eventually raise the global duty rate under Section 122 to 15% from 10%.

• The revised metal tariffs close a loophole, rather than raise tariff rates. Raw steel, aluminum, and copper will remain tariffed at 50%, while derivative products will now be tariffed at a lower 25% rate.
• Steel, aluminum, and copper tariffs protect domestic metal production, but hurt downstream industries that rely on those metals as inputs to their production.
• The 100% pharmaceutical tariffs are very porous and only apply to patented drugs. Most key trading partners receive a lower preferential rate. Most large pharmaceutical firms have signed deals, which will exempt them from tariffs. Affected pharmaceutical imports will likely see a wave of order frontloading before the tariffs are implemented on July 31.
• Importers will soon begin to receive refunds for tariff revenue collected by the federal government under the International Emergency Economic Powers Act, which the Supreme Court ruled as unlawful.

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