On August 7, sweeping new U.S. tariffs on imports from more than 90 countries came into effect, with rates ranging from 10% on the United Kingdom to 50% on India. These changes have raised America’s average effective tariff rate to its highest level in nearly a century.

Certain commodities, including automobiles and steel, have been specifically targeted. Tariffs are paid by U.S. companies that import goods, and their economic effects are being felt both domestically and internationally.

Increase in Tariff Revenue
Data from the Budget Lab at Yale University shows the average effective U.S. tariff rate reached 18.6% in August 2025, up from 2.4% in 2024. U.S. government tariff revenues in June 2025 totaled $28 billion, triple the monthly average from last year.

The Congressional Budget Office (CBO) estimates that tariff revenues from January to May 2025 could reduce cumulative federal borrowing by $2.5 trillion over the next decade. However, it also projects that tariffs could slow overall economic growth. Additionally, revenue gains are expected to be outweighed by reduced income from tax cuts.

Trade Deficit Trends
While tariffs are partly aimed at reducing the U.S. trade deficit, goods imports have increased in the short term due to stockpiling by companies ahead of tariff implementation. Exports have seen only modest growth, leading to a widened goods trade deficit that reached $162 billion in March before narrowing to $86 billion in June. Economists suggest structural factors in the U.S. economy, such as higher national spending than production, remain key drivers of the deficit.

Changes in Trade Flows
Chinese exports to the U.S. in the first half of 2025 fell 11% compared with the same period in 2024. At the same time, China increased exports to other partners, including India (+14%), the European Union (+7%), the United Kingdom (+8%), and ASEAN nations (+13%). Analysts note that some manufacturing shifts to Southeast Asia may be aimed at mitigating tariff impacts.

New Trade Agreements
Some nations are responding by pursuing alternative trade agreements. The United Kingdom and India have finalized a long-discussed trade deal. The European Free Trade Association (Norway, Iceland, Switzerland, and Liechtenstein) has concluded an agreement with Mercosur countries. The European Union is moving forward with a deal with Indonesia, while Canada is exploring a free trade pact with ASEAN.

Impact on Consumer Prices
Economists caution that tariffs can lead to higher consumer prices. The U.S. inflation rate rose slightly from 2.4% in May to 2.7% in June. While earlier stockpiling delayed the impact, certain imported goods—such as major appliances, computers, sports equipment, books, and toys—saw price increases in June. Research from Harvard University’s Pricing Lab indicates that both imported goods and domestic products affected by tariffs are rising in price more quickly than unaffected domestic goods.

#SupplyChainNews #TradeUpdate #TariffsAndDuties #GlobalTrade #EconomicImpact