Whatever happened to trade tariffs?
Worries about trade tariffs – a major source of stress at the start of the year – seem to have evaporated, with markets soaring to new highs as the year draws to a close. Overall, the global economy paints a similar picture. The most alarming assumptions have failed to materialise. Inflation has not soared, growth has not suddenly slowed, and global trade has not collapsed. One could almost believe that the hikes in US trade tariffs never happened. However, the Treasury accounts show that there can be no doubt: with over USD 200 billion collected between April and November 2025, compared to around USD 50 billion during the same period a year earlier, revenues from trade tariffs have quadrupled. This is undeniable proof that they are indeed in place. But then why do they seem to be having so little effect on the economy?
Firstly, we should note that the effective rate for trade tariffs currently stands at 11.5%, below the theoretical rate of around 16.5% based on all announcements from the Trump administration. On top of the delays or temporary lifting of some specific tariffs, the explanation for this can be found in the high stock levels built up in many of the goods threatened by high trade tariffs prior to introduction. This has, until now, reduced import requirements, which automatically reduces the rate of trade tariffs overall as the goods subject to the highest tariffs account for a lower proportion of imports. As stocks are gradually utilised, the effective rate is likely to continue to rise. In other words, the maximum impact from the hike in trade tariffs is yet to come.
Furthermore, the impact on the US economy has been limited by the price cuts granted by some exporters. Notably, US import prices for Chinese goods have fallen by 2.5% year-on-year[1], and some Japanese car manufacturers originally reacted by drastically reducing their prices into the US. Several studies also show price cuts in the steel and aluminium sectors which were hit by high trade tariffs. However, it seems as if this initial reaction from exporters to the US, hoping to preserve their market shares, is now reversing. Import price indices for manufactured goods from many countries have begun to rise sharply again over the last few months, and some companies, such as the Japanese car manufacturers Toyota and Subaru, have recently started to pass on some of the cost to US consumers.
As regards the trade tariffs actually collected, a part of these does seem to have been passed on to consumers. This can be seen in the rise in PPI for goods, which had been on a slightly deflationary trend since the peak in mid-2023. The remainder has most likely been absorbed by US companies: on the one hand, in margins, which, with the exception of the technology sector, are trending slightly down; and on the other, in expenses, employment in particular, now being addressed by a hiring freeze and the start of workforce reductions.
Although US trade tariffs have been absorbed by different elements of the global economy and partly delayed, they nonetheless seem likely to impact the US economy a little more in the coming months, as the effective rate rises once stock levels have declined, and import prices rise. Furthermore, whilst the level of US trade tariffs has stabilised, companies – which have been prudent thus far – could be tempted to pass on more of the price hikes to consumers. Although investors no longer seem worried by trade tariffs, it is worth keeping an eye on this topic. This is especially the case should the Supreme Court – contrary to all expectations – decide in favour of the White House on the issue of the legality of “reciprocal” trade tariffs.
Final version of 12 December 2025 | Enguerrand Artaz, Strategist, La Financière de l’Échiquier (LFDE)
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[1] US Bureau of Labor Statistics