The news: President Donald Trump said the US will set a global “baseline” tariff in the 15%–20% range, up from the 10% rate he outlined in April.
- The comments come a day after Trump announced the outlines of a trade deal with the EU that set a 15% tariff on most European goods to the US, including cars, and no tariff on most US-produced goods to the EU.
Why it matters: Steep tariffs are no longer a negotiating tactic; they’re the new normal. This marks a dramatic break from the post-World War II consensus that trade should foster economic cooperation among global powers.
- That significant upending of decades-long norms will have a substantial impact on the global economy, with many countries shifting trade away from the US amid diversification efforts. That carries major consequences: Global exports to the US are projected to fall more than 46% by 2027—equivalent to $2.68 trillion—compared with the average of the past three years, per the Observatory of Economic Complexity’s Tariff Simulator.
- Higher import taxes will push prices up, discourage shipments, and result in fewer goods on shelves—especially in import-reliant sectors like furniture, electronics, and apparel.
Our take: Tariffs are a hidden tax on consumers.
- The average effective tariff rate stands at 18.2%—or 17.3% after adjusting for changes in spending patterns—marking the highest level since the 1930s, per the Yale Budget Lab.
- Retailers are still absorbing much of the impact, squeezing already-thin margins. That pressure is visible in the producer price index, which shows margin growth slowing sharply for wholesalers and retailers.
- But the burden is beginning to trickle down. Yale estimates that tariffs will drive prices up by 1.8% in the near term, costing the average US household roughly $2,400.
As shoppers are forced to spend more on essentials, they have less room for discretionary purchases—cooling demand in categories ranging from restaurants to airlines. For brands and retailers, that means heightened volatility and a tougher battle for share of wallet.