Trade tracker – Tariff impacts continue to build
US tariff hikes are starting to shift trade patterns, inflation, and market reactions worldwide.
After a flurry of announcements over the past month, we expect the weighted average of announced US tariff rates to rise above 18%. Assuming full compliance, this would be the highest level since the 1930s. Limited retaliation will mitigate the impact on global trade, but we expect world trade to decline for four straight quarters from Q2 by a total of about 3%.
US customs duty payments by importers are running behind the level implied by announced tariff rates, suggesting that the full effect of tariffs on growth and inflation has yet to be seen.
World trade volumes declined in April and May, and survey data is consistent with world trade declining at an annual pace of around 2%, with the International Monetary Fund’s port tracker data showing world export growth dwindling to around zero, broadly in line with our baseline.
Tariff increases haven’t had a large impact on headline US inflation yet, but there is evidence that imported goods prices are rising and retail prices for goods like furniture, toys, and household appliances are increasing at annual rates of several percent. We still expect US headline inflation to rise to around 3.5% by year-end.
Financial markets initially shrugged off the August tariff announcements, but global stocks, US yields, and the dollar have subsequently weakened, partly due to softer US labour market data and political factors. Markets will likely be increasingly sensitive to negative surprises in US growth and inflation data going forward.
Download the report for an in-depth analysis of US tariffs’ impact on global trade and regional economies.
