The US effective tariff rate is expected to reach “nearly 15%” by the middle of next year, potentially boosting inflation and slowing growth in the world’s largest economy, analysts at UBS said.
In a note, the bank said Washington has “built a tariff wall” around the US through various bilateral agreements and sector-specific tariffs, although there is still “a lot of wiggle room” due to exemptions and implementation delays. They estimated the current US effective tariff rate to be “only around 9%.”
“It takes weeks for goods shipped to the US to arrive at ports and be subject to higher tariffs, which for some goods only recently took effect,” the analysts said.
President Donald Trump’s aggressive trade approach, most recently involving the imposition of higher “reciprocal” duties on various countries, has been a hallmark of the early months of his second term in the White House. Trump has also signaled that more tariffs may be on the cards in certain sectors such as pharmaceuticals and semiconductors.
Economists have long warned that Trump’s tariffs could hurt the broader U.S. economy. While activity rebounded in the second quarter from a first-quarter contraction, much of the recovery has been driven by a decline in imports after a big surge in the first three months of 2025. That’s because many businesses and consumers rushed to book ahead of Trump’s announcement of sweeping tariffs in early April.
Meanwhile, overall inflation has remained subdued, although experts are starting to warn of signs of rising prices for goods exposed to the tariffs.
In the meantime, the Federal Reserve has taken a cautious approach to its interest rate decision, waiting to see whether the tariffs will have a wider impact on the economy. However, support for this stance may be waning as signs of a labor market slowdown emerge, a development that comes as Trump has repeatedly urged the Fed to cut interest rates quickly to stimulate the economy.
UBS analysts predict that Trump’s tariffs will ultimately reduce U.S. real gross domestic product (GDP) growth by about 1 percentage point and increase the Consumer Price Index by about the same amount over the next twelve months.
Overall, UBS expects the US economy to slow and the Fed to cut interest rates by 100 basis points by mid-2026, UBS analysts said.
