UBS expects U.S. tariff rate to settle near 15% by year-end

Published 14-05-2025, 05:14 pm
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Investing.com -- UBS expects the effective U.S. tariff rate to stabilize at approximately 15% by the end of 2025, down from a peak of 25% in April, as trade tensions ease but selective product tariffs remain.

In a research note on Wednesday, UBS said the recent de-escalation in the U.S.-China trade standoff has led to a “sharp de-escalation,” with reciprocal tariffs largely paused. 

However, the 10% baseline tariff remains in place and “is unlikely to be negotiated lower.”

UBS believes the current tariff rate “is more conducive to generating tariff revenue than the previous higher rate that would have impaired more imports and economic activity.” 

“We retain our base case view that the effective US tariff rate settles around 15% by year-end, with a higher 30-40% tariff on China and a 10-15% tariff on the rest of the world,” wrote the bank.

While domestic political and business pressures could encourage exemptions or rollbacks, UBS noted that “strategic product tariffs will likely bias tariffs higher.” 

Upcoming product-specific tariffs on sectors like pharmaceuticals, semiconductors, and copper could push the effective rate modestly higher, according to the bank.

Court challenges to President Trump’s use of emergency powers to levy tariffs are said to represent a significant source of uncertainty. 

UBS said the legal disputes “could potentially move them sharply lower” if courts issue injunctions or declare the use of the International Emergency Economic Powers Act (IEEPA) illegal.

At the same time, political realities may limit further escalation. UBS noted that Republicans need tariff revenue to help fund tax cut extensions and that rising tariffs have been a drag on the president’s job approval and the broader economy.

Still, UBS warned that risks remain. “In a downside scenario, the ‘pause’ in tariffs ultimately does not hold and tit-for-tat retaliation resumes,” the firm said, which could trigger a U.S. recession and send equity markets sharply lower.

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