“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
“Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
AI Summary.The U.S.-bound shipping network once turned about 89% of potential fleet capacity into effective service, but utilization fell below 70% as ships waited at anchor, slowed steaming, or sailed around maritime bottlenecks, and has not recovered. Diverting vessels around the Cape of Good Hope drives much of the loss.
Xiwen Bai, Jesús Fernández-Villaverde, Yiliang Li, Ricardo Marto and Francesco ZanettiNational Bureau Of Economic Research
Date Posted:
US-bound shipping can fall far short of potential after disruptions. Pandemic queuing and slow steaming drove effective capacity from ~89% of potential to <70%. Later, Houthi attacks left it near 79% as ships rerouted around the Cape of Good Hope.
Why has shipping capacity to America not regained its prior utilization?
Core argument: The U.S.-bound shipping network converted about 89% of potential fleet capacity into effective service in 2016–2019, but aggregate utilization fell below 70% in 2021–2022 as ships waited at anchor, steamed slowly, or sailed around maritime bottlenecks.
In 2016–2019, the U.S.-bound shipping network turned about 89% of the fleet’s potential capacity into effective service [Figure 3.5]. During 2021–2022, effective capacity declined despite potential capacity reaching record highs. Pandemic-era port congestion and slower steaming pushed aggregate utilization below 70%. On the Asia-Pacific–U.S. West Coast route, utilization fell from about 92% before 2020 to 53% by late 2021. The route has since recovered but remains below its old peak. The network as a whole has not regained its pre-pandemic utilization. More recently, rerouting after the 2023–2024 Houthi attacks in the Red Sea held aggregate utilization near 79%. Utilization on the Middle East and Asia-Pacific routes to the U.S. East Coast via Suez fell to 48% and 61%, respectively, largely because diversion around the Cape of Good Hope lengthened voyages without increasing cargo delivered.
Takeaways by Macro Roundup® AI
The U.S.-bound shipping network converted about 89% of potential fleet capacity into effective service in 2016–2019, but aggregate utilization fell below 70% in 2021–2022 as ships waited at anchor, steamed slowly, or sailed around maritime bottlenecks.
Utilization on the Asia-Pacific–U.S. West Coast route dropped from 92% before 2020 to 53% by late 2021 amid port congestion and slower steaming, recovering since but remaining well below its old peak.
Since late 2023, utilization on the Middle East and Asia-Pacific routes to the U.S. East Coast via the Suez Canal has fallen to 48% and 61%, with diversions around the Cape of Good Hope driving much of the loss as ships travel longer distances without delivering additional cargo.
Related Articles:
How to Fight an Economic War— China earned about $3.4bn from exporting rare-earth elements and magnets in a year, while the U.S. Geological Survey estimates a 30% disruption to U.S. supply of the rare-earth element neodymium alone would cut U.S. GDP by 2.2%, over $600bn. This asymmetry gives Chinese export controls their leverage.
Industrial Policy and Economic Security— Industrial policy justified on national security grounds requires weighing how much economic inefficiency is worth tolerating, since costs incurred today make a country poorer and therefore less able to project power later. The calculation is difficult because security gains are probabilistic and long-term economic costs are speculative.
The Rise Of The Security Premium— Energy security concerns, not environmentalism, are argued to drive the buildout of solar, wind, and nuclear power, since domestic generation avoids chokepoints like Hormuz, the Red Sea, and the Panama Canal. China and India are expected to demand higher strategic stockpiles of energy and other critical commodities, repricing security above efficiency.
AI Summary.The US imposed 50% tariffs on a range of Canadian goods after bilateral talks broke down, and Canada announced one-for-one 50% retaliation. The author argues this continues a descent from an order of cooperation and open markets and will hurt investors.
John AuthersBloomberg
Date Posted:
US-Canada trade talks broke down over the weekend. Canadian Prime Minister Mark Carney announced a forthcoming domestic aid package in an effort to help the Canadian economy manage the fallout from a protracted trade war with the US.
Do matching 50% tariffs between neighbors hurt investors?
Core argument: Washington imposed 50% tariffs on a range of Canadian goods after US-Canada talks broke down, and Canada announced one-for-one retaliation with matching 50% levies.
Last week, US-Canada talks broke down, and Washington levied 50% tariffs on a range of goods. Canadian Prime Minister Mark Carney, elected last year on a platform to resist Donald Trump’s declared aim to make the country the 51st state, responded with a speech announcing truly reciprocal tariffs. There will be one-for-one retaliation with 50% levies. The world is raising its economic drawbridges. That’s profoundly negative, and continues the long descent from an order of cooperation and open markets. In the short term, we’ll see who can take the most pain. There’s no reason to expect a repetition of the Liberation Day swoon, but for investors it will still hurt.
Takeaways by Macro Roundup® AI
Washington imposed 50% tariffs on a range of Canadian goods after US-Canada talks broke down, and Canada announced one-for-one retaliation with matching 50% levies.
Canadian Prime Minister Mark Carney, elected last year on a platform of resisting Donald Trump's declared aim of making Canada the 51st state, announced reciprocal tariffs in a speech.
The escalating tariff exchange continues a long descent from an order of cooperation and open markets, and investors will be hurt even without a repeat of the Liberation Day swoon.
Related Articles:
How Canada Is Responding to American Mercantilism— US tariffs as high as 35% on certain goods not compliant with the US-Mexico-Canada trade agreement have coincided with falling Canadian exports, weaker business confidence and investment, a softening labor market, and a contraction in Canadian output. Canada has responded by aiming to double non-US exports within 10 years, expanding fiscal spending and deregulation, and keeping monetary policy loose.
Share of Young Canadians Living with Parents Doubled, Study Says— Statistics Canada reports 16.3% of millennials aged 25 to 39 lived with their parents in 2021, compared with 8.2% of baby boomers at the same age in 1991, with the pattern most pronounced in expensive cities. Homeownership among 25-to-39-year-olds was 49.9%, down from about 56% for baby boomers and Gen Xers at that age.
Canada’s Population Dips for Second Straight Quarter, Leading to First Annual Fall On Record— Statistics Canada estimates the country's population fell by about 102,436 people, or 0.2%, over the course of a year to 41.47 million, its first annual decline on record, driven by a steep reduction in temporary residents. Deaths exceeded births in the latest quarter, the second consecutive quarterly population drop.
AI Summary.The average statutory US tariff rate stands at 11.1% and, under current law including scheduled increases, is projected to reach 11.8% by year-end. The authors estimate current-law tariffs will raise consumer prices by about 0.7% and generate roughly $1.9tn over ten years, with revenue somewhat lower after accounting for tariffs' negative effect on economic output.
John IselinYale University
Date Posted:
The US’s average statutory tariff rate stands at 11.1% and is set to rise to 11.8% by the end of year. John Iselin projects that the current regime will raise ~$1.9T in revenue over 10 years.
How much will current tariffs raise prices and revenue?
Core argument: The average U.S. statutory tariff rate stands at 11.1%, down about 0.3pp after Section 122 tariffs expired and were replaced with new tariffs under Section 301.
As of July 24th, the average statutory tariff rate stands at 11.1% after falling by about 0.3pp when Section 122 tariffs expired and were replaced with new tariffs under Section 301. Under current law, which includes several scheduled tariff increases in the coming months, this figure is set to be 11.8% by the end of this year. We estimate the ultimate consumer price impact of current-law tariff policy to be about 0.7%. Over the next ten years, we estimate that current-law tariffs will raise about $1.9 trillion. These numbers are somewhat lower, though, after taking into account the negative impact of tariffs on GDP.
Takeaways by Macro Roundup® AI
The average U.S. statutory tariff rate stands at 11.1%, down about 0.3pp after Section 122 tariffs expired and were replaced with new tariffs under Section 301.
Under current law, which includes several scheduled tariff increases in the coming months, the average statutory tariff rate is set to reach 11.8% by the end of this year.
Current-law tariff policy is estimated to raise consumer prices by about 0.7% and to bring in about $1.9 trillion over ten years, with both figures somewhat lower after accounting for the negative impact of tariffs on GDP.
Related Articles:
Who Is Paying for the 2025 U.S. Tariffs?— The authors estimate that 94% of U.S. tariff costs were borne domestically over the first eight months of 2025, with a 10% tariff associated with only a 0.6 percentage point decline in foreign export prices. Pass-through into U.S. import prices later declined to 86%, shifting more of the burden to foreign exporters.
The Global Economy Is Threatened Again by Trade Imbalances— The International Monetary Fund calculates that global current-account deficits plus surpluses reached 3.7% of world gross domestic product, after fluctuating between 1% and 3% until the early 2000s. The US deficit of $1.1tn is the largest single imbalance, and the Fund estimates a budget deficit of 2% of GDP raises the current-account deficit by 0.5% of GDP.
Help for the Heartland? The Employment and Electoral Effects of the Trump Tariffs in the United States— The authors find that the combined effect of U.S.-China trade war import tariffs, retaliatory tariffs, and farm subsidies on employment in exposed U.S. locations was at best a wash and possibly mildly negative, while residents of tariff-protected areas became less likely to identify as Democrats and more likely to vote Republican.
AI Summary.The International Monetary Fund calculates that global current-account deficits plus surpluses reached 3.7% of world gross domestic product, after fluctuating between 1% and 3% until the early 2000s. The US deficit of $1.1tn is the largest single imbalance, and the Fund estimates a budget deficit of 2% of GDP raises the current-account deficit by 0.5% of GDP.
Greg IpThe Wall Street Journal
Date Posted:
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Greg Ip warns that while global imbalances are “narrower” than they were pre-crisis, “they are more persistent and more entrenched in national behavior,” pointing to China’s trade surplus and chronic US fiscal deficits.
How large have global current-account imbalances grown relative to world output?
Core argument: The IMF calculates that global current-account deficits plus surpluses reached 3.7% of global GDP last year after falling steadily from around the global financial crisis; until the early 2000s they fluctuated between 1% and 3%.
The IMF calculates that deficits plus surpluses reached 3.7% of global gross domestic product last year after falling steadily from around the global financial crisis. Until the early 2000s, they fluctuated between 1% and 3%. This is worrisome. Current-account deficits played a part in the crises that swept Latin America in the early 1980s, East and Southeast Asia in the late 1990s, the U.S. in 2007-09, and the eurozone from 2009 on. Today’s imbalances look different. While annual deficits are narrower than 15 years ago, they are more persistent and more entrenched in national behaviour. Take the U.S., whose current-account deficit of $1.1 trillion is by far the largest single imbalance. Last year, tariffs did reduce some imports, but because the AI boom sucked in foreign-made tech equipment, the current-account deficit narrowed only slightly. The bigger contributor to the U.S. current-account deficit is its budget deficit, which sustains excessive U.S. spending and inadequate saving. The IMF estimates a budget deficit of 2% of GDP increases the current-account deficit by 0.5% of GDP.
Takeaways by Macro Roundup® AI
The IMF calculates that global current-account deficits plus surpluses reached 3.7% of global GDP last year after falling steadily from around the global financial crisis; until the early 2000s they fluctuated between 1% and 3%.
The U.S. current-account deficit of $1.1 trillion is by far the largest single imbalance, narrowing only slightly last year as tariffs reduced some imports while the AI boom drew in foreign-made tech equipment.
The IMF estimates that a budget deficit of 2% of GDP increases the current-account deficit by 0.5% of GDP, and the U.S. budget deficit sustains excessive spending and inadequate saving.
Related Articles:
Understanding Global Imbalances— The US, China, Germany, and Japan account for roughly two-thirds of global current account imbalances, with the US deficit at 4% of GDP financed by capital inflows into dollar assets. The average duration of a surplus or deficit spell roughly doubled since the 1980s, building large net foreign asset and liability positions.
Why Global Imbalances Matter— Countries running persistent trade surpluses, such as China, Germany and Japan, have built their economies around an excess supply of tradeable goods and services, leaving them dependent on deficit countries to absorb it. That dependence gives deficit countries bargaining power and exposes surplus countries to pressure to expand domestic demand.
The U.S. Trade Deficit: Myths and Realities— Taxing capital inflows would weaken the dollar but could raise domestic interest rates and depress investment, harming long-term growth, while an interest rate cut absent recession would be inflationary and erode any real depreciation needed to durably improve the trade balance. Fiscal restraint could weaken the dollar and reduce the trade deficit.
AI Summary.Manufacturing in Japan, South Korea and Taiwan has narrowed around artificial intelligence: chips and AI-related gear account for over 40% of South Korean exports and 80% of Taiwan's, both up sharply from earlier shares. The Economist estimates the region's entire rise in industrial output is attributable to AI, with non-AI factory output shrinking.
Economist StaffThe Economist
Date Posted:
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The industrial production of Japan, South Korea and Taiwan has risen 15% since 2019 – entirely driven by AI-related demand. Apart from chip-making, IP has shown no trend since 2011. The fall in non-chip output is likely due to Chinese competition.
Is all industrial growth in north-east Asia coming from AI?
Core argument: The Economist finds that all of the 15% rise in north-east Asian industrial output since 2019 is attributable to AI, after counting firms not classified as AI-linked in official statistics, such as Japan's Advantest and Taiwan's Foxconn.
North-east Asian manufacturing is getting narrower. Chips and other gear related to AI make up over 40% of South Korean exports, more than double their share just two years ago. In Taiwan it is 80% of exports, compared with about half before the pandemic. After accounting for firms not neatly captured as AI-linked in official statistics, like Japan’s Advantest (which makes chip-testing gear) and Taiwan’s Foxconn (which produces data-centre servers, among other electronics), The Economist finds that all 15% of the region’s rise in industrial output since 2019 is thanks to AI. In Japan, South Korea and Taiwan output at factories unrelated to AI has shrunk in recent years.
Takeaways by Macro Roundup® AI
The Economist finds that all of the 15% rise in north-east Asian industrial output since 2019 is attributable to AI, after counting firms not classified as AI-linked in official statistics, such as Japan's Advantest and Taiwan's Foxconn.
Chips and other AI-related gear account for over 40% of South Korean exports, more than double their share two years earlier, and 80% of Taiwan's exports, compared with about half before the pandemic.
Factory output unrelated to AI has shrunk in recent years in Japan, South Korea and Taiwan, leaving north-east Asian manufacturing narrower.
Related Articles:
China’s Next-Generation Industrial Policy— China's export growth is concentrated in upstream, higher-tech goods: exports of intermediate inputs rose 26% and capital goods 32% between 2021 and 2024, while consumption goods exports were broadly flat. This shift embeds China deeper in global production systems and aligns with its long-running import substitution strategy of localizing entire value chains.
China Is Making Trade Impossible— Interviews with Chinese economists, technologists and business leaders yielded no clear answer to what products China would want to buy from the rest of the world in future, beyond commodities, luxury goods and higher education. The author argues China sees nothing it cannot eventually make better and cheaper itself, undermining trade as a two-way exchange.
Sticking with What Works: Raising GDP Forecast on China’s Manufacturing Push— Stronger Chinese growth driven by export-oriented manufacturing may not produce net positive spillovers: for every 1pp export-driven boost to China's GDP, other economies may see a 0.1–0.3pp drag, with high-tech producers such as Europe and Japan facing greater pressure. Cheaper Chinese goods continue to exert a disinflationary impulse.
AI Summary.A multi-country, multi-sector trade model simulation estimates that U.S. tariffs on Chinese goods shifted U.S. demand toward Mexican producers, raising Mexico's GDP by 0.35% in the medium run and 1.08% once its capital stock adjusts. The authors argue structural constraints in Mexico have limited the gains.
Ricardo Reyes-Heroles, Luis Torres and Diego Morales-BurnettFederal Reserve Bank of Dallas
Date Posted:
Between 2017 and 2024, Mexico’s share of total US expenditure rose from ~.8% to ~1.06%, increasing Mexican GDP by an estimated 1.08%, as China’s share fell from ~1.25% to ~.95% in the face of the US-China trade war.
How much do US tariffs on China raise Mexico's GDP?
Core argument: A multi-country, multi-sector general equilibrium trade model indicates U.S.-China trade war tariffs raised Mexico's GDP by 0.35 percent in the medium run, driven by higher exports to the United States and expansion of sectors integrated into North American value chains.
We examine the effects of the tariffs implemented during the U.S.-China trade war on Mexico’s GDP, using a multi-country, multi-sector general equilibrium trade model. Higher U.S. tariffs on Chinese goods reduce the competitiveness of Chinese exports in the U.S. market, thereby shifting U.S. demand toward alternative suppliers, including Mexico. Model simulation indicates the U.S. - China tariff shock generated a positive effect on Mexico’s GDP, shifting U.S. demand from goods produced in China toward those produced in Mexico. There was a clear increase in U.S. demand for goods produced in Mexico during 2017–24, suggesting that output in Mexico expanded to meet this increased demand in response to the China trade tension. [Chart 2]. In the medium run—a period when aggregate capital does not change through investment—Mexico experiences a modest increase in GDP of 0.35 percent, driven primarily by higher exports to the United States and expansion of sectors integrated into North American value chains. Once Mexico’s capital stock adjusts, GDP expands by an additional 0.73 percentage points (total of 1.08 percent), reflecting increased investment in expanding industries (Chart 3). Although trade reallocation has contributed to economic growth in Mexico, structural constraints led to underperformance.
Takeaways by Macro Roundup® AI
A multi-country, multi-sector general equilibrium trade model indicates U.S.-China trade war tariffs raised Mexico's GDP by 0.35 percent in the medium run, driven by higher exports to the United States and expansion of sectors integrated into North American value chains.
Once Mexico's capital stock adjusts, the model shows GDP expanding by an additional 0.73 percentage points, for a total of 1.08 percent, reflecting increased investment in expanding industries.
U.S. demand for goods produced in Mexico increased during 2017–24, suggesting Mexican output expanded to meet that demand, though structural constraints led to underperformance.
Related Articles:
Mexico Is Not Just the Top Supplier to the U.S. Now It Is the Top Buyer— Mexico is now both the largest buyer of U.S. exports and the largest source of U.S. imports, with U.S. goods exports to Mexico at $226.4bn versus $225.6bn to Canada and imports from Mexico totaling $354.9bn. Mexico's growth, including its middle class, has increased demand for U.S. goods among its more than 130 million people.
Mexico’s Growth Stagnation— Mexico's growth has fallen to near zero as an investment boom from recent years faded into a drag on growth and private consumption returned to the weakness seen in the five years before the pandemic. Despite strong exports to the US, the gains from trade are not reaching enough of the population, making the stagnation a structural problem.
The U.S. Wants to Ban China’s High-Tech Cars, but They’re Already Here in El Paso— Chinese automakers BYD, Geely, and Great Wall Motor rank among the world's largest and have gained market share in Europe and Asia, with Chinese vehicles making up a quarter of sales in Mexico. US federal rules let Mexican residents and dual citizens drive noncompliant Chinese cars across the border, and Canada will allow imports of inexpensive Chinese electric vehicles.
AI Summary.Shipments of AI hardware rose almost 40%, accounting for about a third of global trade growth, drawing on supply chains running through Taiwan, South Korea, and parts of Southeast Asia. The US added roughly half of the world's new data center capacity, and its AI-related goods trade rose about 66%.
Tiago Devesa, Jeongmin Seong, Olivia White, Nick Leung, et al.McKinsey
Date Posted:
Despite Trump’s tariffs, global trade growth expanded 6.5% last year, outpacing overall economic growth. The largest driver was the AI buildout; McKinsey estimates AI hardware shipments increased ~40% last year and account for 1/3 of the increase in global trade growth.
How much did AI hardware shipments drive global trade growth?
Core argument: Shipments of AI hardware rose nearly 40% in 2025, accounting for about a third of global trade growth, an effect that has drawn less attention than AI's impact on growth, investment, financial markets, or jobs.
Booming AI investment left a clear mark on global trade in 2025. Shipments of the hardware needed to develop and run the technology increased by almost 40% during the year, accounting for about a third of global trade growth—an impact that has received far less attention than AI’s effects on economic growth, investment, financial markets, or jobs. This expansion unfolded amid heightened geopolitical tensions and tighter trade restrictions. The rapid buildout of data centers required large volumes of semiconductors, servers, and networking equipment from tightly linked supply chains running through Taiwan, South Korea, and parts of ASEAN. The United States added roughly half of the world’s new data center capacity in 2025, making it the largest source of demand. US trade of AI-related goods rose by roughly 66%, or an estimated $220 billion. China was the second-largest builder of data centers, but trade restrictions limited its ability to import some of the most advanced chips and semiconductor manufacturing tools for much of 2025, leading it to rely heavily on domestic supplies. As a result, China’s trade in AI-related goods increased by only 16%, or an estimated $85 billion.
Takeaways by Macro Roundup® AI
Shipments of AI hardware rose nearly 40% in 2025, accounting for about a third of global trade growth, an effect that has drawn less attention than AI's impact on growth, investment, financial markets, or jobs.
The United States added roughly half of the world's new data center capacity in 2025, making it the largest source of demand, with US trade in AI-related goods up roughly 66%, an estimated $220 billion.
China, the second-largest builder of data centers, saw its trade in AI-related goods rise only 16%, an estimated $85 billion, as trade restrictions limited imports of some of the most advanced chips and semiconductor manufacturing tools for much of 2025.
Related Articles:
Taiwan’s Modern Miracle— Taiwan's economy has grown more than 12% over the past year, its fastest annual pace in nearly 50 years, as AI chip demand lifts net exports and pushes manufacturing to nearly 40% of output. Its trade surplus is flowing into outbound direct investment and foreign lending rather than US bonds.
US Notches One of Its Biggest Annual Trade Gaps Since 1960— The US goods and services trade deficit reached $901.5bn for the year, one of the largest in data going back to 1960. US companies increased imports of computers and accessories by nearly $145bn from the prior year, an acceleration in demand that reflects large-scale artificial intelligence investment.
The Dangerous Triumph Of Neo-Mercantilism— Neo-mercantilism is thriving in both China, which pairs infant-industry promotion with large trade surpluses, and in a United States focused on external deficits and protecting domestic markets. The author argues this will likely fracture the world economy, and that a new multilateral treaty could include a mechanism to combat large structural trade surpluses.
AI Summary.The Budget Lab estimates the average effective US tariff rate faced by consumers reached 16%, the highest since 1936, before court-struck tariffs cut it to 9.1%, with new 15% Section 122 tariffs lifting it to 13.7%. If those tariffs expire after 150 days, the authors project $1.3tn in revenue over 2026-35, or $1.1tn after accounting for slower growth.
John IselinYale University
Date Posted:
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The new 15% tariffs under Section 122 bring the mean effective tariff rate to 13.7%, down from 16.9% prior to the SCOTUS ruling that the IEEPA tariffs were illegal. Section 122 tariffs will expire in 150 days unless extended by Congress.
How have court rulings and new tariffs changed effective tariff rates?
Core argument: The Budget Lab estimates the US average effective tariff rate facing consumers at 13.7%, down from 16% before the IEEPA-based tariffs were struck down — the highest since 1936 — and up from the 9.1% reached immediately after that ruling.
The Budget Lab (TBL) estimates the effects of all US tariffs and foreign retaliation implemented through February 20, 2026, including the new 15% Section 122 tariffs and the elimination of IEEPA-based tariffs. Under our baseline case, the Section 122 tariffs expire after 150 days. Before the IEEPA tariffs were struck down, consumers faced an overall average effective tariff rate of 16%, the highest since 1936. Immediately following the IEEPA ruling, the rate fell to 9.1%. After the Section 122 tariffs were imposed, the rate rose to its current level of 13.7%. If those tariffs expire in 150 days, the rate will fall again to 9.1%. Assuming Section 122 tariffs expire in 150 days, the administration’s tariffs will raise about $1.3 trillion over 2026-35, though slower economic growth reduces revenues and brings the net dynamic revenue to $1.1 trillion. (If they are instead made permanent, these figures would be $2.2 trillion and $1.9 trillion.)
Takeaways by Macro Roundup® AI
The Budget Lab estimates the US average effective tariff rate facing consumers at 13.7%, down from 16% before the IEEPA-based tariffs were struck down — the highest since 1936 — and up from the 9.1% reached immediately after that ruling.
The Budget Lab projects the administration's tariffs will raise about $1.3 trillion over 2026–35 if the new 15% Section 122 tariffs expire after 150 days, with net dynamic revenue of $1.1 trillion after slower economic growth reduces receipts.
Should the Section 122 tariffs be made permanent, The Budget Lab estimates revenue of $2.2 trillion over 2026–35 and $1.9 trillion on a net dynamic basis; if they expire after 150 days, the effective tariff rate falls to 9.1%.
Related Articles:
US Notches One of Its Biggest Annual Trade Gaps Since 1960— The US goods and services trade deficit reached $901.5bn for the year, one of the largest in data going back to 1960. US companies increased imports of computers and accessories by nearly $145bn from the prior year, an acceleration in demand that reflects large-scale artificial intelligence investment.
Help for the Heartland? The Employment and Electoral Effects of the Trump Tariffs in the United States— The authors find that the combined effect of U.S.-China trade war import tariffs, retaliatory tariffs, and farm subsidies on employment in exposed U.S. locations was at best a wash and possibly mildly negative, while residents of tariff-protected areas became less likely to identify as Democrats and more likely to vote Republican.
Did Tariffs Make American Manufacturing Great? New Evidence from the Gilded Age— Using digitized industry-level US tariff data from 1870–1900 matched to state-level manufacturing census data for over 80 industries, the authors estimate that tariffs reduced labor productivity. They argue the results are consistent with weaker international competition allowing less efficient firms to survive, reduced incentives to innovate, and lobbying for protection misallocating resources.
