Fitch says new 10% US tariff lowers effective rate to 9.4%

Fitch Ratings said a new 10% blanket reciprocal tariff imposed by the United States on most trading partners would lower the country’s effective tariff rate to 9.4% from 12.7%, following a shift in legal authority for the measures.

President Donald Trump moved to reinstate tariffs after the U.S. Supreme Court ruled on Feb. 20 that reciprocal tariffs imposed under the International Emergency Economic Powers Act were invalid. The new 10% rate is authorized under Section 122 of the Trade Act of 1974 and will expire in 150 days unless Congress extends it.

Section 122 allows a maximum tariff of 15% but does not permit country-specific adjustments.

Fitch said that if the administration raises the levy to 15%, the U.S. effective tariff rate would increase to 11.3%.

Effective tariff rate impact

The lower 9.4% effective tariff rate reflects carve-outs previously applied to the IEEPA-based reciprocal tariffs, including exemptions for passenger vehicles, pharmaceuticals, United States-Mexico-Canada Agreement-compliant goods and certain electronics.

Fitch noted that the status of existing trade agreements remains unclear as the administration continues to use tariffs as both a revenue-raising and policy tool.

Before the Supreme Court ruling, China faced two separate reciprocal tariffs: a 10% fentanyl-related tariff applied to all imports and an additional 10% reciprocal tariff on imports subject to carve-outs. Under the new regime, the two have been consolidated into a single 10% blanket tariff, reducing China’s effective tariff rate to about 19% from 29%.

China still has the highest effective tariff rate among major U.S. trading partners, followed by Vietnam, Japan and Brazil.

Country-level effects

Of the 31 largest U.S. trading partners, 26 will see their effective tariff rates decline under the new framework, Fitch said.

Brazil stands to benefit the most, with its effective tariff rate falling by 18 percentage points to 11% from 29%.

Fitch added that effective tariff rates for most countries remain largely unchanged following the shift in tariff regimes. No country would see an increase in its effective tariff rate if the Section 122 tariff remains at 10%.