Countries issued letters would see the new tariffs replace those Trump originally announced on April 2.
“At some point, the rubber has to hit the road, and there’s risks that reciprocal tariffs with the major trading partners could revert back to at or around the April 2 levels, and that could sort of be a headwind for markets,” said Nadia Lovell, UBS global wealth management senior U.S. equity strategist, during a media briefing on Tuesday. “But for now markets are willing to sort of look through this risk.”
And look through it they have.
“Over the last couple of months, we’ve seen the administration escalate, only to quickly de-escalate, and this could also just be another tactical escalation in some way,” Lovell said of the latest deadlines.
Even with the current pause, overall tariff rates for imports into the U.S. are more than six times higher than they were at the start of the year. The average weighted tariff rate is 16% compared to 2.5% in 2024, according to UBS calculations. If all of the postponed tariffs were to be reimplemented, that rate would rise to 21%.
Across Wall Street, financial institutions have been recommending clients diversify away from U.S. equities, despite having rebounded since April. Many money managers are moving more of their portfolio into some European stocks, which for years had lagged behind their U.S. counterparts. The U.S. markets, these investors reason, are still subject to the vicissitudes of a tumultuous trade policy.
“Nothing that happened yesterday should be taken to mean that we’re near the end to the U.S. tariff story of 2025,” wrote Thierry Wizman, Macquarie global foreign exchange and rates strategist. “Leaving aside that ‘reciprocal tariffs’ still need to be resolved, there are also new ‘strategic tariffs’ to look forward to this year.”
Raising tariff levels would also see the U.S.’ growth forecasts fall lower than they already have. In the earliest days of Trump’s tariff policy, U.S. recession odds soared. Forecasters from Wall Street and the Federal Reserve cut their projections for GDP growth and raised those for inflation and unemployment. The median growth rate for the U.S. among Fed economists is now at 1.4%. UBS’s 2025 projection is lower, coming in at 0.9%, according to Chief U.S. Economist Jonathan Pingle.
If all of the April tariffs were to return, the U.S. might lose “another three tenths” of its annual growth rate, Pingle said.
“Under that scenario, recession probabilities are going to rise, and it’s going to feel like pretty sluggish growth,” he said. “I mean, the U.S. does not run sub 1% growth very often.”
