Key facts
- The US has established a new trade policy framework involving uniform tariff rates, higher tariffs on strategic industries, and acceptance of investment and purchase commitments.
- Framework agreements have been reached with the UK, China, Vietnam, Indonesia, Japan, and the EU.
- The average effective US tariff rate reached 10.3% in January 2026, a level not seen since 1947.
- Research suggests that uniform tariffs, if designed optimally, could increase US GDP by 2.2% by improving terms of trade.
- Global trade policy has seen a dramatic increase in measures, with over 3,000 introduced in 2025.
The United States has significantly reshaped its trade policy, with new tariff announcements and framework agreements signaling a new approach. The average effective tariff rate on goods entering the U.S. reached 10.3% in January 2026, a level not seen since 1947, marking a dramatic transformation in American trade policy.
The administration has announced framework agreements with the United Kingdom, China, Vietnam, Indonesia, Japan, and the European Union. This policy structure is characterized by uniform and significant tariff rates across most products for each partner, with China as a notable exception and details still emerging for the EU. It also includes the retention of higher tariffs on a smaller set of strategic industries, such as steel and aluminum, and the acceptance of investment and purchase commitments rather than reciprocal tariff reductions.
Recent economic research suggests that while tariffs are generally distortionary, large economies like the U.S. can potentially extract welfare gains through strategic tariff policy by improving their terms of trade. Studies indicate that if designed optimally and uniformly across partners, tariffs could increase U.S. GDP by 2.2 percent, relative to a baseline non-tariff scenario, by reducing the total U.S. trade deficit. However, these findings come with critical caveats, including the need for uniform tariffs to avoid trade diversion and the direction of revenue towards income tax reduction rather than lump-sum transfers.
The consequences of these policy shifts are already visible, with factory employment in the United States declining and consumer prices rising faster than central banks expected. Globally, more than 3,000 new trade and industrial policy measures were introduced in 2025 alone, indicating a profound reshaping of global trade.