Effective U.S. tariff rate likely to stay near 15% through year-end, UBS says

Investing.com - The White House is expected to announce country-specific trade deals and tariff delay extensions for other nations ahead of the re-imposition of sweeping "reciprocal" levies later this month, according to analysts at UBS.

However, in a note to clients, the brokerage said they believe "the Trump administration will maintain aggressive tariff stance" even as it negotiates these bilateral trade deals and fights legal challenges to the tariffs.

Countries that hit an impasse with the Trump administration could "very well" see the heigthened reciprocal tariffs take effect, the analysts flagged.

They also anticipate that sector-specific tariff announcements -- which would cover industries like pharmaceuticals, chipmaking, lumber, copper, trucks, critical minerals and aircraft -- are likely "forthcoming" in the third quarter and are seen at "a rate of 25%."

The comments come as a 90-day pause to U.S. President Donald Trump’s punishing "Liberation Day" duties first unveiled in early April is due to expire on July 9, with Washington attempting to notch a string of fresh trade pacts with a host of countries.

On Wednesday, Trump announced a trade deal with Vietnam that will set a 20% tariff rate on items incoming from the Southeast Asian nation. Analysts noted that this rate was lower than the “reciprocal” levy Trump slapped on Vietnam in April.

The agreement also places a 40% of so-called “transshipping,” a move that could indirectly have consequences for China. The White House has claimed that countries like Vietnam have become conduits for Chinese goods to be sent to the U.S. while evading heightened American duties.

While preliminary and abbreviated compared to traditionally more comprehensive trade pacts, the deal was seen as an indication that the Trump administration was making progress in reaching new trade accords prior to the re-imposition of the now-paused reciprocal tariffs later this month. Trump has previously reached trade truces with China and Britain, and has hinted at a possible deal with India.

Still, trade taxes remain elevated. The effective U.S. tariff rate has jumped to 15%, six times greater than it was at the beginning of the year.

"[W]e think this rate will hold through the end of the year, even as there will likely be further headline risk, tough-sounding rhetoric, and shifts in tariff rates during the second half of 2025," the analysts predicted.

Against this backdrop, they anticipate that U.S. economic activity will "slow, but not derail," while upward pressure will be placed on inflation. They added that, although Trump has frequently called on the Federal Reserve to slash interest rates, further tariff hikes could push up prices even momre, "making it more difficult for the Fed to agree" to borrowing cost reductions.