Tariff hit on GDP could reach 1% as price effects build—Barclays

Published 08/08/2025, 14:34
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Investing.com -- The economic drag from U.S. tariffs could deepen significantly as delayed effects take hold and new measures are implemented, according to Barclays (LON:BARC).

In a note titled Mind the tariff gap, the bank said the effective tariff rate “was ‘just’ 10%” as of June, with over half of imports still entering the U.S. duty-free. 

“The real surprise in the U.S. economy’s resilience lies not in its reaction to tariffs but that the rise in the effective tariff rate has been more modest than commonly thought,” analysts wrote.

Barclays estimated that tariffs have so far exerted a 0.4% drag on gross domestic product but warned of “an additional hit of c.1% due to further increases in tariffs and the delayed effects of past ones.” 

The bank expects tariffs to raise the headline price level by 0.8% in total, with at least three-quarters of that impact still to come.

The effective tariff increase up to June is “likely only about half of the eventual total hike,” Barclays noted, citing higher reciprocal tariffs already announced, new sectoral tariffs in the pipeline, potential removal of carve-outs, and the possibility that current trade diversion patterns may not last. 

“Whether the electronics exemption remains in place will be key to watch,” it said.

Using a granular dataset, Barclays attributed the limited increase so far to trade diversion away from China and exemptions such as the U.S.-Mexico-Canada Agreement. 

The price pass-through until June was “slightly more muted than implied by models,” but the bank said its estimates suggest that inflationary effects will continue to build.

 

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