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The Fiscal and Economic Effects of the Revised April 9 Tariffs [1]
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Date: 2025-04
Average effective tariff rate
The sheer size of the proposed tariff on China means that the distinction between pre-substitution (before consumers and businesses shift purchases in response to the tariffs) and post-substitution (after they shift) is a crucial one. One metric where the difference is substantial is the average effective tariff rate.
Measured pre-substitution—assuming there are no shifts in the import shares of different countries—the 2025 tariffs to date are the equivalent of a 24.6 percentage point increase in the US average effective tariff rate. That calculation assumes that under the new 125% China tariffs on certain goods, the share of imports from China remains at 14%, where it was in 2024. This is the right way to think about the tariffs from the perspective of consumer welfare, since it reflects the full cost faced by consumers before they start making difficult spending choices. This increase would bring the overall US average effective tariff rate to 27%, the highest since 1903. This is only slightly different from where the effective rate was before the late-April 9 announcement.
Post-substitution—after imports shift in response to the tariffs—the 2025 tariffs are a 16.1 percentage point increase in the US average effective tariff rate, due to the substantial fall in China’s share of US imports as American consumers and businesses find alternatives for Chinese imports. China’s import share goes from 14% to 4% as a result of the tariffs, which, compositionally, means that fewer Americans are paying the China tariffs which means it has less “weight” in the post-substitution average effective tariff rate calculation. The 16.1pp increase brings the overall US effective tariff rate to 18.5%, the highest since 1933.
The timing of the transition from “pre” to “post” substitution is highly uncertain. Some shifts are likely to happen quickly—within days or weeks—while others may take longer.1
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[1] Url:
https://budgetlab.yale.edu/research/fiscal-and-economic-effects-revised-april-9-tariffs
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