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U.S. tariff rates under Trump will be higher than the Smoot-Hawley levels from Great Depression era

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U.S. President Donald Trump holds a chart next to U.S. Secretary of Commerce Howard Lutnick as Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington, D.C., on April 2, 2025.

Carlos Barria | Reuters

The tariff policy outlined by President Donald Trump on Wednesday appears set to raise the level of U.S. import duties to the highest in more than 100 years.

The U.S. introduced a baseline 10% tariff on imports, but also steep country-by-country rates on some major trading partners, including China. The country-by-country rates appear to be related to the trade deficit the U.S. has with each trading partner.

Sarah Bianchi, Evercore ISI chief strategist of international political affairs and public policy, said in a note to clients late Wednesday that the new policies put the effective tariff rate above the level of around 20% set by 1930’s Smoot-Hawley Tariff Act, which is often cited by economists as a contributing factor to the Great Depression.

“A very tough and more bearish announcement that pushes the overall U.S. weighted average tariff rate to 24%, the highest in over 100 years – and likely headed to as high as 27% once anticipated 232s are complete,” Bianchi wrote. The “232s” is a reference to some sector-specific tariffs that could be added soon.

JPMorgan’s chief U.S. economist Michael Feroli came up with similar results when his team crunched the numbers.

“By our calculations this takes the average effective tariff rate from what had been prior to today’s announcement around 10% to just over 23%. … A White House official mentioned that other section 232 tariffs (e.g. chips, pharma, critical minerals) are still in the works, so the average effective rate could go even higher. Moreover, the executive order states that retaliation by US trading partners could result in even higher US tariffs,” Feroli said in a note to clients.

More downside risk for the economy going forward, says Apollo Global's Torsten Slok

An estimate from Fitch Ratings was in the same range, with a report saying the tariff rate would hit its highest level since 1909.

Trump referenced the Smoot-Hawley Act in his Rose Garden remarks on Wednesday. The president said the issue was not the tariffs imposed in 1930 but the previous decision to remove the higher tariffs that existed earlier in the 20th century.

“It would have never happened if they had stayed with the tariff policy. It would have been a much different story. They tried to bring back tariffs to save our country, but it was gone. It was gone. It was too late,” Trump said.

The full economic impact of the new tariffs will likely depend on how long they are in place and if other countries retaliate. Trump and Treasury Secretary Scott Bessent have indicated that the country-by-country tariffs could come down if those trade partners change their policies.

JPMorgan global economist Nora Szentivanyi warned that Trump’s tariffs were likely to push the U.S. and global economy into a recession this year if they are sustained.

Economics

Bank of England chief focused on tariff ‘growth shock’

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Bank of England governor: We're seeing the uncertainty effect of tariffs

The Bank of England is focused on the potential impact of U.S. tariffs on U.K. economic growth if there is a slowdown in global trade, the central bank’s governor Andrew Bailey said Thursday.

“We’re certainly quite focused on the growth shock,” Bailey told CNBC’s Sara Eisen in an interview at the IMF-World Bank Spring Meetings.

Going into its May 8 monetary policy meeting, the central bank will consider “arguments on both sides” around the impact of tariffs on growth and domestic supply constraints on inflation, Bailey said.

“There is clearly a growth issue we start with, with weak growth … but a big question mark is how much of that is caused by the weak demand, how much of it is caused by a weak supply side,” he continued.

“Because the weak supply side, of course, unfortunately, has the sort of the upside effect on inflation. So we’ve got to balance those two. But I think the trade issue is now the new part of that story.”

Inflation could be pulled in either direction by wider forces, with a redirection of trade exports into other markets being disinflationary, but a retaliation on U.S. tariffs by the U.K. government — which he stressed did not appear likely — pushing up inflation.

Bailey added that he did not see the U.K. as being close to a recession at present, but that it was clear economic uncertainty was weighing on business and consumer confidence.

IMF downgrade

The IMF earlier this week downgraded its 2025 growth forecast for the U.K. to 1.1% from 1.6%, citing the impact of U.S. President Donald Trump’s trade tariffs, higher borrowing costs and increased energy prices.

However, economic forecasting remains mired in uncertainty as countries engage in negotiations with U.S. officials over Trump’s swingeing universal tariff policy, currently on pause. The U.S. has imposed 25% tariffs on steel, aluminum and autos and a 10% levy on other British exports.

U.K. policymakers have expressed hopes of reaching a trade deal with the White House, with U.S. Vice President J. D. Vance saying there is a “good chance” of an agreement.

Bailey told CNBC on Thursday that he would be “very encouraged if the U.K. does make a deal,” but that its economy was very open and services-oriented, so it would still be impacted by a wider slowdown in growth or trade.

He also noted that inflation would increase from the current 2.6% in the coming readings due to effects from markets such as energy prices and water bills, but that the bump up would be “nothing like what we saw a few years ago.”

The Bank of England held interest rates at 4.5% at its March meeting, before Trump shocked the world with the scale of his tariff announcement.

Markets now see the BOE slashing rates to 4% by its August meeting.

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Economics

Orders for big-ticket items like autos and appliances surged 9.2% in March in rush to beat tariffs

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Companies in March accelerated their orders for big-ticket long-lasting goods ahead of President Donald Trump‘s aggressive tariffs on U.S. imports, the Commerce Department reported Thursday.

So-called durable goods orders soared a seasonally adjusted 9.2% on the month, up from a 0.9% gain in February and well ahead of the Dow Jones forecast for a 1.6% increase. Excluding defense, the increase was even higher, at 10.4%, though the ex-transportation number was flat.

Transportation equipment orders surged 27%, led by a 139% increase in nondefense aircraft and parts. In addition to aircraft and autos, the durables category also includes items such as appliances, computers and jewelry.

In other economic news Thursday, the Labor Department reported that initial claims for unemployment insurance rose to a seasonally adjusted 222,000 for the week ended April 19, an increase of 6,000 though roughly in line with the Wall Street consensus of 220,000.

On the durables goods side, the advanced report reflects a pull-forward effect as Trump dangled threats against U.S. trading partners through March before announcing his “Liberation Day” duties on April 2. Trump slapped a 10% tariff against all imports as well as a select charges against dozens of countries that he ultimately tabled for 90 days for negotiations.

A Federal Reserve report Wednesday indicated that companies were adjusting behavior to get ahead of the Trump tariffs.

The economic summary, known as the “Beige Book,” said companies in particular saw an increase in vehicle sales, which would fall under the durables category, “generally attributed to a rush to purchase ahead of tariff-related price increases.”

The report otherwise showed apprehension about economic conditions, particularly in light of the tariffs, indicating that the burst in durables orders for March is likely not indicative of the long-term broader environment.

On the labor front, the jobless claims report showed that layoffs are not rising despite Trump’s efforts to slice the federal employment rolls.

In addition to the stable weekly numbers, continuing claims, which run a week behind, declined to 1.84 million, down 37,000 from the prior week. Claims in Washington, D.C., also fell, down to 753, or a decrease of 112 from the prior week, according to unadjusted numbers.

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Economics

German finance minister prefers zero for zero tariff solution

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I’m optimistic we’ll resolve our differences, Germany's finance minister says

The trust between Europe and the U.S. is not yet broken despite President Donald Trump’s aggressive tariff policies, Joerg Kukies, acting German finance minister, told CNBC Thursday.

“For trust to be broken, a lot more would have to happen because the transatlantic partnership has been built over so many decades that we will not get carried away by the statement of tariffs,” he told CNBC’s Carolin Roth on the sidelines of the IMF World Bank Spring Meetings.

Kukies added that during a previous visit to Washington, soon after the 25% tariffs on all cars imported to the U.S. was announced, there did appear to be interest in coming to an agreement.

Europe and the U.S. have different interests and both parties need to understand one another’s viewpoints, he said. “But this is not the first time ever that the United States and Europe are negotiating over tariffs, so I don’t think we’re anywhere near a crisis moment.”

Kukies struck a positive tone when referring to talks, saying “everything is going in negotiation mode” with the bloc “optimistic” that it can resolve the differences.

A zero-for-zero tariff agreement would be his preferred outcome, Kukies stated. This aligns with what European Commission President Ursula von der Leyen has advocated for.

However, Trump has already rejected a proposal from the European Union for a deal which would see zero percent duties on industrial goods imported from the U.S. as well as on imports from the EU.

Germany is currently subject to 10% tariffs — the temporarily reduced rate announced by Trump after the initially imposed 20% duties.

The country’s struggling economy is heavily reliant on trade, as the U.S. serves as its most important trading partner. Tariff turmoil led by Trump is therefore expected to hit Germany especially hard.

Earlier on Thursday, the German government revised its forecast for the country’s economic growth lower, saying it was now expecting stagnation in 2025. This compares to January’s estimate of 0.3% growth.

Acting economy minister Robert Habeck in a press conference cited U.S. President Donald Trump’s trade policies and their impact on the German economy as the main reason for the downward revision.

The IMF in its latest World Economic Outlook, which was published earlier this week, also cut its expectations for the German economy with the body now projecting a 0.2% contraction.

Germany’s economy has been struggling for some time, contracting in both 2023 and 2024 on an annual basis. The country has however avoided a technical recession, which is characterized by two consecutive quarters of contraction. The latest gross domestic product data is slated to be released next week.

There could however also be some positives on the horizon after a major fiscal package, which could lead to a major investment boost, was enshrined in Germany’s constitution earlier this year. It included changes to the long-standing debt brake rule that are set to enable higher defense spending, as well as a 500 billion euro ($569 billion) infrastructure investment fund.

Germany’s debt brake limits how much debt the government can take on and dictates the size of the federal government’s structural budget deficit

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