Investors cheered President Trump’s tariff reductions and deals with trading partners China and the UK, but Wall Street points out that the tariff rates are still relatively high.
“The US effective tariff rate remains significantly higher than it was at the start of the year,” Solita Marcelli, chief investment officer Americas for UBS Global Wealth Management, wrote in a client note on Thursday.
Marcelli pointed out the US effective tariff rate — at around 15% — is now six times higher than the 2.5% rate that prevailed in January before President Trump returned to the White House.
That assumes that the rolled-back tariffs during the 90-day pause announced last month can be maintained beyond the deadline.
“As the Trump administration has indicated that the 10% baseline tariff is unlikely to be negotiated lower, these higher tariffs could slow the US economy and push up prices,” Marcelli warned.
This morning’s commentary from retail giant Walmart (WMT) CEO Doug McMillon highlights this risk.
“We will do our best to keep our prices as low as possible, but given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins,” McMillon said in the company’s earnings release. He added on the earnings call that tariffs have already led to price increases in April and May.
The tariff impact could seep back into the stock market.
“While we continue to expect a range of trade agreements to be reached to sustain the tariff rate at roughly the level during the pause period, ongoing uncertainty could trigger further bouts of market volatility,” Marcelli said.
