US Effective Tariff Rate Falls on Latest Tariffs, Changing Trade Flows
The U.S. effective tariff rate (ETR) has declined to 7.4% from 9.4% after the U.S. replaced the temporary Section 122 surcharge with new Section 301 tariffs on imports from 60 economies, including the EU.
In a commentary note, Fitch said the revised estimate also reflects its use of annualised January-May 2026 trade flows instead of the 2024 import data used in previous calculations.
Holding trade flows at 2024 levels, the change in tariff policy alone would have lowered the ETR to 8.4%. The additional decline to 7.4% reflects changes in the composition and sourcing of U.S. imports.
Based on annualised January-May data as a proxy for 2026, imports of electronics and semiconductors, which are largely excluded from tariffs, increased to about $800 billion from $340 billion in 2024, Fitch said.
It noted that imports from China, which faces the highest ETR among major U.S. trading partners, fell by 43% over the same period.
President Trump imposed a temporary 10% global import surcharge under Section 122 of the Trade Act of 1974 after the Supreme Court invalidated tariffs imposed under the International Emergency Economic Powers Act.
The surcharge took effect on Feb. 24 and expired on July 24. It was then replaced by Section 301 tariffs on products from economies covered by the U.S. Trade Representative’s forced-labour investigations.
The Section 301 framework has four main tariff regimes. Imports from countries including Mexico, Canada, India and the U.K. face a fixed additional tariff of 10%, while imports from China, Vietnam and most other investigated economies face a fixed additional tariff of 12.5%.
For the EU and Taiwan, the Section 301 tariff is set so that the combined most favored-nation, or MFN, tariff and Section 301 rate do not exceed 10%.
The corresponding combined-rate cap is 12.5% for Japan, South Korea and Switzerland.
Under the capped regimes, products already subject to an MFN tariff at or above the threshold incur no additional Section 301 duty, while products with lower MFN rates face only the additional duty required to reach the cap. The framework also includes broad product exclusions.
Fitch’s ETR estimate also incorporates the separate 25% Section 301 tariff on Brazil, which is subject to significant product exclusions. It also includes the announced 50% Section 338 tariffs on narrowly defined Canadian motor vehicle, dairy and wine imports, scheduled to take effect on Aug. 19, 2026.
The Canadian tariffs cover an estimated $17 billion of goods. If not implemented as announced, they would decrease Canada’s ETR by approximately 2.2 percentage points and the overall U.S. ETR by about 0.25 pp.
China continues to have the highest ETR among major U.S. trading partners, rising to approximately 22.3% from 19.2% under the temporary Section 122 surcharge.
Brazil’s ETR also increases to 14.8% from 11.4%, reflecting its separate 25% Section 301 tariff, while Japan’s rises more modestly to 13.3% from 12.6%. Switzerland’s and Canada’s ETRs also increase to 7.1% from 4.3% and 5.3% from 4.1%, respectively.
By contrast, Vietnam’s ETR falls to 10.2% from 13.2%, South Korea’s to 9.7% from 11.3%, and Taiwan’s to 2.8% from 5.5%. Other notable declines include India at 8.3% from 10.7%, and Mexico at 3.7% from 5.0%. CBN to Auction N700 billion Worth of Nigerian Treasury Bills
