UBS Forecasts U.S. Effective Tariff Rate to Settle Near 15% by Year-End 2025
NEW YORK, May 14, 2025 – UBS, a leading global financial institution, projects that the effective U.S. tariff rate, excluding China, will stabilize around 15% by the end of 2025, according to a report published on May 10, 2025. This forecast follows a volatile period marked by President Donald Trump’s aggressive tariff policies, which have driven the effective tariff rate from 2.5% to approximately 9%—the highest since World War II—since the start of his second term. UBS anticipates a moderation from the current 25–30% peak, driven by trade negotiations and sector-specific carve-outs within the 90-day tariff pause period ending in July 2025.
For U.S.-China tariffs, UBS expects rates to settle around 34%, down from the current 145% on many Chinese imports, as high-level talks in Switzerland signal potential de-escalation. The bank’s base case assigns a 50% probability to “selective tariffs” that dent but do not derail economic growth, with Canada and Mexico likely to remain largely exempt. UBS cites recent progress, such as a U.S.-UK trade deal framework and Trump’s optimism about negotiations with China, India, Japan, and South Korea, as factors supporting a more constructive trade environment by year-end.
The forecast comes amid market turbulence, with the S&P 500 recovering over 10% from April lows following the “reciprocal” tariff announcement. UBS warns that tariffs could add 2% to U.S. consumer prices and slow GDP growth to below 1% in 2025, potentially triggering 75–100 basis points of Federal Reserve rate cuts starting in September. However, resilient corporate earnings (9% growth in Q1 2025) and AI-driven tech demand are expected to support equities, with UBS projecting the S&P 500 to reach 6,600 by year-end, aligning with optimistic outlooks like Christopher Harvey’s 7,007 target.
Risks include prolonged trade wars, particularly if China retaliates further or if Section 232 investigations into pharmaceuticals and semiconductors escalate tensions. Posts on X, such as one from @InvestingFrance, reflect awareness of UBS’s 15% forecast, with sentiment cautiously optimistic about de-escalation. UBS advises investors to diversify portfolios, favor quality tech and small-cap stocks, and maintain gold exposure to hedge volatility.
Sources: UBS Global (various reports), Investing.com, Reuters, posts on X
