- President Donald Trump’s tariffs According to analysts at UBS, it could reach a fast rate of 25% to 30% under his recently announced plan. The sudden rates are at the highest level in over 150 years. However, after a cycle of retaliation and escalation, UBS will see tariffs return later this year.
President Donald Trump’s “liberation day” tariffs have already sent interest rates to the steepest levels of the century, but they could be even higher.
According to Notes from UBS Analysts On Friday, the latest Salvo in import taxes will increase by 25% from 2.5% before the 2024 election. However, it is unlikely to stop there.
“The EU and China are likely to retaliate, and a “mutual” approach to US tariffs means that retaliation by trading partners is likely to be met with even higher US tariffs,” they wrote.
Additionally, some of the imports that weren’t targeted in the past week could be subject to future investigations and lose exemptions, UBS said, saying the Trump administration has “highly convictions” on the merits of restrictive trade policy.
On Wednesday, Trump added 34% collections to China, raising total interest rates to 54%, and struck the European Union with a 20% obligation. China has already retaliated with a 34% tariff, and the EU said it plans to respond to that as well.
UBS expects effective US tariff rates to peak in the 25%-30% range. According to data from Fitch reviewthe effective tariff rate of 25% is already at its highest since 1909.
And if it reaches 30%, it will be the highest since 1872. Civil War hero Ulysses S.S. Grant was president, and the US economy was still in the early stages of the Industrial Revolution.
However, by the third quarter, UBS expects tariffs to begin returning and close 2025 at 10%-15%.
“The various individual countries suggest that they have no intention of retaliation and that dealing with individual countries can reduce overall effective tariff rates,” analysts said.
In fact, Vietnam confirmed over the weekend that it offered to remove all tariffs on US imports, and Trump administration officials said on Sunday that more than 50 countries had contacted the White House for tariff talks.
Trump will also face more pressure on negotiations, UBS predicting, and is extensively lobbying to lower policies and unlock exceptions, as well as potential challenges to his tariff legal basis.
And as midterm election season approaches, political calculations may also ease Trump’s stance. Republican Sen. Ted Cruz warned of a political “blood bath” in 2026 if tariffs cause a recession.
UBS believes GDP has grown to below 1% in 2025, including a year-on-year recession when GDP declines from peak to trough. Stocks will recover, but analysts have reduced their year-end S&P 500 target from 6,400 to 5,800.
“We believe it could include a potentially acceptable ‘off-ramp’ that could allow all aspects to declare victory. We believe this will include increased European defence spending, measures to prevent Asian measures from supplying global markets, reductions of existing tariffs or non-tariff barriers, or measures to increase inward investment in the US,” UBS said.
This story was originally featured on Fortune.com.
