- With Section 122's flat 10% tariff expiring on 24 July, the switch to Section 301 and Section 338 tariffs will send the US average import tariff back above 2025's IEEPA-era level to 12.4%, up from a May low of 7.7%. And this time it should stick: Section 301 requires formal USTR investigations and is far harder to challenge in court. History shows these tariffs tend to outlive the administrations that impose them: China's 2017 case is already in its second statutory review. On top of Section 301, the US will continue using Section 232 tariffs, concentrated on a few sectors – automotive, steel, aluminum, pharmaceuticals – while AI products remain largely shielded at below 5% thanks to a narrow scope of surtaxed electronic products and carve-outs for Taiwan and South Korea. So far, global trade flows have proven more resilient than feared: 2025 export losses came in at USD74bn, well below the USD134bn forecast, with USD 57bn expected in 2026 as frontloading, rerouting, shipment-timing shifts and exemptions cushion the blow. But with the trade war 3.0 the real shift will be structural. Among the largest economies, China (+13pps to 35%), the UAE (+7pps to 22%), Brazil (+8pps to 20%) and Vietnam (+8pps to 15%) face the steepest tariff increases and now rank among the highest tariff levels overall. By contrast, the UK, South Africa, Taiwan and the Philippines remain comparatively insulated, with tariffs holding stable at 4-7%, a divergence set to accelerate the supply-chain reallocation already underway. China's US import share collapsed from 21% in 2016 to 13% in 2024 and 9% in 2025, while that of rerouting alternatives in ASEAN jumped from 7% to 14%.
- The inflation punch of tariffs in the US is fading, but a second round is already warming up. With the H1 2025 tariff wave now largely passed through, the tariff drag on inflation should fade fast – reaching near zero in H2 2026, and bringing the full-year contribution down to +0.3pp. But the truce won't last: Section 301 and Section 338 tariffs should push the effective rate to 12.4% by Q4 2026, reigniting tariff-related price pressure into 2027 (+0.4pp, peaking at +0.5pp annualized in Q2 2027), keeping core CPI sticky at +2.7% even as headline inflation cools to +2.2% on energy deflation. For corporates, the margin squeeze has largely passed: margins for tariffed-goods fell up to -5.5% versus a no-tariff counterfactual, peaking in Q3 2025 before recovering as pass-through advanced. But the recovery is uneven – manufacturers have rebounded, while retailers, wholesalers and transportation remain under pressure.
- Section 301 is now the main event, but the trade war has plenty of extra time to play. Section 301 is becoming the administration's tool of choice, driven by geopolitics, with Vietnam and Germany facing fresh investigations over Intellectual Property (IP) and pricing of pharmaceutical products, respectively. Section 338 will also become Trump’s new more reactive tool to use as a negotiations tool. Watch for NATO defense-spending disputes (e.g. Spain), Chinese rerouting through Asian supply chains and above all digital service taxes – a 100% DST-linked tariff on the EU would push its effective rate to 52% and cost-USD60bn in exports. Elsewhere, tariff relief to incentivize investment in constrained sectors (aluminum), bilateral deal-making resumes – India's 18% interim rate still awaits finalization – while export controls, notably on AI models following the Anthropic Fable 5/Mythos 5 episode, could become a new lever mirroring weapons-export policy. Finally, USMCA's shift to annual reviews through 2036 opens structural fault lines on automotive rules of origin, Chinese content via Mexican nearshoring and agricultural access.