US tariffs have reached levels that are transforming the global economic outlook, significantly raising US recession risks and constraining the Federal Reserve’s ability to lower interest rates further, Fitch Ratings has revealed
The “Liberation Day” tariff increases outlined by the US government on 2nd April, 2025 sharply exceeded the already steep rises assumed in Fitch’s March 2025 Global Economic Outlook (GEO).
These increases impose a minimum tariff rate of 10% for all US trade partners and sizeable additional increases on a subset of 57 trade partners.
The adjustments raise US effective tariff rates (ETR) to approximately 20% for imports from the EU and around 64% for China, surpassing our March assumed levels of 15% and 35%, respectively.
Other Asian economies will also face much higher tariffs, including Vietnam (a 46% rate), Thailand (36%), Taiwan (32%), India (26%), Korea (25%), Malaysia (24%) and Japan (24%). The country-specific rates allow for the exclusion of sectors where product-specific tariffs remain under discussion, such as for semiconductors, pharmaceuticals, copper, and lumber.
Fitch estimates the changes will raise the overall US ETR to about 25%, which would be significantly higher than the 18% it had assumed for 2025 in the March GEO and the highest rate for more than 115 years.
US growth in 2025 is likely to be slower than the 1.7% that the UK-based firm had projected in March 2025, given higher-than-anticipated tariffs.
Recent US consumer sentiment indicators have weakened sharply against a backdrop of equity market volatility, and US consumer spending growth slowed notably in January and February.