U.S. consumers now face highest overall tariff rate since 1934 after Trump's latest levies

• President Trump has announced new tariffs on pharmaceuticals, furniture, and heavy trucks, raising the average effective tariff rate for U.S. consumers to 17.9%, the highest since 1934, which is projected to increase overall price levels by 1.7% and decrease average household income by $2,400 in 2025 dollars.

• The tariffs are expected to result in a 0.5 percentage point decline in GDP growth for this year and a 0.4 percentage point reduction for 2026, potentially shrinking the U.S. economy by approximately 0.4% in the long term, translating to an annual loss of around $125 billion.

• The unemployment rate is forecasted to rise by 0.3 percentage points by the end of this year and by 0.7 points by 2026, with payroll figures expected to decline by 490,000 by the end of 2025, indicating significant labor market impacts.

• While the tariffs are projected to generate $2.5 trillion in revenue from 2026 to 2035, this figure adjusts to $2 trillion after accounting for $469 billion in negative dynamic revenue effects, showcasing the complex fiscal consequences of these tariffs.

Tariff Impact Analysis and Economic Outlook

In a recent announcement, President Donald Trump revealed a new set of tariffs aimed at pharmaceuticals, furniture, and heavy trucks. This move has raised the average effective tariff rate for U.S. consumers to 17.9%, marking the highest level since 1934, as reported by the non-partisan policy research institute, The Budget Lab at Yale.

The Budget Lab's findings indicate that these 2025 tariffs will ultimately result in a 1.7% increase in overall price levels in the short term. This figure translates to an estimated loss of $2,400 in average household income when adjusted for 2025 dollars.

Regarding impacts on the nation’s real gross domestic product (GDP), the analysis forecasts a decline of 0.5 percentage points in GDP growth for the current year and a 0.4 percentage point reduction for 2026. Over the long term, it is projected that the U.S. economy will be approximately 0.4% smaller, equating to an annual loss of around $125 billion in 2024 dollars, as detailed in a chart shared by The Budget Lab.

In terms of labor market repercussions, The Budget Lab anticipates a rise in the unemployment rate of 0.3 percentage points by the end of this year, increasing to a 0.7 percentage point rise by the conclusion of 2026. Additionally, payroll figures are forecasted to be 490,000 lower by the end of 2025.

Economist Ernie Tedeschi from The Budget Lab noted, "In the long run, tariffs present a trade-off. Total U.S. manufacturing output may increase by 2.7%, but advanced manufacturing is expected to decline by 4.2%. Furthermore, gains in manufacturing are exceeded by contractions in other sectors, such as a 3.7% drop in construction output."

On the fiscal side, the tariffs imposed in 2025 are projected to generate $2.5 trillion in revenue from 2026 to 2035. However, this figure accounts for $469 billion in negative dynamic revenue effects, bringing the adjusted dynamic revenue estimate to $2 trillion.

In the world of finance, Trump’s latest tariff measures appeared to take a backseat this week, as Wall Street focused instead on various Federal Reserve announcements and an active economic calendar. For investors, notable exchange-traded funds that track the standard S&P 500 index include (NYSEARCA:SPY), (NYSEARCA:VOO), (NYSEARCA:IVV), (NYSEARCA:RSP), (NYSEARCA:SSO), (NYSEARCA:UPRO), (NYSEARCA:SH), (NYSEARCA:SDS), and (NYSEARCA:SPXU).