Wolfe Research strategist Tobin Marcus redirected attention from overseas conflict to domestic trade policy in the first installment of a multi-part series aimed at answering investor questions about tariffs and trade dynamics.
Central to Marcus's note is the observation that the U.S. effective tariff rate on all imports has declined notably - from a high of 10.9% in October to 6.8% in the most recent March data. That reduction, he argues, has eased a material drag on the economy.
Marcus attributes the fall in the effective tariff rate to three primary influences: policy changes affecting China and India, mounting evidence of tariff evasion, and a Supreme Court ruling that undercut the administration's use of IEEPA tariffs. He writes that these developments have helped reduce the tariff headwind and that investors may not fully appreciate the extent of the change.
"Tariff easing has been a below-the-radar factor supporting US growth more broadly," Marcus wrote.
Wolfe Research frames the decline in tariffs as a complementary force supporting U.S. expansion along with two other elements called out in the note - AI-driven capital expenditure and consumer tax cuts from the One Big Beautiful Bill. Together, Wolfe sees these factors as contributing to a more supportive growth backdrop than is widely recognized.
Despite the recent easing, the note warns of an emerging policy shift. The administration has proposed restoring permanent tariffs under Section 301 and issued a rulemaking proposal to establish a rate floor. Wolfe anticipates that this step will be followed by adjustments that raise country-level tariffs for key trading partners.
Marcus expects the renewed tariff headwinds to appear later in 2026, but he characterizes them as modest in scale. "It's unlikely that they'll ramp up high enough to derail growth," he added, signaling that while the policy change could tighten conditions for some import-related activity, it is not expected to overturn the broader growth outlook outlined by Wolfe.
Implications and context
- The effective tariff rate fall has been meaningful and may have supported aggregate U.S. growth.
- Policy moves to reinstate permanent Section 301 tariffs and a rate floor could lift country-specific tariff rates.
- Wolfe expects any renewed tariff pressure to emerge in 2026 and to be modest rather than economy-altering.