Analysts at UBS project that President Donald Trump’s tariffs may reach an effective rate as high as 30%, increased from 25% under his recent announcements. This rate would be the highest in over 150 years. However, UBS anticipates that after a period of retaliation and escalation, the tariffs may decrease later in the year.
The “Liberation Day” tariffs introduced by Trump have already elevated rates to unprecedented levels, but according to a recent note from UBS analysts, they could rise further. The latest round of tariffs has already increased the effective rate to 25%, from 2.5% prior to the 2024 election, and further escalation is possible.
UBS analysts suggest the European Union and China may retaliate, and the U.S. may respond with even higher tariffs on trading partners. Additionally, some imports not previously targeted might be investigated and could lose their exemptions, given the administration’s strong belief in the benefits of restrictive trade policies.
On a recent Wednesday, Trump implemented a 34% levy on Chinese imports, elevating the total rate to 54%, and imposed a 20% duty on the European Union. China has reciprocated with its own 34% tariff, and the EU has indicated plans to respond. UBS forecasts that the effective U.S. tariff rate will peak between 25% and 30%. According to Fitch Ratings data, a 25% rate would already be the highest since 1909, and a 30% rate would be unprecedented since 1872 during Ulysses S. Grant’s presidency.
UBS, however, predicts a decline in tariffs by the third quarter, expecting the effective rate to conclude 2025 between 10% and 15%. Some nations have expressed intentions not to retaliate, suggesting potential agreements to reduce tariffs overall. For instance, Vietnam announced its offer to remove all tariffs on U.S. imports, and Trump administration officials have noted that more than 50 countries have reached out for tariff discussions.
UBS also foresees increased pressure on Trump to negotiate, highlighting possible legal challenges and lobbying efforts to moderate the tariffs or secure exceptions. Political calculations—with midterm elections approaching—may also influence Trump’s approach, as Republican Senator Ted Cruz warned of a potential political setback in 2026 if tariffs lead to a recession.
UBS estimates that the U.S. GDP will grow by less than 1% in 2025, forecasting an intra-year recession with a 1% GDP decline from peak to trough. The stock market is anticipated to rebound, though UBS has lowered its year-end S&P 500 target to 5,800 from 6,400.
UBS suggests several potential compromises could allow all parties involved to claim success, such as increased European defense spending, measures in Asia to prevent market dumping, reductions of existing barriers, or actions to boost investment in the U.S. This report was initially published on Fortune.com.