State of U.S. Tariffs: April 2, 2026
Key Takeaways
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The Budget Lab (TBL) estimates the effects of all US tariffs and foreign retaliation implemented through April 2, 2026, including the 10% Section 122 tariffs and the Section 232 tariffs on steel, aluminum, copper, automobiles, auto parts, and other products. Under our baseline case, the Section 122 tariffs expire after 150 days, but this report also presents estimates for a scenario where they are made permanent.
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Current Tariff Rate: The US average effective tariff rate stands at 11.0%, the highest since 1943 (excluding 2025). If the Section 122 tariffs expire in 150 days as scheduled, the rate will fall to 8.2%, the highest since 1946. Post-substitution, these figures are 9.6% and 7.1%, respectively.
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Overall Price Level & Distributional Effects: TBL assumes the Federal Reserve “looks through” the tariffs and allows prices to rise, such that the tax burden is felt through higher prices for consumers rather than lower nominal incomes for workers and firms. If Section 122 tariffs expire as scheduled, the ultimate price level impact will be between 0.5% and 0.6%, representing a loss of between about $650 and $780 for the average household. (If they are instead made permanent, the price impact would be between 0.8% and 1.0% and the household loss figures would be between $1,130 and $1,340).
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Macro Effects: On a year-over-year basis, the 2026 economy benefits from lower tariff rates this year compared to last year. In the long run, the US economy is persistently 0.1% smaller, the equivalent of about $27 billion annually in 2025 dollars. (If Section 122 is extended, the long-run reduction in output grows by about two-thirds.)
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Long-Run Sectoral GDP & Employment Effects: In the long run, tariffs present a trade-off. US manufacturing output expands by 0.7%, but these gains are more than crowded out by other sectors: construction output contracts by 2.0% and mining declines by 0.8%. (These effects are directionally similar and larger if Section 122 is extended.)
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Fiscal Effects: Assuming Section 122 tariffs expire in 150 days, the administration’s tariffs will raise about $1.1 trillion over 2026–35, though slower economic growth reduces revenues and brings the net dynamic revenue to $1.0 trillion. (If they are instead made permanent, these figures would be $1.7 trillion and $1.6 trillion.)
Changes Since the Last Report
This report reflects several changes, the code behind which is available to view in our public GitHub repository, since our update published on March 9:
- New input-output price model. Prior to this update, our consumer price estimates were based on a top-down formula which applied an overall average effective tariff rate shock to an estimated import content share of goods parameter. We have since replaced this approach with a Leontief input-output price model based on the methodology described in Barbiero and Stein (2025). The new model uses Bureau of Economic Analysis use tables and requirements matrices to trace tariff shocks through the full production network. Rather than assume all commodities share the same exposure to import shocks, this approach allows the import content assumption to vary with changes in composition of the tariff regime.
- Consumer prices by spending category. In prior reports, our disaggregation for the aggregate price impact was reported in terms of commodities—essential product types like “metals” or “wheat”. We have since updated our breakout to instead report consumption categories, which more clearly reflect the types of final goods and services households actually spend their money on rather than product types. For example, increases in wheat prices previously appeared as a standalone commodity category, but are now reflected in consumer-facing categories such as food at home (e.g., bread or cereal). This approach better captures how upstream price changes translate into the prices households ultimately pay.
- Inclusion of daily tariff rate figures. In 2025, our State of Tariffs report typically included a chart showing the overall effective tariff rate for each day of the year. In recent months, however, we discontinued this series: it became increasingly difficult to report a concept-consistent series because we had made several methodological improvements to our measure of ETRs over the year. Yesterday’s release of the Budget Lab’s Daily Tariff Rate Tracker, an open-source tool that parses the official Harmonized Tariff Schedule for every day since 2025 and calculates country- and product-level tariff rates, allows us to reintroduce that figure and add a tariff authority breakout of the overall ETR.
- Improved USMCA estimates. We now estimate USMCA eligibility at a more fine-grained degree of product detail. This change slightly increases our estimated overall ETR.
We analyze two scenarios for tariff policy: one where Section 122 expires at the end of 150 days as scheduled, and another where it is extended. Both scenarios assume that the invalidated IEEPA duties are refunded to importers over the course of 2026.
Average effective tariff rate
The distinction between pre-substitution metrics (before consumers and businesses shift purchases in response to the tariffs) and post-substitution (after they shift) is a crucial one. One metric where the difference is meaningful is the average effective tariff rate.
Measured pre-substitution—assuming there are no shifts in the import shares of different countries and products—current tariff policy, while the Section 122 tariffs are in effect, represents the equivalent of a 9.0 percentage point increase in the US average effective tariff rate. A pre-substitution approach is a good measure of welfare, since it reflects the full cost faced by consumers before they start making difficult spending choices. This increase would bring the overall US average effective tariff rate to 11.0%, the highest since 1943, excluding last year’s tariff rates.
Post-substitution—after imports shift in response to the tariffs—the current tariffs generate a 7.6 percentage point increase in the US average effective tariff rate, which brings the overall US effective tariff rate to 9.6%. If the Section 122 tariffs expire in 150 days as scheduled, the effective tariff rate will then be 8.2% (7.1% post-substitution).
Figure 1 shows the Trump administration’s tariffs in the long-run historical context, and Figure 2 plots the daily ETR, broken down by legal authority, throughout 2025 and 2026.
Results
Average Aggregate Price Impact
The current tariff regime implies an increase in consumer prices of 1.0% in the short run, assuming full passthrough of tariffs to consumers and assuming that the Section 122 tariffs are extended. If these tariffs expire as scheduled, this figure is about 0.6%. These pre-substitution numbers capture consumer welfare effects and are the equivalent of a loss of income of about $1,338 (extension) or $780 (expiration) per household on average in 2025 dollars.
Under expiration of the Section 122 tariffs, the post-substitution price increase settles at 0.5%, a $648 loss per household. (If extended, these figures are roughly 0.8% and $1,130.)
US Macroeconomic Effects
TBL estimates that, all else equal, the current tariff regime has reduced GDP and increased unemployment slightly. While the level of output in 2026 is lower than it would have otherwise been if the pre-2025 tariff regime had been maintained, tariffs are increasing the growth rate of output in 2026 as the economy recovers somewhat from the large shock in 2025. The level of real GDP remains persistently 0.10% to 0.16% smaller in the long run, depending on the duration of Section 122 tariffs. Our modeling suggests any economic boost associated with refunds of IEEPA tariffs to businesses will be small.
Long-Run US Sectoral Output & Employment Effects
Tariffs shrink the overall size of the US economy in the long run, but beneath aggregate GDP, they also drive reallocation across US sectors. Long-run output in the manufacturing sector expands slightly, with durable manufacturing seeing the largest gains within the manufacturing category. But this expansion in manufacturing more than crowds out the rest of the economy: construction, mining & extraction, and agriculture contract slightly. These patterns are similar regardless of whether Section 122 tariffs expire or are extended.
Long-Run US Sectoral Output & Employment Effects
Tariffs shrink the overall size of the US economy in the long run, but beneath aggregate GDP, they also drive reallocation across US sectors. Long-run output in the manufacturing sector expands slightly, with durable manufacturing seeing the largest gains within the manufacturing category. But this expansion in manufacturing more than crowds out the rest of the economy: construction, mining & extraction, and agriculture contract slightly. These patterns are similar regardless of whether Section 122 tariffs expire or are extended.
Global Long-Run Real GDP Effects
Long-run global GDP is slightly lower due to tariff policy. Canada, China and Mexico see the largest negative hits to output, while European and other free trade agreement partners see slight boosts to output. These directional effects are similar regardless of whether Section 122 tariffs expire or are extended in July.
Fiscal Impact
The current tariff regime, assuming that Section 122 tariffs expire, would raise about $1.1 trillion over ten years, conventionally scored. Given the negative output effects of the tariffs, these new revenues will be partially offset by reductions in tax revenue as a result of lower growth. TBL estimates that these effects would total about $90 billion over the decade, bringing net dynamic revenue to about $1.0 trillion.
If instead the Section 122 tariffs are extended, revenue would be meaningfully higher: conventional revenue would be $1.7 trillion over the decade and the dynamic score would be roughly $1.6 trillion.
Distributional Impact
One way to measure the distributional burden of tariffs is to look at the relationship between consumption, which gets more expensive under tariffs, and income for a given year. Under this view, tariffs are a regressive tax because lower-income households spend a larger fraction of their income than higher-income households do on average.
TBL finds that the burden, expressed as a share of post-tax-and-transfer income, on the first decile is about three times that of the top decile (1.1% versus 0.4% if Section 122 tariffs expire, and 1.9% versus 0.6% if extended). The average annual costs to households in the bottom and top deciles are about $430 and $1,810 respectively in 2025 dollars—figures that assume Section 122 tariffs expire. If instead Section 122 is made permanent, these annual household burdens would be about $740 and $3,100.
Consumer Prices by Spending Category
Tariffs affect different goods and services differently. Figure 7 shows the estimated price impact by spending category. Assuming Section 122 tariffs expire as scheduled, the categories most affected are goods products like motor vehicles, clothing, and furnishings. Services, which account for the majority of consumer spending, face only indirect price pressures through tariffs and thus see much smaller price effects. If Section 122 tariffs are extended, the price effects are directionally similar but larger, and clothing would rank above motor vehicles as the hardest-hit category.
