The trade war rages on! What are the possible scenarios? 🔎

The United States' customs policy has undergone a major transformation in recent years. From a very open trade country, the United States has become increasingly closed, which has intensified in recent months. After Donald Trump's return to the White House, the American administration significantly raised tariffs on imported goods from almost every region of the world.

Currently, the average tariff rate on products imported into the USA has increased from 2.3% in 2024 to 13.3% in 2025. This increase includes both sectoral tariffs (e.g., 25% on cars, 50% on steel and aluminum), and so-called reciprocal tariffs, i.e., countervailing duties on trading partners, as well as special tariffs on China and selected products from Canada and Mexico. Although the suspension of reciprocal tariffs was supposed to expire on July 9, Donald Trump announced that he is extending the negotiation period until August 1 and emphasizes that countries that do not reach a trade agreement with the US will have to reckon with a significant increase in tariffs.

Possible Scenarios for the Further Trade War

Economists at Bloomberg Economics have presented three possible scenarios for the further development of US customs policy:

Base Scenario

In this variant, most current tariffs are maintained, and new sectoral tariffs are introduced, e.g., 25% on pharmaceuticals. The average tariff rate rises to 15.5%. A 23% decrease in US imports is expected, and tariff revenues could exceed $2.8 trillion over the decade. A side effect will be a 1.9% decrease in US GDP over 2-3 years and a 1.1% increase in prices. New higher tariffs on pharmaceuticals are negative news for European countries, not only those in the EU but also for Switzerland, which is a large exporter of pharmaceutical products.

High Tariff Scenario

In this variant, the US implements all announced increases, including high sectoral tariffs and a radical increase in countervailing duties (e.g., 50% on the EU, 34% on China). The average tariff rate reaches 28%. US imports fall by as much as 42%, and tariff revenues increase to $3.7 trillion. The American economy experiences a strong slowdown (3.7% drop in GDP) and a significant price increase (2.2%), which threatens stagflation. This is, of course, the worst-case scenario from the perspective of financial markets and may also lead to a further desire to move away from the US dollar as a reserve currency. In recent weeks, any uncertainties regarding US trade policy have coincided with a sell-off of the American currency. Today, however, after the weekend extension of the negotiation period, the US dollar began to strengthen across the board.

Low Tariff Scenario

In this case, tariff rates are partially reduced—the average drops to 10.5%. Imports decrease by 13%, tariff revenues reach $2.1 trillion, and the negative impact on GDP and inflation is significantly smaller (1.2% drop in GDP, 0.7% price increase). It is worth mentioning that in every scenario, the overall impact of tariffs is negative, but the currently maintained general rates of 10% are acceptable to most countries worldwide. However, one of the problems is high sectoral tariffs on the prices of certain basic goods such as aluminum, steel, and cars.