At Howe & Rusling, we have provided updates on this topic throughout the year from the major tariff announcement in April to trade deals and other significant developments. With the deadline here, it’s a suitable time to take stock of the current state of tariff rates and trade deals.
As a refresher, tariffs are taxes imposed by one country on the import of goods or services from another country. Countries may impose tariffs for a variety of reasons including exerting influence on trading partners, raising revenues for the country imposing the tariffs, and protecting domestic industries. One of the stated goals of the tariff policies is to encourage businesses to invest in domestic manufacturing. At Howe & Rusling, we have held the view that tariffs are being used as leverage to negotiate favorable trade deals. Because they are a tax on imports, tariffs have the effect of raising prices on imported goods and services. The Federal Reserve has cited this as a reason for delaying rate cuts as they watch economic data for signs of tariff-related inflation. So, who are the largest trade partners of the United States and what trade deals have been reached with them?
Which countries are the largest trade partners with the U.S.?
According to the U.S. Census Bureau, as of the end of 2024, the top five trade partners with the United States, in order, are Mexico, Canada, China, Germany, and Japan. Trade with these five countries accounted for 49.7% of goods traded with the United States in 2024. These numbers include both imports and exports, but the United States also imported the most goods from these same countries in 2024: Mexico ($505.9B), China ($438.9B), Canada ($412.7B), Germany ($160.4B), and Japan ($148.2B) (U.S. Census Bureau). The Trump administration has cited trade deficits as an area of concern for international trade policy. In 2024, the U.S. had the largest trade deficit with China and the second largest with Mexico. Germany came in at number five on that list, Japan at number seven, and Canada at number nine. The developing situation with tariff rates and trade agreements has the potential to affect the balance of trade with these countries.
What trade deals have been reached?
Since the announcement of a pause on tariffs in April, the United States has finalized trade agreements with the UK, Vietnam, Japan, Indonesia, and the EU. There are ongoing negotiations still in progress with Canada, China, India, and the Philippines. The details of each deal differ, but they all include a reduction in U.S. tariffs on imports from the target countries and promises from these countries to import more goods from the U.S.
The U.S.-UK Economic Prosperity Deal created an allowance for UK automobiles to receive a reduced tariff rate, exempted the UK from the global 25% tariff on steel and aluminum, and includes agreements regarding U.S. agricultural exports.
The agreement with Vietnam set tariff rates on non-exempt imports from the country at 20% with a 40% rate placed on goods suspected of originating in China, while exports of U.S. goods will not face tariffs in Vietnam.
The trade deal with Japan set tariff rates at 15% on non-exempt imports and included agreements from Japan to buy Boeing aircraft and agricultural products.
The Indonesia trade agreement set a 19% U.S. tariff rate on Indonesian goods and included requirements for the country to purchase Boeing aircraft and U.S. agricultural and energy exports.
Following the EU trade deal, the U.S. will impose a 15% tariff rate on imports from the EU while the EU agreed to purchase U.S. energy exports.
While trade talks are still ongoing with China, some progress has been made. Threatened tariff rates on China got as high as 145% in April but are currently at 30% on most goods. There is a separate deadline of August 12 for the U.S. and China to reach a formal agreement without which tariffs on Chinese goods could climb back to 54% when paused tariffs resume.
As with China, tariff rates with Canada and Mexico have shifted throughout the year. Trade negotiations are currently ongoing with both countries. Tariffs on Mexican goods were set to increase to 30% on August 1, but another 90-day extension to the deadline for Mexico was announced on Thursday. There was no such extension announced for Canada which means 35% tariffs are in effect on Canadian goods. It is important to note that USMCA-compliant goods are exempt from tariffs under that existing agreement. According to Sandler, Travis & Rosenberg, this exempts roughly half of imports from Mexico and 38% of imports from Canada.
There were additional announcements throughout the week. Some of the more notable news included an effective date of August 6 for the higher tariff rates, a 25% tariff on most Indian goods, a 50% tariff on many goods from Brazil, and a 15% tariff rate on South Korean imports. The expected 50% tariff on copper imports narrowed to only “semi-finished copper products” which would impact less trade than originally expected. The de minimis exemption for commercial packages valued below $800 will be eliminated, and tariffs on affected shipments will take effect on August 29. As this is a quickly developing story, more news will undoubtedly break before this article is published.
What is the current state of tariffs?
Despite the trade agreements that have been reached, tariff rates are much higher today than they were at the beginning of the year. The Budget Lab at Yale estimates that the average effective tariff rate for American consumers, as of July 28, is 18.2% compared to 2.4% in January.
U.S. Average Effective Tariff Rate 1970
State of U.S. Tariffs: July 28, 2025 | The Budget Lab at Yale
Economists have expressed concerns that higher tariff rates could lead to goods inflation that would squeeze the wallets of everyday Americans and lead to a slowdown in both consumer and business spending (U.S. inflation warms up in June as tariffs boost some goods prices, Reuters). However, economic data has not yet confirmed that outcome. In June, the Consumer Price Index increased slightly to 2.67%, but U.S. retail sales increased to 3.51% and data on business spending showed continued investment. This suggests that both people and businesses are still spending money.
So far markets have shrugged off the warnings from economists. While the Federal Reserve takes a “wait and see” approach, the attitude of the markets is “show me.” The stock market is a machine that quickly prices in the latest information, but it also anticipates future developments. Currently the stock market is not reflecting anxiety about a slowing economy. If economic data begins to confirm the predictions of rebounding inflation or slowing growth, or tariff rates settle in at levels higher than expected, then the market may adjust accordingly. At Howe & Rusling, we are monitoring all these factors and will keep you informed of the developing situation. If you have questions, we are here to help.
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