One Tariff, Many Questions: Trade Policy Uncertainty Under Trump

Ten percent reciprocal tariffs worldwide. That was President Trump’s response on February 20 to a US Supreme Court decision declaring the tariffs he imposed under the International Emergency Economic Powers Act (IEEPA) illegal.

At first glance, the announcement appears to simplify an increasingly complex tariff regime. But in reality, it introduces yet another layer of uncertainty.

The facts

On February 20, President Trump issued an executive order declaring that all executive orders relying on IEEPA would no longer be in effect. This decision rescinded all reciprocal tariffs imposed on countries around the world through executive orders and their amendments; the additional reciprocal tariffs imposed on Brazil; additional tariffs on India related to oil imports from Russia; tariffs on countries importing oil from Venezuela or Iran and on countries exporting oil to Cuba; and the so-called fentanyl tariffs imposed on China, Mexico, and Canada. At the same time, the exclusion of de minimis imports from the list of tariff-exempt products was reaffirmed.

Through a White House fact sheet released that day, the administration replaced reciprocal tariffs with a uniform 10 percent tariff applied to all countries, invoking Section 122 of the 1974 Trade Act. This measure is explicitly temporary, limited to 150 days. A revised list of exempted products was also published.

Importantly, sector-specific tariffs—including those on copper, steel, aluminum, automobiles, and lumber—remain in place.

On February 21, President Trump announced via social media a possible increase in the uniform tariff to 15 percent. At the time of this writing, however, that increase has not taken effect.

How were countries affected?

To assess the impact of these changes, we updated the CGD Tariff Tracker to calculate changes in effective tariff rates (ETRs)—the weighted average tariff actually applied to a country’s exports, taking into account product-level exemptions and sector-specific levies. Figure 1 compares the ETRs before and after the most recent policy shifts.

Figure 1. Effective tariff rates before and after recent US policy announcements

As shown by countries’ positions relative to the 45-degree line, no country faces higher ETRs under the new regime; most are either unaffected or face a lower ETR. Three factors explain this result:

• Before February 20, the baseline reciprocal tariff for many countries was already 10 percent; no country faced a lower reciprocal tariff.
• The new list of exempted products differs only marginally from the previous one.
• We assume that countries with existing and pending trade agreements will also face a 10 percent reciprocal tariff until either a new policy is announced or the temporary authority expires in July, whichever comes first. In other words, even if a country has agreed to a reciprocal tariff above 10 percent in a trade deal, we assume the agreed tariff is not applied while the temporary regime remains in place.

Who benefits most?

Which countries see the largest decline in effective tariffs—that is, which lie farthest above the 45-degree line? Two groups stand out: the BRIC countries excluding Russia, and countries that previously faced very high tariffs after failing to secure trade deals with the US.

Among the BRIC countries:

• Brazil faced a 50 percent reciprocal tariff, which, after exceptions, translated into an ETR of 26.3 percent.
• China was subject to additional Trump-era tariffs totaling about 20 percent, partly driven by fentanyl-related tariffs.
• India announced a trade deal in early February that would have reduced its reciprocal tariff from 50 to 18 percent. However, negotiations were paused on February 23 in light of recent developments.

Among countries without trade deals, Laos and Myanmar stand out. Both faced ETRs close to 40 percent, reflecting stalled negotiations and limited alignment with US trade and security priorities.

What about countries that had negotiated deals?

The table below summarizes the status of recent trade agreements and their agreed reciprocal tariffs. Most involved tariff rates well above 10 percent.

If the new tariff regime stays in place, many of these agreements will effectively need to be reopened. Indeed, India has paused trade talks, and the European Union has signaled a freeze on ratification of the recently concluded agreements.

The threat of heightened uncertainties

Do stable or declining ETRs mean that countries—and the global economy—are better off? The answer is a resounding NO.

Enormous uncertainty defines the current trade regime, weighing heavily on governments’ and firms’ ability to make investment and production decisions. Consider just a few open questions:

• How will US importers respond? In 2025, expectations of tariff increases led firms to frontload imports in the first half of the year, followed by a sharp decline once tariffs took effect in August. Will firms rush to frontload imports again, while the current regime lasts? Or will the costs imposed by pervasive uncertainty significantly discourage trade, dragging down both US growth and global demand?
• What happens to previously negotiated trade deals? Even if reciprocal tariffs settle at 10 percent, what becomes of the non-tariff concessions—most notably large investment commitments into the US—that partner countries agreed to? Recent developments strongly incentivize a wait-and-see approach over renewed negotiations.
• What about sub-Saharan Africa? Many African countries benefit from the African Growth and Opportunity Act (AGOA), which exempts numerous exports from US tariffs. But AGOA is set to expire at the end of this year. What tariffs will replace AGOA? How can investors (in both the US and African countries) make credible trade and investment plans when the post-AGOA regime remains entirely unclear? These uncertainties don’t bode well for Africa’s economic prospects.
• Will uncertainty accelerate trade fragmentation? Heightened US-driven uncertainty may inject new momentum into alternative trade blocs and deepen shifts away from the US as both a trade and a financial partner. It is difficult to see how the US ultimately benefits from such dynamics

A final word

Uncertainty is the enemy of trade and investment. Firms cannot commit capital when the rules of the game change every few weeks. A final figure underscores the point: US trade policy uncertainty has returned to levels last seen in April 2025, when the US administration launched a rapid and destabilizing sequence of tariff changes that continue to disrupt the global economy.

Figure 2. Daily Trade Policy Uncertainty Index (Index, average for 2024-2026 = 100)