Beyond the daily churn of breaking news, US tariffs remain firmly in place. In fact, over the past month, the US government has reaffirmed its commitment to using them as an important policy instrument.

US President Donald Trump announced a new round of tariffs at the end of September. These new tariffs range from 25% on heavy trucks and 50% on kitchen cabinets and bathroom vanities to 100% on pharmaceuticals. These tariffs came under Section 232, declaring products as a threat to national security. And as little as kitchen cabinets are a threat to US national security as European washing machines were during Donald Trump's first term in office, these tariffs should be considered a contingency plan, ready to be activated if the US Supreme Court blocks the government's bilateral tariffs in its final ruling on 5 November.

On a more positive note, the US government also announced that it had acknowledged the EU's start of the legislative process, outlined in the trade framework agreement between the EU and the US, which in turn triggers a retroactive reduction of US tariffs on European automobiles to 15%, from the current rate of 27.5%.

All of this shows that the shifts in global trade will continue, and it will take longer than expected before the full impact on the global economy will unfold. Currently, for example, the effective US tariff rate implemented by US customs is only some 10%, while based on the trade agreements known so far, it should be close to 20%.

As regards our base case assumption for trade and tariffs, we stick to the belief of an average US tariff rate of close to 20% until the end of Trump's full term in office. Tariffs remain one of Trump's main instruments in foreign policy, but also an important source of public finance funding.

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