Word of the month: Tariffs
Since February, new tariffs have constantly been imposed on imports from individual countries or on certain goods such as steel, aluminum, and motor vehicles, only to often be suspended again. Since April, the US has been demanding an additional tariff of at least 10 % from practically all trading partners. Most recently, the US has threatened the EU with 30 % tariffs starting August 1.
According to data from the US tax research institute Tax Foundation, the effective US import tariff rate is now higher than it has ever been since the Second World War. Tariffs increase prices in the US, burden the exports of trading partners, and lead to trade diversion. Monetary policy reactions are also likely to follow.
IHS model simulations conclude that the US tariffs imposed so far could reduce Austria's economic output by 0.2 % this year and 0.1 % next year. Particularly significant declines are to be seen in the automotive industry and the metal sector. For the US, larger GDP losses of 0.5 % in 2025 and 0.7 % in 2026 are expected.
In addition to the immediate effects of tariffs on trade, erratic US trade policy has caused a massive increase in economic policy uncertainty. Uncertainty leads companies to rethink investment and location decisions, and private households to postpone purchases of durable consumer goods. More cautious bank lending could follow. Recent developments make it clear that using tariffs as political leverage not only harms the directly affected industries, but also threatens the stability of the global economy as a whole.
Klaus Weyerstraß
IHS senior researcher
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