Tariff rate Peak creates Economy Peak ?

Last week, the USA announced new tariff rates that will be effective from 8th  August. The previous base rate was 10% excluding China and sectoral tariffs. In this round, it is about 15% but for some major partners, it’s close to 20% or above. Given that the future average rate will be above the current one despite whatever deals are struck, the uncertainty of its impact will only create more nervousness. 

As per the latest data release, the Custom Duty collection for July 2025 is at $29.6 Bn compared to $26.6Bn in June 2025 and $7.1 Bn in July 2024. In recent results, some of the consumer discretionary companies, especially automotive companies, have guided for the cost of tariff hit above $1 Bn. 

All this is calculated at the average rate from April to July 2025. The impact on their and other businesses with new rates would be much higher. The question now is when and how much of this impact is shared with consumers. 

This would lead to the next few months to be important as the “positive” sentiment of the tariff fades out and the reality of its impact on earnings, economy and inflation fades in. The markets at peak earnings risk a quick and strong correction in the worst-case scenario.