The Budget Lab at Yale University estimates the average effective U.S. tariff rate climbed to 17.9% as of Oct. 30—its highest level since 1934—under the 2025 mix of duties now in force. After consumers and companies shift purchases to lower-tariff sources, the rate settles at 17.4%. If the Supreme Court throws out tariffs imposed under the International Emergency Economic Powers Act (IEEPA) and those collections are refunded, the rate will fall to 9.1%.
The lab models a 1.3% rise in the overall price level in the near term, equivalent to a short-run hit of about $1,800 to the average U.S. household ($1,000 for the lowest-income households). Real GDP growth is shaved by 0.5 percentage points in both 2025 and 2026, with a persistent long-run drag of 0.35%—about $105 billion a year in 2024 dollars—and payrolls lower by 490,000 jobs by late 2025. The group also corrected an earlier calculation error, reaffirming 17.9% as the correct effective rate.
Tariff exposure is uneven. The steepest short-run price spikes are in apparel and leather (about +24%) and textiles (+15%), with electronics-heavy categories such as electrical equipment and computers in the mid-teens. Motor-vehicle prices rise about 10% in the short run and 5% overall; food prices are up 1.9% initially and 1.6% long-run. Sectorally, the lab projects manufacturing output up 3.2% eventually, but those gains are more than offset by declines in construction (-4.0%) and agriculture (-0.7%), leaving the economy smaller overall.
The backdrop is a fast-moving 2025 tariff landscape. A presidential proclamation imposed new Section 232 duties effective Nov. 1: 25% on medium- and heavy-duty vehicles and parts and 10% on buses, layered atop earlier actions on steel, aluminum, and copper. The administration also trimmed the IEEPA “fentanyl” tariff on Chinese imports from 20% to 10% and made bilateral tweaks with key partners.
A legal reckoning could alter the trajectory. During oral arguments last week, justices across the ideological spectrum questioned whether IEEPA authorizes sweeping, economy-wide tariff powers typically reserved for Congress. A decision to curb that authority would point the outlook closer to Yale’s “IEEPA invalidation” scenario, with a smaller price shock (about +0.6%) and a lighter hit to growth and jobs—and potential refunds for importers.
For wholesale distributors, the implications are immediate and operational. Landed costs are rising fastest in metal-intensive goods (electrical, electronics, machinery) and apparel/textiles, pressuring margins where pass-through power is limited.
The vehicle and parts tariffs lift fleet acquisition and maintenance costs, with knock-on effects for last-mile and regional logistics budgets.
With the lab modeling a 4% long-run contraction in construction, distributors tied to building materials, HVAC, tools, and MRO should brace for slower project starts and lengthening sales cycles. Sourcing will keep tilting toward USMCA partners and select Europe/UK channels flagged as relative “winners,” making dual-sourcing, qualification of alternates, and tighter tariff-surcharge and refund language in contracts near-term priorities. If the Court reins in IEEPA, distributors will need playbooks for rapid price resets, credit/rebate handling with customers, and renegotiation of supplier term.
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