Technical Note
Methodology for assessing the impact of US tariffs on trade
28th July 2025
The prepared Tariff Briefs evaluate the economic impact of “reciprocal tariffs” by the United States (US)
on imports from third countries, which were announced on April 2nd and are now to take effect on August
1st 2025. The methodology employed aims to estimate both the direct and indirect trade effects arising
from the introduction of these tariffs by the US, using robust quantitative tools and reliable trade data
sources.
Data Sources
• Data on planned ‘retaliatory’ US tariff increases were obtained from the White House Executive
Order & Trump tariff letters: A full list of countries and proposed rates so far : NPR
• Existing tariffs on steel, aluminium and the auto sector were applied. Additional tariffs on USMCA
partners and China were also applied. Exemptions taken by the US on some products (such as
energy products) were also included in the simulation.
• Baseline tariff rates were obtained from ITC MacMap for the latest available year, 2023. This covers
the Ad Valorem Equivalent (AVE) of the minimum tariff rates applied by the US on the country’s
imports.
• Export values and trade flows used in the simulation are based on 2024 US import data sourced
from ITC Trade Map/UN Comtrade and processed through International Economics Consulting’s
(IEC) Trade Simulation Tool.
• Elasticities of demand are obtained from Ghodsi et al. (2016). Infinite elasticities of supply are
assumed, meaning that countries exporting to the US do not have the ability to influence world
prices. Armington elasticities to differentiate between country varieties are set at 1.5 by default,
meaning that consumers are very price-sensitive and switch to other varieties from other
countries when relative prices change.
Tariff Scenarios and Average Tariff Rate Calculations
To assess the potential impact of the new US tariff regime, two distinct scenarios were modelled:
1. Tariffs in Effect: Reflects the tariff rates that have been officially implemented as of the latest US
announcement.
2. Threatened Tariffs: Reflects proposed or announced tariffs that have not yet entered into force
but represent a potential future policy scenario.
Product-specific tariffs were applied using HS6-level Ad Valorem Equivalents (AVE), distinguishing between
current tariffs and threatened future tariffs. Sectors such as aluminium, steel, automobiles, and energy
products are subject to tariffs currently in effect, while additional sectors such as copper, iphones,
semiconductors, and maritime cargo handling equipment face newly announced threatened tariffs of up
to 100%.
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Table 1 Product specific tariff rates under current and threatened Scenarios
Sectors Tariff in effect Threatened tariffs
Aluminium (Excl. UK) 50% 50%
Aluminium (UK) 25% 25%
Automobiles 25% 25%
Automobile parts 25% 25%
Steel (Excl. UK) 50% 50%
Steel (UK) 25% 25%
Potash (Canada, Mexico) 10% 10%
Energy or energy resources (Canada, Mexico) 10% 10%
Copper 25%
Iphones 25%
Lumber, timber, and derivative products 25%
Pharmaceuticals, pharmaceutical ingredients, and derivative
25%
products
Semiconductors, semiconductor manufacturing equipment, and
25%
derivative products
Maritime cargo handling equipment 100%
Source: Trump tariff letters: A full list of countries and proposed rates so far : NPR; The White House (2025).
Country-specific average tariffs were derived by aggregating product-level tariffs applicable to each
country using a simple arithmetic mean at HS6 level. These average tariffs provide a clear comparison
between the status quo (tariffs in effect) and a more adverse scenario (threatened tariffs), reflecting the
broader economic risk for each trading partner.
Table 2: Countries’ tariff rates under applied and threatened Scenarios
Country Tariffs in effect Threatened tariffs
Algeria 10% 30%
Angola 10% 32%
Bangladesh 10% 35%
Bosnia & Herzegovina 10% 30%
Botswana 10% 38%
Brazil 10% 50%
Brunei 10% 25%
Cambodia 10% 36%
Cameroon 10% 12%
Canada 10% 35%
Chad 10% 13%
China 30% 145%
Côte d'Ivoire 10% 21%
Democratic Republic of the Congo 10% 11%
Equatorial Guinea 10% 13%
European Union 15% 15%
Falkland Islands 10% 42%
2
Fiji 10% 32%
Guyana 10% 38%
India 10% 27%
Indonesia 19% 19%
Iraq 10% 30%
Israel 10% 17%
Japan 15% 15%
Japan 10% 15%
Jordan 10% 20%
Kazakhstan 10% 25%
Laos 10% 40%
Lesotho 10% 50%
Libya 10% 30%
Liechtenstein 10% 37%
Madagascar 10% 47%
Malawi 10% 18%
Malaysia 10% 25%
Mauritius 10% 40%
Mexico 10% 30%
Moldova 10% 25%
Mozambique 10% 16%
Myanmar 10% 40%
Namibia 10% 21%
Nauru 10% 30%
Nicaragua 10% 19%
Nigeria 10% 14%
North Macedonia 10% 33%
Norway 10% 16%
Other countries 10% 10%
Pakistan 10% 30%
Philippines 19% 19%
Reunion 10% 20%
Serbia 10% 35%
South Africa 10% 30%
South Korea 10% 25%
Sri Lanka 10% 30%
Switzerland 10% 32%
Syria 10% 41%
Taiwan 10% 32%
Thailand 10% 36%
Tunisia 10% 25%
Vanuatu 10% 23%
Venezuela 10% 15%
Vietnam 20% 20%
Zambia 10% 17%
3
Zimbabwe 10% 18%
Source: Trump tariff letters: A full list of countries and proposed rates so far : NPR; The White House (2025).
Exposure (or Share) Calculations
Exposure was calculated as the proportion of each country’s total exports destined for the US as a share
of total exports to the world. This approach provides an indication of the risk facing the country in terms
of changes in US trade policy. Taken another way, it shows the dependence of a country’s exports on the
US market.
Impact Analysis
The simulation undertaken by International Econoics was conducted using applied tariffs at baseline
against projected tariffs announced on 9th April 2025 (but postponed until 9th July 2025 until further
notice), using a partial equilibrium model in two-stages. The first stage calculates the impact of bilateral
tariffs applied to all partners to estimate trade creation and diversion effects. The trade diversion values
were then re-inputted into the model with the retaliatory tariffs included to adjust for the higher prices
from tariffs.. Final flows are estimated by calculating the total trade effects. More formally, the basic PE
model used includes three simultaneous equations, specifying demand, supply, and a market clearing
equation to ensure equilibrium (equations (1) to (3)). Additionally, a price linkage equation (4) shows how
import prices relate to export prices.
M = 𝛼𝑀 𝑃𝑀𝜀 (1)
X = 𝛼𝑋 𝑃𝑋𝜇 (2)
X=M (3)
PM = PX (1 + 𝑡) (4)
𝑃𝑀 𝛼 (5)
ΔWM=∫𝑃𝑀 0 𝛼𝑀 𝑃𝑀𝜀 𝑑𝑃𝑀 =𝜀 +1
𝑀
(𝑃𝑀0 𝜀+1 − 𝑃𝑀1 𝜀+1 )
1
𝑃𝑋 𝛼 (6)
ΔWX=∫𝑃𝑋 1 𝛼𝑋 𝑃𝑋 𝜀 𝑑𝑃𝑋 =𝜇 +1
𝑋
(𝑃𝑋1 𝜇+1 − 𝑃𝑋0 𝜇+1 )
0
Where M is imports, X exports, PM price of imports, PX price of exports, αM > 0, and αX > 0 are shift
parameters, ε < 0 and μ>0 are the elasticities of import demand and export supply, and t is the ad valorem
tariff rate. TR is tariff revenue. Equations 5 and 6 show the changes in trade flows: ΔWM and ΔWX are the
changes in the gains for importing and exporting countries, respectively.1
Data Discrepancies
To ensure consistency and comparability, US-reported trade data was used instead of data reported by
individual economies. While US data provides a harmonized view of bilateral flows, discrepancies may
arise for a variety of reasons, including (i) Differences in reporting/valuation methods (CIF vs FOB); (ii)
Differences in HS version (HS code mapping); (iii) time lags in reporting; (iv) trans-shipment through third
countries. These variations may slightly affect accuracy but were deemed acceptable for uniform exposure
and impact modelling.
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1
Gilbert (2017). Partial Equilibrium Analysis. UNESCAP: Bangkok; Baker & Le (2022). Guidebook on Trade Impact Assessment. UNCTAD: Geneva.
UNCTAD/DITC/TNCD/2021/4