Tariffs will weigh heavily on US business equipment investment

Accounting for the suspension of the April 2 ‘reciprocal’ tariffs, the 10% baseline tariff, and the triple-digit tariff rate on China that is still in place, plus the various exemptions, we estimate the average effective tariff rate across all products and countries is now 25%, up from 2.5% in January.

We have traced how imports feed into business equipment investment through direct imports and the use of imported components across the supply chain.

In this report, we present our key findings:

• Direct imports account for 21.4% of the total value of equipment investment.
• With heavy exposure to China, our linkages model suggests the average tariff increase for equipment investment is closer to 35%, rather than our 25% estimate for the overall average tariff.
• Based on the slate of tariffs and exemptions currently in place, we estimate potential rises in prices for 25 categories of business equipment investment.