US Tariff Hikes and Trade Policy Uncertainty Impact Imports, Economist Reports

In a recent discussion at the University of the Philippines School of Economics, Dennis Novy, chief economist at the UK's Foreign, Commonwealth and Development Office, presented evidence that higher tariffs and confusion surrounding US trade policy have significantly curtailed American imports in 2025. His findings indicate that tariffs alone reduced imports by an average of 4 to 6 percent, while the uncertainty surrounding these tariffs led to an additional decline of 7 to 12 percent.

Novy elaborated that the overall decline in imports reached an average of 13 percent during periods of peak tariffs, with approximately half of this decrease attributable to the uncertainty surrounding trade policies. He emphasized that established trading relationships tend to be more resilient in the face of such uncertainty. Companies that deal in customized products or maintain long-standing partnerships are less impacted than those offering easily substitutable goods.

Novy highlighted that if there is a trustworthy relationship between countries, the impact of confusion is lessened, underscoring the importance of stable trading relationships in mitigating the effects of tariff-related uncertainties.

Novy noted an unprecedented frequency of tariff interventions by the US in 2025, with the US Harmonized Tariff Schedule undergoing 32 revisions, compared to an annual average of 10.5 revisions in 2023 and 2024. This complexity was exacerbated by the unconventional methods employed in implementing trade policy, including presidential executive orders and proclamations, as well as the use of the International Emergency Economic Powers Act (IEEPA) for country-level tariffs and Section 232 of the Trade Expansion Act for product-specific restrictions.

The economist pointed out that the frequent alterations to tariff rates and the changing rules governing them created a climate of uncertainty that discouraged trade. Novy explained that tariffs themselves are detrimental, but the complete confusion around them is equally harmful. He concluded that prolonged uncertainty over trade policy can be as damaging to trade as the tariffs themselves, effectively amplifying the economic impact of higher duties.

This analysis comes amidst ongoing discussions about the implications of US trade policy on global markets, particularly in Southeast Asia. InsideASEAN has reported on similar concerns regarding Thailand's exports facing increased tariffs and the broader impact of US tariff changes on regional economies.