Why Predicted and Actual Tariff Rates Diverged in May 2025

Marina Azzimonti

Richmond Fed Economic Brief, 2025, vol. 25, issue 29

Abstract: The predicted average effective tariff rate (AETR) for May 2025 was 17.5 percent, but the actual AETR was only 8.7 percent. This large gap motivated a systematic decomposition of the sources of divergence. Shifts in importer behavior — such as changes in sourcing strategies and product composition — account for part of the gap. In particular, imports from China and other high-tariff countries fell sharply, while imports from lower-tariff countries like Vietnam increased. The largest factor seems to be implementation frictions. Many country-product pairs that were expected to be tariffed either generated no duties or much lower-than-expected collections, likely due to legacy exemptions, shipping timing and delays in customs system updates.

Keywords: trade; and; international; economics (search for similar items in EconPapers)
Date: 2025
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