The New Trade Rules
The US tariff regime shifted again on July 24, 2026. After the Supreme Court ruled 6-3 in February that IEEPA did not authorise tariffs, the White House replaced its global reciprocal rates with new Section 301 duties covering 60 plus trading partners. The average effective US tariff rate now sits at roughly 10 to 13 percent, the highest level since the 1940s. On August 1, a separate two-year transition period began for pharmaceuticals: generic drug tariffs are locked at zero for now, rising to 100 percent in 2028 and 200 percent in 2029. Canada faces a separate blow: 50 percent Section 338 duties on dairy, autos and alcohol take effect August 19.
"Tariffs are not going away. The president is here to protect American workers. These countries will open their markets or they will pay the tariff.
"Howard Lutnick
China
35% above MFN rate, plus 100% on EVs and 50% on solar panels
Canada (Section 338, Aug 19)
50% on dairy, autos and alcohol
Brazil
25% Section 301 rate under forced-labour designation
EU
15% ceiling under the July 1 trade deal
Taiwan
15%, down from 32% after $250B investment pledge
South Korea
15%, after $350B investment commitment to the US
Vietnam and Thailand
10 to 12.5% Section 301 baseline
Steel and aluminium (all countries)
50%, raised from 25% in January 2026
Average effective US tariff rate
10 to 13%, highest since the 1940s
Household cost burden
$700 to $1,050 per year (Tax Foundation and Tax Policy Center)
$581billion in additional duties projected over 2026 to 2036 under Section 301 alone
What this means for you right now
- Clothing is the hardest-hit category: retail prices up roughly 17 points versus pre-tariff levels.
- Coffee, tea and building materials are each up around 10 points at the register.
- Electronics escaped the worst: a carve-out from April 2025 limits smartphone and laptop increases.
- Generic drug prices are frozen at pre-tariff levels until 2028, then jump sharply. Stock up on maintenance prescriptions before 2027.
- Canada's Section 338 tariffs (August 19) will raise prices on Canadian whisky, wine and cheese.
- South Korea and Taiwan avoided the highest rates by pledging hundreds of billions in US investment.
- China remains the most restricted partner: combined duties on most goods exceed 35 percent above normal rates, with EV tariffs at 100 percent.
Section 338 is a 1930 statute. The Trump administration's August 19 Canada tariffs mark the first time Section 338 of the Smoot-Hawley Tariff Act has been used in living memory. Canada argues the move violates USMCA and is preparing a legal challenge. Ontario has already restricted purchases of US alcohol in provincial liquor stores.
The July jobs report landed on August 1 showing only 73,000 new positions, the weakest reading since the start of COVID. Economists note tariff-driven uncertainty is cooling hiring before the full price impact has even passed through to consumers. The Fed held rates steady, watching both signals at once.
