Editor’s note: Tariff updates are happening at a breakneck pace. This content is current as of May 13, 2025, but you can stay up to date with all of our latest coverage on the impact of tariffs here.

The US and China will rollback the steep tariffs that threatened to sever economic ties between the world’s two largest economies. Under the 90-day deal, the US will reduce tariffs on most Chinese goods from 145% to 30%, while China will cut duties on US products from 125% to 10%. Though the remaining 30% duty is still substantial, the agreement signals both sides are seeking to de-escalate—a welcome development for retailers ahead of the back-to-school and holiday shopping seasons. Yet, the 90-day window leaves significant uncertainty, complicating long-term planning for brands and retailers.

The Impact of the Temporary Rollback Will Be Limited

The rollback marks a clear step back from the brink, but the 30% duty on Chinese imports suggests that the days of low tariffs are over. The recent US-UK trade agreement maintains a 10% tariff and points to a new tariff baseline for many global trade relationships. This shift will squeeze corporate margins and could force brands to rethink global sourcing.

In light of the dynamic trade environment, we’ve developed three retail and advertising forecast scenarios for 2025:

1. Limited tariffs (Q1 forecast): Tariffs remain minimal and selectively applied. This optimistic scenario sees little disruption to global trade or consumer pricing.
2. Moderate tariffs (now the baseline): Partial relief from recent deals, but continued economic drag from elevated duties. This scenario reflects current conditions.
3. Heavy tariffs: Full implementation of Trump’s universal tariffs and reciprocal “Liberation Day” duties. This scenario anticipates a global recession triggered by inflation, retaliation, and collapsing confidence.

We now consider the moderate tariffs scenario as the baseline outlook for our forecasts. While tariffs remain elevated, the temporary easing suggests the Trump administration’s desire to restore some stability—making the heavy tariffs scenario increasingly unlikely.

Projected Impact on 2025 US Retail Sales