HIGHER tariffs and uncertainty over US trade policy discouraged American imports in 2025, while tariff confusion led to businesses unable to calculate their costs, said a UK economist.
Dennis Novy, chief economist at the United Kingdom’s Foreign, Commonwealth and Development Office, presented his findings in a discussion hosted by the University of the Philippines School of Economics.
Novy said high tariffs lowered imports by an average 4 to 6 percent, while tariff confusion resulted in an additional decline of 7 to 12 percent.
Across countries, imports fell by an average 13 percent when tariffs were at their peak, with about half of the decline attributed to policy uncertainty, Novy said.
The effects of tariff confusion persisted over time, became more pronounced at higher tariff levels, and were fully passed on to import prices.
His research also found that established trading relationships were more resilient to tariff uncertainty. Companies dealing in customized products or with long-standing trading partners were less affected than those selling easily substitutable goods, he said.
“If you have a trustworthy relationship between countries, then the impact of confusion is lessened,” Novy said.
He pointed to an unprecedented frequency of US tariff interventions in 2025, when the US Harmonized Tariff Schedule (HTS) underwent 32 revisions. This compared with an annual average of 10.5 revisions in 2023 and 2024, and 18.5 in 2018 and 2019.
Novy also cited the unconventional way US trade policy was implemented through presidential executive orders, proclamations, and President Donald Trump’s social media posts.
Other measures included 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.
Novy said the complexity of US trade policy heightened as tariffs were repeatedly introduced, delayed, reinstated, or revised. The countries and products covered by the tariffs and exemptions also changed, along with rules governing how tariffs were combined.
He said the frequent changes made it difficult for businesses to determine what tariff rates would ultimately apply, creating uncertainty which discouraged trade.
“The takeaway is it’s half-half,” Novy said. “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 tariff increases themselves, effectively amplifying the economic impact of higher duties.