Fitch updates U.S. effective tariff rate to 16% as more goods classify as USMCA-compliant

Fitch Ratings estimated that the overall U.S. effective tariff rate ("ETR") is 16%, down from its estimate of 17% at the beginning of the month, reflecting a marked increase in imports from Canada and Mexico classifying as USMCA-compliant.

The lower estimated effective tariff rate illustrates the increasing share of goods entering the U.S. from Mexico and Canada that are tariff-free, avoiding the 35% tariff President Donald Trump set for Canada and the 25% rate for Mexico.

Recall that Trump renegotiated the North American Free Trade Agreement in his first term, renaming it the U.S.-Mexico-Canada Agreement in November 2018. It went into effect on Jan. 1, 2020.

"In June 2025, 81% of goods imported from Canada were USMCA compliant, up from 56% in May," Fitch ratings said in a recent report. "Similarly, 77% of Mexican imports met USMCA criteria in June, compared to 42% the previous month."

The updated U.S. ETR reflects a 50% tariff rate on most imports from India, a 15% tariff on the European Union, and higher tariffs on imports from Brazil, Taiwan, and Switzerland. For EU member countries, the rates range from ~3% to more than 18%, depending on import composition and origin, Fitch said. [https://www.fitchratings.com/research/sovereigns/fitch-ratings-updates-us-effective-tariff-rate-monitor-amid-rising-usmca-compliance-15-08-2025]

China's ETR is estimated at 41.4%, up 30.7 percentage points from 2024.

The overall 16% figure represents an incremental increase of 13.7 percentage points from a 2.3% ETR in 2024.

Since the start of 2025, the U.S. dollar's strength, overall, declined as major policy shifts chip away at confidence in the currency. The US. Dollar Index (DXY [https://seekingalpha.com/symbol/DXY]) dropped 9.5% year-to-date, while the Canadian dollar has risen 4.1% [https://seekingalpha.com/symbol/CAD:USD/charting?compare=CAD%3AUSD%2CSP500%2CMXN%3AUSD%2CDXY&interval=YTD] against the greenback and the Mexican peso has climbed 11%.
[Chart shows US Dollar Index dropping 9.5% year-to-date, as Canadian dollar rises 4% against the U.S. dollar and the Mexian peso increases 11%.]
US Dollar Index slips in 2025 against Canadian dollar, Mexican peso (Seeking Alpha)

Relevant tickers include: (CAD:USD [https://seekingalpha.com/symbol/CAD:USD]), (MXN:USD [https://seekingalpha.com/symbol/MXN:USD]), iShares MSCI Canada ETF (NYSEARCA:EWC [https://seekingalpha.com/symbol/EWC]), iShares MSCI Mexico ETF (NYSEARCA:EWW [https://seekingalpha.com/symbol/EWW]), Invesco CurrencyShares Canadian Dollar ETF (NYSEARCA:FXC [https://seekingalpha.com/symbol/FXC]), Mexico Fund (NYSE:MXF [https://seekingalpha.com/symbol/MXF]).

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