How Will New Tariff Rates Impact the US Economy? | Presented by CME Group

"The economic effect, though, wasn't nearly as dire as many economists had predicted. Nonetheless, it is yet to be determined how a 2.3 percentage point reduction may affect the job picture..." Economists modeled severe economic contraction based on the 2025 tariff spikes, but the US economy proved highly resilient. Now that the effective tariff rate is actually dropping by 2.3% from its previous peak, the headwind on corporate margins and consumer prices is easing. Broad large-cap and domestic small-cap equities will benefit from this unexpected margin relief and subsequent upward GDP revisions. LONG broad market and domestic equities as the macroeconomic reality outperforms dire economic forecasts. The persistent threat of new, unannounced tariffs could reverse this relief, reignite inflation fears, and compress equity valuation multiples.

"implied volatility has remained elevated very much due to the fact that we could see an update literally at any time." The options market is structurally pricing in headline risk. Because tariff policy updates can be announced without warning, institutional market participants must maintain active hedges. This constant demand for downside protection keeps implied volatility elevated, supporting long volatility products as a tactical portfolio hedge against sudden policy shocks. LONG VIXY to capture sudden spikes in volatility driven by unexpected tariff announcements. If the administration pauses tariff adjustments and policy stabilizes, implied volatility will experience a crush, causing severe structural decay in VIX-tracking products.