Board of Governors of the Federal Reserve System

Figure 1. Decomposition of the ETR in both tariff episodes

This figure consists of two stacked area charts showing monthly data of tariff rates measured in percentage points. Each chart decomposes the gap between the effective tariff rate (shown as a dashed line) and the realized effective tariff rate into three components: Realized effective tariff rate (blue area at bottom), Composition (maroon/brown middle area), and Rate discrepancies (tan area at top).

Panel (a)
The 2025 decomposition, spans January 2025 to December 2025, with the y-axis ranging from 0 to 20 percentage points. The chart shows that the gap between the ETR and RETR is generally increasing, spanning from1.2 in February 2025 to 5.3 in December 2025 with a peak of 10.3 in April 2025. The gap size between May and December 2025 is more constant. In April (when the gap peaks), rate discrepancies explain over two thirds of the gap between the ETR and the RETR, while in December, composition explains more than half, but less than two thirds, of the gap between the RETR and the ETR, with the remainder of the gap accounted for by rate discrepancies.

Panel (b).
The 2018-19 decomposition, spans January 2018 to December 2019, with the y-axis ranging from 0 to 8 percentage points. The chart shows that the gap between the ETR and RETR is increasing over time spanning from .03 in February 2018 to 2.2 in December 2019 with a peak of 2.2 in December of 2019. In that time, the portion of the attributable to composition is generally increasing and accounts approximately two thirds of the gap by December 2019.

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