US Tariff Index: Hawkish Momentum Continues

Insights from the Rebalanced US Tariff Index and Market Trends

Doug Crescenzi

02 Jul 2025 — 4 min read

Insights from the Rebalanced US Tariff Index and Market Trends

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TL;DR:

U.S. tariff policy remains hawkish, with the US Tariff Index trending upward
High probability (98%) of Trump imposing large tariffs in 2025, with little relief when it comes to the removal of 10% blanket tariffs (23%)
US-China tariff agreement holds a strong 83% chance before the 90-day deadline, with rates on China expected between 25%-40% by August 15.
Tariff revenue projections rise to $200-$300 billion for 2025, impacting businesses and investors amid ongoing supply chain shifts.

Market Snapshots

Event Breakdown

U.S. tariff policy landscape continues to evolve: The U.S. tariff policy landscape continues to evolve, with recent market movements reinforcing a hawkish trajectory as outlined in our "Tariff Tides Turning" newsletter published on June 24, 2025 in which we rolled out our U.S. Tariff Index.

Since then, the US Tariff Index has been rebalanced and updated to reflect expired markets and the introduction of new ones, now aggregating data from Polymarket, Kalshi, and Limitless. You can learn more about how the index was rebalanced here. This broader platform integration enhances the index's robustness, offering a more comprehensive view of market sentiment. The index, which tracks whether U.S. tariff policy is trending hawkish or dovish, has shown a persistent upward trend, suggesting a continued lean toward protectionism.

Recent data indicates a strong market consensus on escalating tariffs. The probability of Trump imposing large tariffs in 2025 remains high, with markets hovering around 97%, underscoring early policy momentum. Similarly, the likelihood of the 10% blanket tariff remaining in effect in 2025 has increased, reflecting minimal expectation of near-term relief following the April 5 tariff rollout.

This hawkish tilt is further evidenced by the US-EU trade agreement market trending downward, currently at 34%. However, the likelihood of a US-China tariff agreement continues to trend upward, currently at 83%, indicating dovish sentiment.

The absence of significant trade deal progress completed before July amplifies a hawkish trend. However, the likelihood of trade deals getting done with the European Union (61%) and Vietnam (99%) before August indicates the stagnation associated with stalled negotiations may be easing.

Real-world implications are significant. Businesses face heightened volatility, with over 30% of U.S. firms citing trade policy as a top concern. Manufacturing and construction sectors are actively diversifying supply chains, a response to a likely increase in U.S. tariff rates on China before August 15th.

This escalation drives tariff revenue projections, with markets leaning toward $200-$300 billion for 2025, a fiscal impact that could influence inflation and interest rate expectations.

For investors, this hawkish shift offers both risks and opportunities—macro funds might favor gold or short Treasuries, anticipating higher import costs, while domestic equities could see overweighting as a hedge against global trade uncertainty.

Legal and legislative dynamics remain a wildcard. The probability of Congress passing a bill to increase tariffs this year stays below 25%, and the chance of courts *not* forcing a tariff refund remains high at 81%. The new Kalshi market introduced to the index concerning congressional support for increased tariffs, trading at 19%, indicates a potential alignment with executive protectionism, adding complexity to the policy landscape.

The US Tariff Index’s upward movement, now at 38.1%, reflects these shifts, driven by events like the June 12 expansion to household goods tariffs. This surge highlights a policy leaning heavily on protectionism, with market liquidity and volume across platforms enhancing signal reliability. For policymakers, these trends signal a need for vigilant monitoring, as rapid changes demand adaptive strategies. Businesses must navigate supply chain adjustments, while investors can use these granular, real-time signals for tactical asset allocation, such as hedging FX exposure or positioning for inflation.

The convergence of market probabilities across Polymarket, Kalshi, and Limitless—especially on key events like China tariffs—suggests a maturing ecosystem where information flows efficiently. This alignment, coupled with growing liquidity, provides a reliable barometer for tariff policy direction. As the index continues to trend hawkish, the road ahead points to sustained protectionist measures, with significant implications for global trade, domestic economies, and investment strategies. Stakeholders are advised to leverage these market insights to anticipate and mitigate the evolving tariff landscape’s impact.

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