As of May 29, 2025, significant changes have been made to US-China trade tariffs following a temporary agreement reached during negotiations in Geneva and a recent federal court decision. These developments mark a pivotal moment in the ongoing trade dispute between the two economic powerhouses.
The federal court ruling represented a clear dismissal of the legal foundations behind several of Trump’s notable and contentious initiatives during his short four-month second term. The administration quickly submitted a notice of appeal, and it is highly likely that the Supreme Court will be asked to provide a definitive resolution — yet it deals a significant setback.
The temporary agreement includes a phased reduction of tariffs on key goods such as electronics, agricultural products, and industrial machinery. Additionally, both nations have committed to further discussions aimed at addressing long-standing issues, including intellectual property rights and market access.
Key Points
- A federal court ruled against President Trump’s use of emergency powers to impose broad tariffs, stating they exceeded his authority and were based on questionable legal grounds.
- Trump’s tariffs, referred to as “Liberation Day” tariffs, aimed to reduce trade deficits and bring manufacturing jobs back to the U.S., but critics argued they caused economic instability and increased prices.
- The court upheld tariffs imposed under Section 232 of the Trade Expansion Act of 1962 but rejected those under the International Emergency Economic Powers Act (IEEPA).
- The administration plans to appeal the ruling, and the Supreme Court is likely to weigh in on the matter.
U.S. Tariffs on Chinese Imports 90 days’ reprieve
- U.S. Tariffs on Chinese Imports: The U.S. has reduced its tariffs on Chinese goods from a peak of 145% to a base rate of 30%, effective May 14, 2025, for a 90-day period. This reduction includes the rollback of additional tariffs imposed in April 2025 (e.g., 125% across multiple tranches) but retains pre-April 2, 2025, tariffs such as:
- Section 301 tariffs targeting unfair trade practices, which vary by product list (e.g., 25% on Lists 1 and 2, 15% on List 4A).
- Section 232 tariffs on steel (25%) and aluminum (25%, increased from 10% in February 2025).
- Fentanyl-related tariffs (10% imposed in February, increased by 10% in March).
- A 10% universal tariff on all imports, including China, implemented April 5, 2025.
- The effective tariff rate on most Chinese goods is around 30% to 40%, depending on product-specific duties. For low-value parcels (under $800), the de minimis exemption was ended, with tariffs at 30% for commercial carriers and 54% for USPS shipments.
- Chinese Tariffs on U.S. Exports: China has lowered its retaliatory tariffs from 125% to 10% for a 90-day period starting May 14, 2025. This includes suspending non-tariff countermeasures, such as export controls on rare earths and anti-dumping probes on U.S. firms. However, some pre-April 2025 tariffs remain, contributing to an average tariff rate of approximately 32.6% across all U.S. goods.
- Context and Implications:
- The 90-day truce, effective until mid-August 2025, aims to facilitate further negotiations. Both sides have expressed interest in addressing trade imbalances, with the U.S. pushing for increased Chinese purchases of American goods and China seeking to maintain its stance as a responsible trading partner.
- Despite the reduction, tariffs remain significantly higher than pre-2025 levels, with the U.S. effective tariff rate at 17.8%, the highest since 1934, impacting consumer prices (estimated $2,800 annual household loss).
- Trade flows have been disrupted, with a 60% drop in U.S.-China shipments in April 2025, though businesses are now stockpiling to leverage the lower rates.
- China’s non-tariff measures, like currency weakening and potential transshipment through Southeast Asia, could mitigate tariff impacts but complicate enforcement.
- Uncertainties: The temporary nature of the tariff cuts introduces uncertainty, as rates could revert to 54% (U.S.) and 34% (China) if talks fail. The U.S. claims Chinese producers may absorb some tariff costs, though this is debated.
Overall, the tariffs had a complex and multifaceted impact on the U.S. economy and businesses. While intended to protect American jobs and industries, they often resulted in higher consumer prices, supply chain disruptions, and challenges for small businesses, ultimately leading to broader economic concerns.
These tariffs have significant implications for global supply chains, impacting industries ranging from technology to agriculture. Businesses are advised to stay informed and adapt their strategies accordingly, as shifting policies could influence costs, market access, and competitive dynamics.
