On May 12, 2025, the United States and China announced their agreement to reduce the high tariff rates imposed on each other’s goods since early April while they enter into consultations to resolve their respective trade concerns. The agreement remains a temporary measure rather than a comprehensive resolution.
US Tariff Modifications
The United States will, for an initial period of 90 days, reduce the “reciprocal” tariff rate on Chinese goods from 125% to the baseline rate of 10% imposed by Executive Order 14257 of April 2, 2025 (and which currently applies to imports from all other countries except for Canada and Mexico). If a new deal is not reached during this period, the United States may raise the “reciprocal” duty rate on Chinese goods to the originally announced China-specific rate of 34%. Additionally, the United States will retain all duties imposed on Chinese goods prior to April 2, 2025, including general duties, Section 301 tariffs, industry-sector tariffs under Section 232, and the 20% fentanyl-related tariff imposed earlier this year under the International Emergency Economic Powers Act..
De Minimis Tariffs Adjustments
The May 12 Order also decreases the tariff rate applicable to low-value imports from China from 120% to 54%. However, the de minimis exemption has been removed for goods from China (including Hong Kong and Macau), while it remains available for imports from other jurisdictions.
Chinese Actions and Consultation Mechanism
China will lower tariffs on US goods to 10% and reduce non-tariff barriers. Previously, China had announced a range of non-tariff retaliatory measures, including adding US companies to its “unreliable entities” list and imposing export controls on rare earth minerals. The Joint Statement also promises that the US and China will establish a mechanism to engage in consultations about economic and trade relations.
Conclusion
These developments underscore that global trade policy remains fluid. The relationship between the United States and China, valued at an estimated USD 582 billion worth of annual goods trade, remains critical. The agreement sets a path for future discussions to open market access for American exports and stem the flow of fentanyl and other precursors from China to illicit drug producers in North America.
Overall, the announcement presents a temporary de-escalation in the trade war between the United States and China, with both countries making concessions to temporarily reduce tariffs and remove non-tariff barriers. The agreement is seen as a hopeful step forward, but much remains to be negotiated in the coming months.
