Relaxing of Tariffs on China and the Future of the Trade War

On May 13, 2025 President Trump signed an executive order reducing the reciprocal tariff rate on China. After a couple of weeks of acknowledgement from both sides that the current tariff rates were unsustainable and were, in effect, an embargo, settlement was reached. The new reciprocal tariff rate with China will be 34% but for the next 90 days this is further reduced to 10%. Additionally, the de minimis rate is reduced from 120% to 54% and the per package fees have been eliminated.

The IEEPA fentanyl and Section 301 tariffs are still in place for Chinese goods. Like the break in reciprocal tariffs for other nations, the Section 232 and auto parts tariffs are still in full effect as well. So this means that, except for certain luxury and high risk items tariffs could be anywhere from 20 to 70% on most goods imported into the US. This is a good start and is setting off a bit of a scramble to get items imported in the next 90 days Ocean freight fees are rising and trade is ratcheting up again... but for how long?

Once we return to 34% reciprocal, then most products imported from China could have 79% tariff rate on top of the normal ad valorem value. Most forwarders seem to agree than too much past 50% is generally felt as not sustainable. So we should enjoy the boon while it's available but we also need to hope that leaders figure out some method for further reducing these rates or we're just going to wind up in the same place again in July with more and more shipments being cancelled and importers abandoning cargo at docks due to high tariffs.

As I stated in my last post, I don't think things will change much until consumers start feeling the pinch of higher prices. There is a lot of stockpiling that will be going on in the next 90 days as importers look to take advantage of both global and Chinese low tariff rates. But after July 9, what happens? The only trade deal released so far isn't a deal, but a set of tariff rate quotas, India is looking at retaliatory tariffs on US goods in reaction to aluminum and steel, Japan and South Korea are not giving in to US demands for concessions and all the big talk about 70 countries looking for trade deals has evaporated. But as we roll into the fall with not only additional tariffs but also port fees for Chinese built vessels consumers are going to get a lot of price increases passed on to them. Then the pressure will build and then we'll see if tariffs are lowered or if we're going to be looking at a rough winter.