Research & Analysis

The US Court of International Trade on Wednesday struck down President Donald Trump’s tariffs imposed under the International Emergency Economic Powers Act, ruling that the president exceeded his authority. This includes the so-called reciprocal tariffs levied on numerous countries, including China, on April 2; the universal 10% baseline tariff on all other countries; and tariffs on China, Mexico, and Canada related to fentanyl concerns.

Multinational companies have struggled to acquire rare earth magnets from China since the announcement, with several USCBC members expressing concern about manufacturing disruptions caused by delays in export approval for rare earth material from China.

Under this system, duties are incurred only when goods enter China’s domestic market. However, to close tax loopholes and monitor specific “sensitive” goods, the new rules impose stricter requirements on the  storage, processing, and domestic sales of sensitive imports, while also narrowing the scope of goods impacted.

On May 14, China’s National People’s Congress and State Council released their legislative plans for 2025, offering a window into economic and social priorities. Included are a landmark law to guide macroeconomic development planning, stricter regulation of financial markets, and legal tools to respond to foreign sanctions.

Talks between US and Chinese negotiators in Geneva over the weekend were more constructive than anticipated. In a joint statement, the two sides drastically reduced baseline tariffs on the other for 90 days to facilitate further negotiations. The reprieve will bring some relief to US companies and consumers, but tariff rates remain high and negotiators face several obstacles to a durable settlement.

At a press conference this month, the People’s Bank of China announced a new round of supportive economic measures aimed at enhancing liquidity, reducing borrowing costs, and supporting targeted sectors. These measures follow promises of further stimulus first announced in late 2024 and reiterated throughout Q1 2025.

Beijing is recalibrating its domestic consumption strategy in 2025. Using the services sector as a testing ground, recent policy efforts aim to boost both actual and perceived wealth among Chinese households, thereby fostering a “wealth effect” that encourages consumption. Through livelihood-oriented reforms, premium services campaigns, and selective liberalization to attract foreign investment, the government is attempting to engineer consumer sentiment by making spending feel safe, worthwhile, and emotionally rewarding.

New US tariffs and retaliatory tariffs from China have impacted US companies in China across sectors, but mitigation strategies vary. Nearly all firms are exploring further localizing their supply chains in China to build resilience to trade disruptions. Meanwhile, exemptions from China’s retaliatory tariffs on US imports are just starting to take shape, and the Chinese government has yet to announce an official point of contact for companies to make their case.

Senior US officials are set to meet with a Chinese trade delegation this weekend in Switzerland. The meetings signal a potential thaw in tensions following weeks of tariff escalation first initiated by the United States.

The Trump administration this week signaled a willingness to soften its tariff stance, offering relief for certain imports while continuing to pursue trade agreements with countries seeking relief from reciprocal duties. Reprieve for China imports, however, remains minimal.