Following a trade summit held in Switzerland from May 9-12, China and the United States have agreed to lift many recent bilateral tariffs for 90 days. The United States will lower its 145% tariffs related to fentanyl and reciprocal trade to 30%, while China will lower its retaliatory 125% tariffs to 10%. The United States further cut tariffs on “de minimis” packages valued under $800 (€675) from China and Hong Kong from 120% to 54%. Additionally, China will rescind some of its non-tariff barriers enacted since April 2, including its ban on deliveries of Boeing aircraft. However, the Chinese government has yet to remove export controls on the rare earth minerals samarium, terbium, gadolinium, dysprosium, lutetium, scandium, and yttrium. The two countries will continue to engage in negotiations during the 90-day tariff exemption period.
U.S.-China trade to partially resume during 90-day negotiation period
The remaining U.S.-China tariffs still represent a significant increase from tariffs prior to January 2025 and could cut U.S. imports from China by as much as 70% in the medium-term. However, the tariff cuts will be a reprieve for companies dependent on Chinese suppliers. U.S. Treasury Secretary Scott Bessent has said that while tariffs on China are unlikely to be reduced under 10%, they are also unlikely to be raised beyond the 34% reciprocal trade tariff initially applied by the U.S. Bessent indicated that while the current U.S. administration will pursue strategic decoupling in sectors relevant to national security such as semiconductors, medicines, and steel, the government does not want a general decoupling of the American and Chinese economies.
During the 90-day reduction period, increased U.S.-China shipments are expected as companies rapidly import goods before tariffs are added or resumed. Increased port congestion is likely, especially at ports that handle high volumes of U.S.-China trade, including the Ports of Los Angeles/Long Beach and Boston. Shipping company Hapag-Lloyd has already reported a jump in container bookings of 50% and has announced plans to increase vessel sizes at its U.S. ports of call. However, some manufacturers have raised concerns that 90 days is too brief of a period to adjust order strategies and set new prices. In the long-term, if tariffs on China remain higher than on alternative suppliers such as India and Vietnam, U.S.-based manufacturers may ultimately continue with long-term plans to relocate suppliers out of China. Current tariff threats have already had tangible impacts on U.S.-China trade, with exports of Chinese-made smartphones falling to their lowest volume since 2011 in April 2025.
In a separate measure on May 19, China imposed anti-dumping taxes on imports of polyformaldehyde copolymer, a durable engineering thermoplastic used in many plastic components, including car parts, electronics, consumer goods, construction materials, and pharmaceutical products. Imports of U.S. products will be taxed at 74.9%, while imports from the European Union will be taxed at 34.5%. Japanese imports will be taxed at 35.5%, and Taiwanese imports will be taxed at 32.6%. Some key Japanese and Taiwanese suppliers received exceptions and will be taxed at rates ranging from 3.5-24.5%, including Asahi Kasei Corp, Formosa Plastics, and Polyplastics Taiwan. Official statements indicate the measure is not related to U.S. tariffs and is intended to target alleged dumping. The duties are scheduled to remain in place for five years.
United States and trade partners continue negotiating reductions in reciprocal tariffs
Amid the recent improvements in U.S.-China tariffs, the U.S. is moving forward with negotiations on threatened reciprocal tariffs affecting other countries. U.S. President Donald Trump has indicated that the U.S. will not be able to reach a deal with all trade partners within the 90-day exemption period, and will notify affected trade partners of their final tariff rate within 2-3 weeks. It is unknown how many nations this will include, but bigger trade partners that have already begun negotiations are likely to be excluded, such as India, Japan, South Korea, and the European Union.
One sticking point in trade talks has been the U.S. 25% tariffs on finished automobile imports, which the U.S. is reluctant to rescind. Recently, Mexico’s economic ministry claimed that carmakers from Mexico and Canada have been able to apply for reductions to the tariffs based on how much of each vehicle is made of U.S. components, with tariffs on finished Mexican vehicles now averaging around 15% due to the reductions. Each automaker must reportedly apply with the U.S. Department of Commerce for reductions, which will then remain in place for six months
Despite the 90-day pause, threatened reciprocal tariffs have already begun to affect the economies of targeted countries. Japan’s exports to the U.S. fell by 1.8% in April 2025 compared to a year earlier, while the European Commission lowered its estimate for export growth in 2025 from 2.2% to 0.7%. Additionally, export growth in South Korea is now estimated at 0.3% in 2025, down significantly from the 7.0% export growth recorded in 2024.
In response to President Trump’s tariff plans, some countries continue to draw up potential counter-tariffs. Although comments by both the U.S. and India indicate that the two countries are making progress towards a trade deal, India recently proposed tariffs on some U.S. steel and aluminum products in retaliation for the recently enacted 25% U.S. tariff on foreign steel and aluminum goods. It is unknown which U.S. products would be affected. The Indian tariffs could be enacted as soon as June 8. Separately, European Union officials indicated on May 15 that they would seek more of a tariff reduction than has been given to China or to the United Kingdom, the latter of which previously achieved an agreement that outlined reductions in U.S. tariffs for some goods but retained the 10% baseline tariff for most products. Some E.U. leaders indicated that leaving the 10% baseline tariff in place could result in new E.U. retaliatory tariffs.
United States threatens additional sectoral tariffs and sanctions on Russia
President Trump’s administration is still considering additional tariff measures to come. The U.S. Department of Commerce recently announced a new national security investigation into the import of commercial aircraft, jet engines, and parts. The investigation began on May 1 and will accept public comments through May 30. Additionally, public hearings on tariffs on Chinese port equipment began on May 19. If enacted, the proposed 100% tax on port gantry cranes and components could lead to port disruptions if port operators cannot afford to repair or replace broken cranes. Many port operators are advocating for the timeline for the tariff to be extended to at least 12 months to allow more time for preparation.
Furthermore, as peace talks continue to stall in the Russia-Ukraine War, leaders in both the United States and the European Union are considering additional sanctions on Russia. In the U.S., Republican Senator Lindsay Graham has proposed a bill in the Senate that would impose additional sanctions on Russia and high tariffs on countries that purchase Russian energy products. The bill currently has at least 60 co-sponsors to pass in the Senate, but it is unclear if it will be signed by President Trump. Under the proposal, the U.S. would enact new unspecified sanctions on Russia and tariffs of 500% on countries that import Russian oil, gas, and uranium if Russia refuses to negotiate a peace agreement, violates a peace agreement, or invades Ukraine again. The most affected Russian trade partners would likely include China, India, and Iran. E.U. policymakers have also made progress on a new sanctions package that would target Russian energy products, with affected areas including the Nord Stream 1 and Nord Stream 2 pipelines, vessels of the Russian shadow fleet, and companies in the financial sector.
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