1. Reciprocal Tariff Agreement
- 10% Reciprocal Rate: Effective May 14, 2025, both the U.S. and China imposed a 10% reciprocal tariff on most goods. This resulted from a 90-day truce agreement signed in Geneva, which suspended 24 percentage points from prior rates (U.S. tariffs dropped from 34% to 10%, China's from 34% to 10%) .
- Scope: Applies to all articles imported from China (including Hong Kong and Macau) and U.S. goods entering China, subject to existing exceptions (e.g., some energy products) .
2. Exceptions and Layered Tariffs
Despite the reciprocal rate, effective tariffs remain higher due to "tariff stacking":
- Section 301 Tariffs: Range from 7.5% to 100% on specific goods (e.g., semiconductors, EVs, rare earths) and are applied alongside the 10% reciprocal rate .
- Example: A U.S. semiconductor import faces a 50% Section 301 tariff plus the 10% reciprocal tariff, totaling 60% .
- Section 232 Tariffs: 50% on steel/aluminum and 25% on autos (effective June 4, 2025), which also stack with reciprocal duties .
- De Minimis Shipments: Specialized 54% tariff on low-value postal imports from China (e.g., e-commerce packages), unaffected by the reciprocal reduction .
3. Duration and Future Outlook
- 90-Day Window: The reciprocal rate expires on August 12, 2025 (90 days from May 14). Post-deadline, tariffs may revert to pre-truce levels (U.S.: 34%, China: 34%) unless extended or renegotiated .
- Negotiation Mechanism: Both countries established a consultation framework led by U.S. Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng. Talks will address long-term issues like intellectual property and fentanyl-related trade restrictions .
4. Economic Impact and Controversies
- Market Reactions: Global stock markets surged after the deal was announced, reflecting relief from the prior 145% U.S. tariff peak and 125% Chinese retaliation .
- Complexity and Confusion:
- Media Misreporting: Some outlets cited "30%" or "55%" tariffs due to misinterpretations of stacked rates .
- Legal Challenges: U.S. courts ruled the IEEPA-based tariffs unconstitutional in May 2025, but collections continue pending appeals .
- Chinese Narrative: State media framed the deal as a victory, citing "defiant posture" and minimal concessions .
Unresolved Issues
- Rare Earths: China pledged to remove export curbs but later blamed "foreign entities" for smuggling, signaling lingering tensions .
- Fentanyl Controls: Both nations agreed to cooperate on stemming fentanyl trade, but enforcement mechanisms are unclear .
- WTO Non-Compliance: Economists criticize the reciprocal tariff formula as violating global trade rules, risking further isolation .
For ongoing updates, stakeholders should monitor:
1. U.S. Court of International Trade rulings on IEEPA tariffs .
2. USTR product exclusions under Section 301 .
3. China’s State Council Tariff Commission announcements .
This truce offers temporary relief but leaves structural trade disputes unresolved. The next 60 days will determine whether this pause evolves into stability or becomes another escalation trigger.