US China Trade Truce Extended to Avoid Tariff Surge
In a move that could calm escalating tensions between the world’s two largest economies, the US China trade truce has been officially extended for another 90 days, narrowly avoiding a steep tariff hike that was scheduled to take effect.
The announcement came just hours before the deadline, with Washington and Beijing issuing a rare joint statement confirming the agreement. Talks between the two sides had been ongoing for weeks, described by both as “constructive,” but the final sign-off from US President Donald Trump sealed the deal.
What the New Agreement Means
Under the extended truce, the US will keep tariffs on Chinese imports at 30%, while China maintains its 10% tariff on American goods. Without this agreement, both nations were set to impose far higher rates, at one point, Washington had threatened 145% tariffs on Chinese products, while Beijing had prepared to respond with 125% duties on US shipments.
The White House says the 90-day reprieve will provide more time for talks aimed at fixing long-standing trade disputes, including what it calls “unfair trade practices” and “imbalanced trade flows.” According to official figures, the US trade deficit with China reached nearly $300 billion in 2024, the largest with any single partner.
The negotiations will also address national security concerns, such as restricting sensitive technology exports, and improving market access for American goods in China.
Beijing’s Response and Expectations
A spokesperson for the Chinese embassy in Washington emphasized that “win-win cooperation” is the best path forward, urging the US to lift “unreasonable” restrictions. China also stressed the need for stability in global semiconductor supply chains, which have been disrupted by recent export controls.
The request is no surprise, semiconductor chips are at the heart of many current disputes. Washington has previously restricted sales of high-end chips to Chinese companies but recently eased some rules, allowing firms like AMD and Nvidia to sell certain products in exchange for a 15% revenue share with the US government.
Tariffs’ Impact on Businesses
While the extension avoids an immediate tariff spike, many business owners say uncertainty is far from over. Beth Benike, founder of baby product company Busy Baby, told the BBC:
“There’s no way to plan for the future of the business. I don’t know what the tariff will actually end up being, so I can’t set pricing confidently.”
This uncertainty has already disrupted supply chains and pushed some companies to consider relocating production outside of China.
Background: How Trade Tensions Escalated
The trade dispute between the US and China intensified in April when Trump introduced sweeping tariffs on imports from multiple countries, with Beijing facing some of the steepest penalties. In retaliation, China hit back with its own tariffs, creating a tit-for-tat trade war that pushed tariff rates into triple digits.
By May, both sides agreed to temporarily ease some restrictions, but even after those adjustments, Chinese goods still faced 30% additional tariffs in the US, while American products were met with 10% tariffs in China.
Key Issues Still on the Table
Despite the truce extension, major points of contention remain unresolved:
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Access to rare earth minerals: China controls a large share of these critical materials used in electronics and defense.
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Purchases of Russian oil: Beijing has increased imports despite Western sanctions.
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US tech export restrictions: Especially on advanced semiconductors and AI chips.
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TikTok ownership dispute: Washington is pressing ByteDance to spin off TikTok, a move Beijing opposes.
Trade Flows Already Hit Hard
Even with the truce in place, trade between the two countries has slowed significantly. In June 2024, US imports of Chinese goods were down nearly 50% compared with June 2023.
For the first half of 2024, the US imported $165 billion worth of goods from China, a 15% drop from the same period last year. American exports to China fell even further, down 20% year-on-year.
What Comes Next?
The 90-day extension buys negotiators more time, but it does not guarantee a permanent resolution. Trade experts warn that if talks fail, the threat of extreme tariffs could quickly return, reigniting economic uncertainty for businesses and consumers alike.
According to analysts, both nations face strong political and economic pressures to secure a more stable agreement. For the US, it’s about protecting jobs and addressing national security concerns. For China, it’s about maintaining growth and ensuring access to critical technologies and foreign markets.
