The tariff truce between the United States and China, which has helped ease tensions over the past three months, is on the verge of expiring. Both sides have yet to announce an extension, and the deadline is looming.
The current agreement, reached in May, lowered tariffs from the extreme 145% rate seen in April and paused other punitive measures for 90 days, creating space for more negotiations. Without an extension, tariffs will automatically revert to higher levels, potentially reigniting a trade war between the world’s two largest economies.
After the last meeting in Stockholm in July, Beijing expressed optimism, suggesting both sides were working toward another 90-day extension. But U.S. negotiators have said the decision now rests with President Donald Trump, who has so far given little indication of his position, increasing uncertainty.
At present, Chinese goods bound for the U.S. face a 20% tariff linked to the fentanyl dispute, a 10% baseline tariff, and an additional 25% duty on certain products from Trump’s first term. American exports to China face tariffs averaging more than 32.6%.
While there’s no official word on extending the truce, many expect a Trump–Xi summit in Beijing in the coming months. Such a meeting could signal a more stable relationship, though not necessarily a friendlier one. Both countries still appear to be moving toward economic decoupling.
Trade between the two nations has already suffered. China’s July data showed exports to the U.S. falling for the fourth straight month, down 21.7% year-on-year. Imports from the U.S. fell 10.3% from January to July. Any new deal could include commitments from China to increase purchases of U.S. goods—especially energy, agricultural products, and possibly semiconductors—if allowed.
Trump recently suggested China should quadruple its soybean orders. Indeed, China’s soybean imports have risen sharply in recent months, with year-on-year growth of 36.2% in May, 10.4% in June, and 18.4% in July.
Another key issue is “transshipment” — Chinese exports being rerouted through Southeast Asia to avoid tariffs. Trump has warned of a blanket 40% tariff on goods entering the U.S. from third countries if they are found to be Chinese products, though the definition remains unclear.
Tensions also extend to semiconductor export controls. The U.S. had restricted sales of Nvidia’s H20 chip to China earlier this year, but recently reversed the ban. This change is seen as a tactical adjustment, not a major policy shift. Trump may still offer selective concessions on technology controls to secure a deal, though national security concerns remain strong.
Chinese officials are also pushing for the U.S. to relax restrictions on high-bandwidth memory chips, banned under the Biden administration. In a controversial move, Nvidia and AMD agreed to give 15% of their China-related revenues to the U.S. government in exchange for export licenses.
Rare-earth minerals are another bargaining chip. China, which dominates the global supply, agreed in June to ease restrictions on rare-earth exports to the U.S., resulting in a surge in shipments before slowing in July. Rare-earth magnets sent to the U.S. in June increased more than sevenfold from the previous month.
A further point of friction is Trump’s threat to impose secondary tariffs on China for buying Russian oil, similar to the penalties recently placed on India. China’s July imports from Russia reached $10.06 billion, the highest since March, despite being down 7.7% year-on-year.
Chinese President Xi Jinping recently spoke by phone with Russian President Vladimir Putin ahead of Putin’s meeting with Trump on the ongoing Russia–Ukraine conflict. Observers believe this call was meant to strengthen China’s bargaining position.
As the deadline approaches, the lack of clarity over the tariff truce extension is keeping businesses and markets on edge. The outcome will have a major impact on global trade flows, commodity prices, and supply chains.
