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Sherry Xi

Corporate and Finance Manager, Kreston Brighture

China-US tariff shifts in 2025

July 18, 2025

In 2025, the China-US trade relationship—one of the most significant bilateral economic ties globally—underwent substantial turbulence. Tariff policies emerged as a central instrument in the strategic rivalry between the two nations. Over the year, these policies transitioned from a phase of intense confrontation to a period of temporary easing, marked by a series of rapid and substantial adjustments. The frequency and magnitude of these changes represent a rare chapter in global trade history.

The evolution of China’s retaliatory tariff measures

A review of China’s official announcements throughout 2025 highlights the escalation and subsequent de-escalation of tariff measures imposed in response to US actions.

• On February 4, China issued Announcement No. 1 of 2025, which took effect on February 10. This policy imposed additional tariffs ranging from 10% to 15% on US imports including coal, liquefied natural gas, crude oil, agricultural machinery, and automobiles. This move was a direct response to the US tariff hike in January.
• On March 4, Announcement No. 2 of 2025 followed, coming into effect on March 10. This round targeted US agricultural products such as chicken, wheat, corn, and cotton (15% tariffs), as well as soybeans and pork (10% tariffs), retaliating against a new wave of US tariffs issued in March.
• The escalation continued in April. On April 4, Announcement No. 4 imposed an additional 34% tariff on all US imports, in retaliation to the US’s “equivalent tariffs.” This was swiftly followed by Announcement No. 5 on April 9, raising tariffs from 34% to 84%, with particular focus on agricultural products, energy, and automobiles.
• Just days later, on April 11, Announcement No. 6 increased tariffs further to 125% on all US goods, matching the US’s own 125% tariff hike.
• However, a turning point came on May 13 with Announcement No. 7, effective from May 14. In this statement, China reduced tariffs from 125% to 10%, suspending a 24% portion of the tariff for 90 days. This adjustment was aligned with the terms of the Geneva Agreement, marking the first significant sign of de-escalation.

Outcomes from the London negotiations

Further progress was made in June during negotiations held in London, building on the Geneva Agreement. Two major outcomes emerged:

1. The 90-day ceasefire on tariff escalations was extended until August 12, maintaining the 10% base tariff. The future of the suspended 24% tariff remains undecided.
2. The United States reduced tariffs on small cross-border e-commerce packages (valued under $800) from 120% to 54%, offering some relief to e-commerce platforms and traders.

While these developments provided temporary relief for Chinese enterprises, fundamental disagreements persist. The US maintains a 20% tariff on fentanyl and continues to apply a 10% base tariff across the board. Meanwhile, China upholds restrictions on rare earth element exports. Underlying technological competition between the two countries also remains unresolved.

Impacts on Chinese enterprises

The ongoing tariff conflict, marked by both escalation and partial resolution, has had far-reaching effects on Chinese businesses. These effects vary by industry and company size and have influenced areas ranging from financial performance to operational strategy. Key impacts include:

1. Export challenges and operational strain

• Rising costs: Elevated tariffs have raised the cost of exporting goods to the US, eroding the price competitiveness of Chinese products and reducing profit margins for export-driven firms.
• Fewer orders: Demand from the US has declined, especially impacting small and medium-sized, labor-intensive enterprises that rely heavily on the US market. Many of these companies now face serious survival threats.

2. Supply chain realignments

• Production relocation: To sidestep high tariffs, some Chinese firms have moved parts of their manufacturing operations to countries such as Vietnam, Thailand, and Mexico.
• Industrial upgrading: The pressure of tariffs has spurred innovation and encouraged businesses to invest more in R&D, upgrade production processes, enhance product value, and boost overall efficiency and competitiveness.
• Market diversification: Many enterprises are seeking to reduce dependency on the US market by expanding into other global markets.

3. Heightened uncertainty and compliance burdens

• Unpredictability: The volatile nature of trade policy makes long-term planning difficult, increasing business risks.
• Rapid policy adjustment: Companies must remain agile, adapting quickly to new rules and avoiding losses caused by regulatory non-compliance.
• Contractual risks: Sudden changes in tariff policy can disrupt existing contracts, necessitating renegotiations and increasing the potential for legal disputes.

Conclusion

The China-US tariff fluctuations in 2025 posed serious challenges for Chinese enterprises, but they also acted as a catalyst for growth and adaptation. Businesses responded with innovation, supply chain transformation, and market diversification—strategies that will serve them well in an unpredictable global trade landscape.

Looking ahead, it is vital for both China and the US to enhance communication and cooperation. By doing so, they can promote a stable and mutually beneficial trade relationship and contribute to broader global economic prosperity and order.