US-China Tariff Wars Insights May 2025: Key Updates and Business Impacts

In May 2025, the US and China made a significant move to reduce tariffs for 90 days, offering temporary relief to businesses caught in the ongoing trade conflict. This shift marks an important development in the US-China tariff wars, with potential implications for global trade, supply chains, and economic growth.

While this pause presents a brief window of opportunity, the long-term outlook remains uncertain as both nations continue to navigate complex trade negotiations.

This blog will explore the latest insights on the tariff reduction, its impact on key industries, and what businesses need to know to stay agile in the face of ongoing uncertainty.

Key Takeaways:

• US tariffs on Chinese goods are reduced to 34%, while China lowers tariffs to 10% on US products.
• A trade surge is expected as both nations leverage the reduced tariffs.
• Tariffs may return to higher levels after the 90 days ends, creating uncertainty.
• Diversifying supply chains and exploring new markets can help mitigate future risks.
• Ongoing negotiations mean a permanent trade deal is still uncertain.

US-China Trade Tensions: A Brief History of Tariff Wars

The US-China trade war, which ignited in 2018, has been a defining feature of global trade for nearly half a decade. Initially driven by President Trump’s concerns over trade imbalances and intellectual property theft, it quickly escalated into a broader economic conflict.

Both countries imposed escalating tariffs on each other’s goods, impacting industries ranging from electronics and machinery to agriculture and automotive.

By 2025, tariffs on Chinese imports into the US reached as high as 125% for specific products like electronics and steel. In response, China retaliated with its tariffs, imposing similar rates on US goods, including agricultural exports like soybeans and automobiles.

Despite intermittent negotiations, the trade war has disrupted global supply chains, inflated consumer prices, and led to widespread uncertainty for businesses reliant on cross-border trade.

The effect on international markets was significant, with the International Monetary Fund (IMF) noting that the US-China trade tensions could reduce global GDP by up to 1%.

For Indian exporters and D2C brands shipping to the USA, these tariff fluctuations can mean higher sourcing costs, production delays, and shipment uncertainties.

Intoglo‘s door-to-door FCL ocean shipping from India to the USA simplifies this process, handling everything from warehouse pickup to US delivery, including customs clearance.

Major May 2025 Update: US-China Agree to Reduce Tariffs for 90 Days

In a significant development, the US and China agreed on May 11, 2025, to temporarily reduce tariffs for a 90-day period, providing relief to industries affected by the ongoing trade dispute. The new agreement marks a temporary pause in the tariff escalation that has dominated US-China relations for years. This truce is expected to have far-reaching consequences on trade flows, production schedules, and global supply chains.

Details of the Agreement:

• US Tariffs: As of May 14, 2025, the US will reduce its additional tariffs on Chinese imports from a steep 125% to 34%. Furthermore, 24% of this 34% rate will be suspended, making the effective tariff rate just 10% for the next 90 days.
• China Tariffs: In a reciprocal gesture, China will lower its tariffs on US goods from 125% to 10%. This includes significant reductions in key US exports, such as agricultural products, machinery, and electronics.

HS Codes for Key Product Categories

Economic Impacts of the US-China Tariff Pause on Global Trade

The temporary reduction in US-China tariffs introduces both opportunities and challenges for the global economy. While the immediate effects of the tariff pause may offer some relief, businesses and policymakers must navigate a complex landscape of shifting economic dynamics. Here’s a breakdown of how this tariff pause impacts both the US and Chinese economies, along with global trade:

US Economic Effects

The US is expected to experience short-term benefits from the reduction in tariffs, primarily in industries that rely heavily on Chinese imports, such as electronics, automotive, and consumer goods. The reduced tariffs may lower costs for US businesses and consumers, potentially alleviating inflationary pressures.

According to reports, the effective US tariff rate has increased to 15.8% by August 2025, up from just 2.3% at the end of 2024. However, with tariffs remaining high on key goods like steel and aluminum, many industries will still face cost challenges.

The short-term drop in costs due to the 90-day tariff reduction could improve consumer spending power and potentially help the US economy maintain growth momentum. However, businesses will need to prepare for the eventual return to higher tariffs unless a broader deal is reached.

Chinese Economic Outlook

For China, the reduction in tariffs provides an opportunity for growth, particularly in the industrial and manufacturing sectors. Lower tariffs could boost Chinese exports to the US, giving the economy a short-term lift. China’s GDP growth target for 2025, initially at risk due to the tariff escalation, may now be within reach.

Reports suggest that China’s GDP growth for Q2 2025 could be revised upward, partially due to the tariff reductions and a subsequent increase in exports.

Additionally, the removal of certain non-tariff barriers by China, such as restrictions on US companies, could enhance trade relations and ease some of the business climate tensions between the two nations. However, China will still face significant hurdles in managing the long-term impacts of tariffs on its manufacturing and export sectors.

Global Supply Chain Disruptions

While the tariff reduction offers short-term relief, global supply chains that the US-China trade war has reshaped will not fully recover overnight. The tariff escalation has led to shifts in production and sourcing strategies, with businesses diversifying their supply chains away from China to mitigate tariff risks.

Supply chains will continue to feel the effects of high tariff rates, even with the 90-day pause. The long-term effect could be a continued shift in global manufacturing, with countries in Southeast Asia, Mexico, and India seeing increased production and export opportunities as US businesses look for alternatives to China.

Global Trade Forecasts

The 90-day tariff reduction is expected to boost global trade flows, particularly in sectors directly impacted by the US-China tariffs. However, the uncertainty about future tariff rates and the potential for future tariff increases after August 2025 will keep businesses on edge.

Economists predict that the global economy could see a minor uptick in trade volumes during the tariff pause, but the full impact will depend on the outcomes of ongoing US-China negotiations.

Also Read: China Exports to the US: Trends and Trade Impact

Strategic Opportunities for Businesses During the US-China Tariff Pause

With the 90-day reduction in tariffs, businesses now have a critical opportunity to optimize their operations, increase exports, and plan for future shifts in trade policy. Here’s how businesses can make the most of this temporary reprieve:

1. Maximize Exports During the 90-Day Window

The reduced tariff rates create an ideal window for businesses to boost exports to the US.

• What to do:
  • Chinese manufacturers should ramp up production to meet the increased demand from the US market.
  • US exporters can take advantage of the lower tariffs on US goods entering China, potentially boosting sales.
• Actionable Tip: Work closely with supply chain partners to optimize production and shipping schedules, ensuring orders are fulfilled before tariffs return to higher rates.

2. Diversify Supply Chains to Mitigate Future Risks

The uncertainty of future tariff rates means businesses should prepare for long-term resilience.

• What to do:
  • Shift production to regions with favorable trade deals (e.g., Southeast Asia, Mexico, India).
  • Look for alternative suppliers outside of China to hedge against future tariff hikes.
• Actionable Tip: Analyze and adjust your sourcing strategies, considering both cost-effectiveness and geopolitical stability.

3. Maximize Production Capacity and Inventory

Increased demand during the tariff reduction phase offers a chance to stockpile goods.

• What to do:
  • For businesses with manufacturing capabilities in China or the US, boost production to capitalize on the reduced tariffs.
  • Ensure inventory levels are high enough to meet both current and future demand.
• Actionable Tip: Secure additional production slots and optimize shipping logistics to ensure timely deliveries.

4. Strengthen Partnerships Across the Supply Chain

Efficient communication with supply chain partners can help navigate the complex tariff landscape.

• What to do:
  • Collaborate with logistics providers, customs brokers, and suppliers to ensure smooth operations.
  • Stay informed about regulatory changes on both the US and China fronts.
• Actionable Tip: Develop stronger relationships with key partners to streamline processes and minimize delays during future tariff adjustments.

5. Monitor Policy Changes and Prepare for Long-Term Impacts

The 90-day tariff reduction is temporary, and future tariffs may increase after the pause.

• What to do:
  • Stay informed on US-China negotiations and potential changes in trade policies.
  • Prepare for the worst-case scenario by diversifying markets and creating flexible business strategies.
• Actionable Tip: Use scenario analysis to forecast the impact of various trade policy outcomes and adjust your business plans accordingly.

Consumer Impact: How the US-China Tariff Wars Affect Prices in 2025

The impact of the US-China trade war on consumer prices has been a significant concern, with tariffs driving up costs on a wide range of goods. With the recent 90-day tariff reduction, there’s a brief opportunity for prices to stabilize, but the long-term outlook is far from certain. Here’s what to expect in terms of price adjustments, shifts in demand, and the inflationary pressures still at play.

Short-Term Price Relief

The tariff reductions offer some immediate price relief for consumers, particularly on goods that have been subject to steep tariffs. Products like electronics, clothing, and machinery, key imports from China, could become more affordable, as the US cuts its tariffs on Chinese goods from 125% to 34%, with a further temporary suspension.

This pause could also reduce costs for businesses that rely on these imports, which may allow them to lower prices, ultimately benefiting the consumer.

However, this relief will be temporary, as tariffs are set to revert to higher rates after the 90-day period unless further negotiations take place.

Continued Pressure on Specific Sectors

While some product categories will benefit, many others will continue to face high costs. Steel and aluminum tariffs remain intact, along with tariffs on certain high-tech components.

This means that industries like automotive and construction may still feel the sting of higher material costs. Research predicts that the overall effective tariff rate for the US will remain elevated at 15.8%, which suggests that inflationary pressures will persist.

For consumers, this could mean higher prices for cars, home appliances, and other goods that rely heavily on these materials. Companies in these sectors will need to account for these ongoing costs when setting their prices.

Shifting Consumer Preferences

With lower prices on some goods, we might see a shift in consumer demand. Lower-cost electronics, for example, could see a surge in sales, especially for products previously inflated by tariffs. Meanwhile, agricultural products from the US may become more competitive in the Chinese market, potentially opening up new trade opportunities.

However, this shift in demand won’t necessarily be uniform. Certain sectors will benefit more than others, and consumers will likely prioritize price-sensitive items. Retailers and manufacturers will need to adjust their strategies quickly to cater to these changing consumer habits.

Global Price Impact

The ripple effects of the US-China tariff reductions are not just limited to the two countries. Global markets, particularly in Europe and Southeast Asia, may feel the impact of price changes due to their reliance on US and Chinese imports. Prices for goods sourced from or transshipped through these two nations will fluctuate, especially in sectors like electronics and textiles.

For businesses with global supply chains, this means additional volatility in pricing strategies. Companies that import Chinese goods indirectly through other markets, like Southeast Asia, may see price shifts as well, and will need to remain flexible in their pricing models.

Long-Term Outlook: Navigating the Post-Tariff Landscape

The 90-day tariff reduction between the U.S. and China offers temporary relief, but businesses must prepare for the evolving trade environment. Here’s what to anticipate:

1. Post-August Tariff Trajectory

• Potential Reversion to Higher Tariffs: The U.S. has extended the trade truce until November 9, 2025, maintaining current tariffs at 30% on Chinese goods and 10% on U.S. products. However, without a comprehensive agreement, tariffs could revert to previous levels, potentially escalating to 145% on Chinese imports.
• Strategic Implications for Businesses: Companies should prepare for the possibility of increased tariffs by diversifying supply chains and exploring alternative markets to mitigate risks.

2. Prospects for a Comprehensive Trade Agreement

• Ongoing Negotiations: While the 90-day pause provides an opportunity for further discussions, significant issues remain unresolved, including intellectual property rights and market access.
• Uncertain Outcomes: Analysts caution that achieving a comprehensive deal may take time, and businesses should remain agile to adapt to changing policies.

3. Geopolitical Considerations

• Broader Tensions: Beyond trade, geopolitical issues such as technology access and defense policies continue to influence U.S.-China relations.
• Impact on Global Trade: These tensions may affect global supply chains and market dynamics, requiring businesses to monitor developments closely and adjust strategies accordingly.

4. Global Trade Dynamics

• Shifts in Trade Patterns: The tariff reductions may lead to changes in global trade flows, with countries like India and Southeast Asian nations potentially benefiting from shifts in manufacturing and sourcing.
• Strategic Opportunities: Businesses can explore these emerging markets for new partnerships and supply chain diversification, aligning with global trends toward regional trade agreements.

5. Preparing for Uncertainty

• Scenario Planning: Given the unpredictable nature of trade policies, businesses should develop flexible strategies that can adapt to various outcomes, including the re-escalation of tariffs or the establishment of new trade agreements.
• Continuous Monitoring: Regularly assess the political and economic landscape to identify potential risks and opportunities, ensuring preparedness for any shifts in the trade environment.

Conclusion

The 90-day tariff reduction between the US and China offers short-term relief, but the future of US-China trade remains uncertain. While businesses can seize this moment to optimize their operations, secure exports, and adjust supply chains, they must also prepare for the possibility of tariffs returning after the pause. With the negotiations still ongoing and geopolitical factors at play, the situation remains fluid.

In these unpredictable times, adaptability is crucial. Companies that diversify their supply chains, explore new markets, and stay informed about shifting trade policies will be better positioned to navigate the challenges ahead.

Take proactive action now to stay ahead. As global trade dynamics shift, ensuring your logistics strategy aligns with evolving policies is essential.

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Frequently Asked Questions (FAQs)

1. How will the 90-day tariff reduction affect US businesses?

The 90-day reduction will provide US businesses with a temporary reprieve from high tariffs on Chinese imports. This could lower the cost of goods and increase profit margins, especially in industries like electronics, apparel, and machinery. However, businesses should remain cautious, as tariffs may revert to previous levels after the truce.

2. What should Chinese exporters do during the tariff pause?

Chinese exporters should maximize production and export volumes during the 90-day period, as tariffs on many US goods are temporarily reduced. This presents an opportunity to fulfill delayed orders and capitalize on the favorable conditions before tariffs rise again.

3. How will the tariff reduction impact global trade?

The reduction in tariffs between the US and China is expected to temporarily boost trade between the two nations, especially in sectors like electronics and agriculture. However, the uncertainty surrounding the future of tariffs could cause volatility in global markets, requiring businesses to stay agile.

4. What risks do businesses face after the 90-day tariff reduction ends?

After the 90-day period, businesses may face a return to higher tariffs if negotiations stall or fail. Tariffs could return to previous levels, potentially increasing costs and disrupting supply chains again. Businesses should be prepared for both scenarios by diversifying suppliers and markets.

5. Will a comprehensive trade deal between the US and China happen soon?

While the 90-day tariff reduction is a positive step, a comprehensive trade deal is still uncertain. Both countries remain far apart on key issues like intellectual property and market access. Businesses should be prepared for a prolonged negotiation process and adjust their strategies accordingly.