With the United States and China agreeing to lower tariff rates after bilateral trade talks in Switzerland, the triple-digit duties imposed since April have been significantly reduced. The headline changes seem simple enough: for the next 90 days, Chinese goods shipped to the U.S. will be subject to at least 30% in tariffs, and American exports will receive a minimum 10% in duties, down from the respective 145% and 125% rates leveled in the wake of the “Liberation Day” tariff package unveiled by U.S. President Donald Trump on April 2. But these rates do not include previous tariffs, held over from the first trade war during Trump’s initial White House term, nor do they factor in other duties on specific goods and categories of products. To help sift through the morass, the South China Morning Post has summarized the new tariffs, how they stack up with earlier duties, and predict their potential impact on Chinese manufacturers and exporters.
While specific tariff levels for Chinese exporters will vary depending on the product, the baseline rate is about 50% according to estimates from financial institutions and comments from U.S. Treasury Secretary Scott Bessent. That 50% rate is derived by adding the around 20% in tariffs imposed during Trump’s first term plus the 30% in new duties still in force after the latest agreement. This number is consistent with the 49.3% estimated by Huatai Securities, which calculated the effective rate to be 19.3% at the end of last year. Other sectors – such as steel and aluminum, which carry an additional 25% in tariffs, would see rates higher than that 50% baseline.
“There’s still a lot more that has to be done, because Chinese companies have been operating on increasingly thin margins for the past couple of years,” said Nick Marro, Principal Economist for Asia at the Economist Intelligence Unit (EIU). A tariff rate of around 40% to 50% is still “prohibitive” for a lot of firms. “What this means is that we’re going to see continued activities around transshipment, the mislabelling or under-invoicing of China- originated goods, and Chinese firms fulfilling U.S. orders via their factories in Southeast Asia or other non-China markets,” Marro said.
Stephen Olson, Senior Fellow at the Yusof Ishak Institute (ISEAS) in Singapore and a former U.S. Trade Negotiator, called a 30% tariff rate “very steep” but “not necessarily impenetrable” – unlike the previous rates which threatened to stop bilateral trade cold. “At least some industries might be able to absorb the 30% and still be able to export to the U.S.,” he noted. “For those sectors facing the 30% plus the previous tariffs of 25%, it might be insurmountable,” he added.
Lower tariffs on Chinese goods are likely to keep auto-parts exports relatively attractive for American buyers, prompting China-based producers to reassess their plans to build production facilities in the U.S. Representatives of five vendors said they embraced the truce since their goods were still demanded by their American clients. China shipped almost CNY100 billion worth of auto parts to the U.S. – from electric vehicle (EV) batteries to lidar sensors and drive control systems – in 2024. “We are confident that U.S. customers will be willing to buy our products, even if they still have to pay the extra lower tariffs,” said Qian Kang, who owns a factory making printed circuit boards in Zhejiang province. “But neither Chinese vendors nor American customers are able to strike deals, because the outlook is uncertain. You have to be aware that tariffs may jump again after 90 days.” Chinese-made EV batteries are now subject to 58.4% U.S. tariffs – which comprises the 30% extra levy and the existing duties, down from 173.4% before the Geneva deal. Not all Chinese car-parts producers were subject to the 145% additional duty the U.S. imposed last month. On average, they faced an import duty of around 70%, according to the International Intelligent Vehicle Engineering Association. “All those companies are closely monitoring the tariff war and the adjustments,” said David Zhang, General Secretary of the Shanghai-based Association. “But there is no way that any of them can figure out the best way to sustain their business given the uncertainties.”
Several automotive supply-chain vendors are still bemused by the volatile tariffs that are complicating their go-global strategies. Studies on production and logistics costs, as well as pricing strategies, were not keeping up with the dynamic trade conditions, they said, making risk management a top priority to navigate the tariff spat. At Auto Shanghai, the world’s largest marquee event that ended on May 2, several car-parts producers said they had plans or were already in talks to set up factories in the U.S. as a way of sidestepping Trump’s punitive tariffs. Autolink, a smart cockpit supplier backed by Chinese EV maker Nio, has been planning to set up a production base in Detroit since the beginning of this year, a manager told the South China Morning Post. “We see greater sensitivity to tariffs among China’s car-parts makers,” S&P Global Analysts including Claire Yuan wrote in a report. “My suggestion to Chinese car-parts makers is not to make any definitive plans due to the ongoing uncertainty,” said Yale Zhang, Managing Director of Shanghai-based consultancy Automotive Foresight, as reported by the South China Morning Post.
