With the United States and China agreeing to lower tariff rates after bilateral trade talks held over the weekend 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 US will be subject to at least 30 per cent in tariffs, and American exports will receive a minimum 10 per cent in duties, down from the respective 145 and 125 per cent rates levelled in the wake of the “Liberation Day” tariff package unveiled by US President Donald Trump on April 2.
But these rates do not include previous tariffs, held over from the first iteration of the trade war during Trump’s initial White House term, nor do they factor in other duties on specific goods and categories of products.
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To help sift through the morass, we have summarised the new tariffs, how they stack with earlier duties and predict their potential impact on Chinese manufacturers and exporters.
What is the new effective tariff rate?
While specific tariff levels for Chinese exporters will vary depending on the product, the baseline rate is about 50 per cent according to estimates from financial institutions and comments from US Treasury Secretary Scott Bessent.
That 50 per cent rate is derived by adding the around 20 per cent in tariffs imposed during Trump’s first term – a figure given by Bessent in an interview on Monday – plus the 30 per cent in new duties still in force after last weekend’s agreement.
This number is consistent with the 49.3 per cent estimated by Huatai Securities, which calculated the effective rate to be 19.3 per cent at the end of last year.
Other sectors – such as steel and aluminium, which carry an additional 25 per cent in tariffs – would see rates higher than that 50 per cent baseline.
What does this mean for Chinese exporters?
“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.
However, Marro added, Chinese manufacturers and companies that have China-based operations will be encouraged by the tariff reduction.
A tariff rate of 20 per cent would have been difficult to manage, he said, and a tariff rate of around 40 to 50 per cent is still “prohibitive” for a lot of firms.
“What this means is that we’re going to see continued activities around transshipment, around the mislabelling or under-invoicing of China originated goods, around Chinese firms fulfilling US orders via their factories in Southeast Asia or other non-China markets,” Marro said.
Stephen Olson, a visiting senior fellow at the ISEAS – Yusof Ishak Institute in Singapore and a former US trade negotiator, called a 30 per cent 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 per cent and still be able to export to the US,” he noted. “For those sectors facing the 30 per cent plus the previous tariffs of 25 per cent, it might be insurmountable.”
More from South China Morning Post:
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