Trade between the world’s two largest economies—a link that defined the world economy for two decades—is on life support. U.S. tariffs on China now stand at 145%; China’s tariffs on the U.S. now stand at 125%. And that’s just the baseline, not including additional tariffs on specific goods like steel (in the case of the U.S.) or agricultural products (in the case of China). “The tariff rates are now so high as to be prohibitive of most direct bilateral trade,” says Yeling Tan, a professor of public policy at Oxford University. Even Beijing recognizes that, with tariffs this high, U.S. goods don’t have a chance. “Given that American goods are no longer marketable in China under the current tariff rates, if the U.S. further raises tariffs on Chinese exports, China will disregard such measures,” the country’s finance ministry said in a statement announcing its new 125% tariffs.
The tariffs are rapidly unwinding a close economic relationship: Chinese manufacturers built products, from lawn chairs and Christmas ornaments all the way to smartphones and semiconductors, and U.S. consumers and businesses bought them. Both Washington and Beijing have signaled they’re open to negotiations, even if there are no public signs that they’re talking. Each thinks the other need to move first; on Friday morning, CNN reported that the U.S., rather than requesting a phone call with Xi, demanded China should instead request a phone call with Trump. The U.S. may have realized its steep tariffs on China are unsustainable. Late Friday, the White House exempted electronic goods like smartphones, laptops and computer processors from U.S. tariffs, including some imposed on China.
Tariffs and trade The U.S. imported $438 billion worth of goods from China in 2024, compared to $143.5 billion worth of China-bound exports, according to data from the U.S. Census Bureau. Trump’s 145% tariff on Chinese imports is just the baseline. There’s also 25% tariffs on steel and aluminum imports, and the looming threat of a 25% tariff on any country that uses Venezuelan oil, a set that includes China. And then there’s all the earlier tariffs slapped by previous administrations: on Chinese home appliances, solar panels, and EVs. Beijing, too, has slapped additional tariffs on U.S. goods, like heavy machinery, oil, gas, and agricultural products. It’s also imposed a range of other non-tariff barriers; for example, on Friday, Chinese officials said they will reduce the number of U.S. films approved for screening in China. If the current situation persists—145% tariffs on China, 10% on everyone else—both Western and Chinese companies will likely accelerate their drive to set up manufacturing hubs outside of China in countries like Vietnam, India, and Mexico.
