On February 4, the U.S. imposed a 10% tariff on all Chinese imports. Although significantly lower than the 60% tariffs President Donald Trump promised while on the campaign trail, the move represents a new escalation in the U.S.-China trade relationship following China’s imposition of countermeasures on the same day. Since then, President Trump has also announced new tariffs on steel and aluminum imports, as well as reciprocal tariffs that would raise American tariffs to match the levies other countries place on American goods. These actions highlight the president’s willingness to use tariffs for economic and policy ends and indicate that tariffs will likely continue to intensify as U.S.-China trade negotiations progress.
Trump enacts new tariffs on Chinese goods and changes policies on low-cost shipments
President Trump enacted the 10% tariff on all Chinese imports to criticize the alleged import of fentanyl and precursor chemicals into the U.S. Although many goods currently imported to the U.S. from China already have tariff rates of 10% or higher, the newly announced tariffs are expected to increase prices of Chinese imports in several sectors, including electronics, electrical equipment, generic pharmaceuticals, pharmaceutical ingredients, and apparel.
In retaliation, China announced tariffs of 15% on coal and liquefied natural gas, 10% tariffs on crude oil, agricultural machinery, and certain cars from the U.S., effective February 10, as well as export controls on tungsten, tellurium, bismuth, molybdenum, and indium. China has also filed a dispute with the World Trade Organization in protest of the tariffs. No negotiations have been announced between U.S. and Chinese leadership, indicating that the tariffs could continue indefinitely.
In addition, President Trump announced tariffs of 25% on all steel and aluminum imports, which are expected to come into effect on March 12. His administration also reportedly plans to announce reciprocal tariffs on all goods for which trading partners place a higher tariff on U.S. imports than the U.S. places on theirs within the next week. These measures are not expected to have a major impact on U.S.-China trade since Chinese finished metal imports are already taxed at a similarly high rate, and U.S. and Chinese tariff rates on the same goods are generally comparable. However, the steel and aluminum import tariff could negatively impact demand for Chinese raw materials used in other countries that export finished steel and aluminum products to the U.S.
Trump’s February 4 order further revoked the U.S. de minimis exception, which exempts Chinese shipments under $800 (€773) from tariffs, causing confusion and delays at customs facilities. The United States Postal Service (USPS) briefly halted the receipt of all parcels from China and Hong Kong from February 5-6 amid concerns on how to process affected goods. On February 6, Trump announced plans to temporarily reinstate the de minimis exception until the Department of Commerce can execute the order. If the measure ultimately moves forward, disruptions are expected at logistics and customs processing facilities that handle these packages, which mainly include consumer goods and apparel from providers such as Temu and Shein. New documentation, duties, and fentanyl screening could slow processing times and increase overall congestion. Following the initial order, delays were reported to the processing of over 1 million packages at John F. Kennedy International Airport (IATA: JFK) in New York City, while air logistics providers SEKO Logistics and DHL acknowledged that the measure increased regulatory uncertainty for their operations. In the long-term, higher prices from the tariffs could decrease demand and hit air cargo operators, who transport 1.2 million tons per year of low-cost e-commerce goods from China. The de minimis exception constitutes a significant portion of business for operators including FedEx and United Parcel Service (UPS).
Concerns about semiconductor and electronics chip trade prompt action in U.S. and Japan
On January 27, President Trump announced additional plans to impose global tariffs on all imports of computer chips, pharmaceuticals, copper, and steel to promote U.S. manufacturing of these goods. More announcements on the timeline and extent of the tariffs are expected in mid-February. If ultimately enacted, the tariffs on imported chips would likely have a major impact on the Taiwan Semiconductor Manufacturing Co. (TSMC), which gains approximately 70% of its revenue from customers in North America. Memory chips from South Korean producers including Samsung Electronics and SK Hynix could also be affected. Two high-ranking officials from Taiwan’s Ministry of Economic Affairs have since arrived in the U.S. to negotiate with Trump, and have announced plans to import more U.S. natural gas to appease concerns about Taiwan’s trade surplus with the U.S.
Two U.S. lawmakers have also filed a request for the U.S. Department of Commerce to consider placing Nvidia’s H20 artificial intelligence chips and chips of similar sophistication on the export control list. The proposal follows reports that these technologies are used by Chinese artificial intelligence engine DeepSeek, which has prompted scrutiny and criticism from U.S. lawmakers. Trump’s administration is reportedly considering the move but has not made a final decision.
Additionally, Japan’s Ministry of Economy, Trade, and Industry is considering imposing additional export controls on semiconductors and related equipment, aiming to prevent use for military purposes. Under the proposed measures, exporters would be required to apply for a license before shipping these products, during which the waiting period for a license would be approximately 90 days. Although the restrictions would apply to all regions, the policy announcement appears geared mainly towards China and has drawn strong criticism from the Chinese government. Currently, the Japanese government is gathering public feedback on the proposal and has not set a definitive date for its enforcement.
U.S. government puts pressure on Panama over alleged Chinese influence in Panama Canal
Following President Trump’s December threat to take back the Panama Canal, his administration has heavily criticized China’s alleged influence in the Canal and raised concerns about CK Hutchison Holdings, the Hong Kong-based port operator that owns two major ports at each end of the Canal and serves vessels carrying around 39% of the Canal’s traffic. American officials have suggested that the Chinese government could use the Hutchison ports to block or control access to the Canal, or even to stage potential military operations. Following these accusations, Panama’s government has announced its withdrawal from China’s Belt and Road Initiative development aid program, and is reportedly considering canceling its contracts with Hutchison after launching an investigation into the company’s financial dealings, although no final decisions have been made.
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