U.S. pause on higher tariffs for China set to expire. What to know

Global News

5 days ago

A 90-day pause on imposing higher tariffs on China is due to expire on Tuesday and it is unclear if it will be extended.
After the most recent round of China-U.S. trade talks, held late last month in Stockholm, Chinese and U.S. officials said they expected the deadline to be extended for another 90 days. The U.S. side said the decision was up to President Donald Trump. So far there has been no formal announcement about whether he will endorse an extension or push ahead with the higher tariffs.
The uncertainty has left businesses in limbo and a decision to raise the import duties could jolt world markets.
Silence from Washington and Beijing
Trump has repeatedly shifted deadlines and tariff rates, and neither side has indicated what it plans for Tuesday. Extending the Aug. 12 deadline for reaching a trade agreement with China would forestall earlier threats of tariffs of up to 245 per cent.
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Treasury Secretary Scott Bessent said Trump was deciding about another 90-day delay to allow time to work out details of an agreement setting tariffs on most products at 50 per cent, including extra import duties related to illicit trade in the powerful opiate fentanyl.
Higher tariffs are aimed at offsetting the huge, chronic U.S. trade deficit with China, which hit a 21-year low in July as the threat of tariffs bit into Chinese exports.
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It's not unusual for the U.S. to give hints on where talks stand, but it's rare for China to make announcements until major decisions are set. So far, Beijing's refrained from commenting ahead of Tuesday's deadline.
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In an interview with Fox News taped on Thursday but aired on Sunday, U.S. Vice President JD Vance said Trump was considering additional tariffs on Beijing because of China's purchases of Russian oil. But he said Trump 'hasn't made any firm decisions.'
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China resisted cutting early bargain
Prohibitively high tariffs on Chinese exports to the United States would put huge pressure on Beijing at a time when the Chinese economy, the world's second largest, is still recovering from a prolonged downturn in its property market. Lingering effects of the COVID-19 pandemic have left millions of people reliant on 'gig work,' crimping the job market. Higher import taxes on small parcels from China have also hurt smaller factories and layoffs have accelerated,
But the U.S. relies heavily on imports from China for all sorts of products, from household goods and clothing to wind turbines, basic computer chips, electric vehicle batteries and the rare earths needed to make them. That gives Beijing some powerful leverage in the negotiations with Washington.
Even with higher tariffs, China remains competitive for many products. And its leaders are aware that the U.S. economy is only just beginning to feel the effects of higher prices from Trump's broad tariff hikes.
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For now, imports from China are subject to a 10% baseline tariff and a 20 per cent extra tariff related to the fentanyl issue. Some products are taxed at higher rates. U.S. exports to China are subject to tariffs of around 30 per cent. Before the two sides called a truce, Trump had threatened to impose 245% import duties on Chinese goods. China retaliated by saying it would hike its tariff on U.S. products to 125%.
What's at stake?
A trade war between the world's two largest economies has ramifications across the global economy, affecting industrial supply chains, demand for commodities like copper and oil and geopolitical issues such as the war in Ukraine.
After a phone call with Chinese leader Xi Jinping in June, Trump said he hoped to meet with Xi later this year. That's an incentive for striking a deal with Beijing.
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If the two sides fail to keep their truce, trade tensions could escalate and tariffs might rise to even higher levels, inflicting still more pain on both economies and rattling world markets. Businesses would refrain from making investment commitments and hiring, while inflation would surge higher.
Companies are in an 'extended wait-and-see mode,' Oxford Economics said in a recent report.