Assessing the Latest US Tariff Threats to China and Their Implications
QU Peipei, LIU Yitong, DU Yuchen, and SHAO Suya
QU Peipei, LIU Yitong, DU Yuchen, and SHAO Suya
CF40 Institute
Abstract: Since April 2025, US–China trade tensions have followed a pattern of US action and Chinese counteraction—tariff for tariff, rare earth controls for technology restrictions. The escalation began with US tariffs citing fentanyl in February and peaked in April with “reciprocal tariffs.” Despite several rounds of talks and a 180-day tariff truce, tensions resurfaced in late September as Washington expanded export controls under the “50% rule,” and Beijing responded with full-chain rare earth export controls. The US then threatened a 100% tariff on all Chinese goods starting November 1.
China’s measures are viewed as retaliation to US tech containment. The US, facing higher inflation risks and political pressure ahead of the 2026 midterms, is less able to bear a full escalation. The new tariff threat is therefore unlikely to be fully implemented and may be delayed, as the IMF and APEC meetings offer a negotiation window. In the longer term, such instability will further strengthen both countries’ drive for supply-chain self-reliance.
On October 10, 2025, US President Donald Trump announced on social media that he plans to impose a 100% tariff on all Chinese imports starting November 1, in response to China’s move a day earlier to tighten export controls on rare earths and related materials. The statement sparked renewed fears of an escalation in US–China trade tensions and triggered a sharp sell-off on Wall Street.
This paper reviews the evolution of bilateral trade frictions since early 2025, analyzes the logic and constraints behind the latest escalation, and assesses possible future developments.
I. Review of US–China Trade Dynamics in 2025
Since the start of 2025, the basic pattern in US–China economic and trade frictions has been: the United States initiates measures such as added tariffs and tighter export controls, and China responds “tooth for tooth.” Whether tensions escalate or ease, each side’s policy adjustments often mirror those of the other: tariffs countered with tariffs, rare earth export controls countered with technology restrictions.
Tariff-based friction had already begun before April. Citing the fentanyl issue, the US government from February imposed a 10 % tariff on all Chinese goods, and in March raised that rate to 20 %. In retaliation against what it saw as the US’s unilateral measures under the fentanyl pretext, China gradually imposed retaliatory tariffs of 10–15 % on US agricultural products.
In early April, the conflict exploded after “Liberation Day.” On April 2, the US announced a 34 % “reciprocal tariff” on Chinese goods, and via subsequent executive orders, raised the cumulative tariff rate on Chinese imports to a peak of 145 %. In response, on April 4 China announced retaliatory tariffs of 34 % on US goods, matching US actions step by step; China then raised its cumulative tariffs to a peak of 125 %.
Tensions eased in early May. On May 12, both sides held trade talks in Geneva and released a joint statement agreeing to a 90-day tariff truce. During this period, the US reduced new tariff rates on Chinese goods to 30 %, while China reduced its tariff rates on US goods to 10 %.
On export controls, the US targeted key software for exports to China, especially electronic design automation (EDA) software used in advanced semiconductor design. Building on earlier restrictions on advanced computing and AI software, in late May the US Department of Commerce’s Bureau of Industry and Security (BIS) demanded that major EDA firms apply for special licenses for exports to China. In the same month, the US government also announced the revocation of visas for some Chinese students in STEM fields. In response to these US technology restrictions, China began imposing export controls on rare earth items containing Chinese components—reflecting the dynamic of “reciprocal controls.”
At the second round of talks in London in June, the focus shifted from tariffs to export controls. The two sides explicitly discussed the possibility of easing US technology controls in exchange for Chinese rare earth access—this is a concrete reflection of reciprocal lifting of controls (“mutual cancellation”). To maintain a stable environment for complex negotiations, the Stockholm talks in July extended the tariff truce by another 90 days. As core issues progressed, the fourth round of talks in Madrid in September expanded the scope to other unresolved disputes. The two sides reached a basic framework agreement on the divestment of TikTok’s US operations: they agreed to form a new US-based joint venture, with US majority ownership, and entrusted Oracle to manage US user data and supervise algorithms.
II. China’s Tightening of Rare Earth Controls: A Reciprocal Response to US Technology Restrictions
1. The Logic Behind This Round of Escalation
On October 10, Trump claimed on social media that China had adopted an “extremely confrontational” stance on trade issues, accusing China of tightening rare earth export controls. However, based on our observation of the interactive patterns in China-US trade friction, we believe that China’s tightening of rare earth export controls this time is a countermeasure against the US “50% Rule.” On September 29, the USBIS issued stricter regulations, further escalating sanctions against Chinese companies. Following closely, on October 9, China’s Ministry of Commerce announced tightened export controls on rare earths and related technologies and equipment. Meanwhile, on October 3, US Customs and Border Protection (CBP) released guidance on Section 301 vessel fees, planning to impose fees on vessels owned, operated, or constructed by China starting October 14. In response, China also released countermeasures on October 10, implementing phased fees on US vessels docking at Chinese ports starting October 14. It can be seen that this series of events is consistent with the interactive pattern observed since this year—the US escalates friction first, and China then takes corresponding countermeasures.
