U.S.-China Trade Agreement: Tariff Reductions Signal New Phase in Trade Relations

The United States and China announced a substantial reduction in bilateral tariffs this week, impacting electronics manufacturers, distributors, and customers. For a 90-day period, the agreement lowers tariffs between the two countries from 125% to 10%, allowing businesses to adjust their component sourcing strategies.

Key Changes in U.S.-China Trade

President Donald J. Trump has reached a new agreement with China that reduces tariffs between the two economies. This agreement, announced May 12, 2025, addresses trade imbalances and sets a framework for future negotiations.

Key Points of the Trade Agreement

The White House announced the following tariff modifications, effective May 14, 2025:

• Suspension of the 34% Reciprocal Tariff: For 90 days, the U.S. will suspend the 34% tariff imposed on April 2, 2025.
• Implementation of 10% Baseline Tariff: A 10% baseline tariff will apply during this suspension.
• Reduction from Previous Levels: This represents a decrease from the previous 125% tariff rate.
• Chinese Tariff Reduction: China will reduce its tariffs on U.S. goods from 125% to 10% and eliminate certain retaliatory measures.

What Tariffs Remain in Effect

Despite these reductions, several existing tariff structures remain unchanged:

• Section 301 Tariffs: These tariffs, which were implemented during President Trump's first term, remain in effect.
• IEEPA Tariffs: The 20% tariffs implemented under the International Emergency Economic Powers Act (IEEPA) in February/March 2025 continue to apply.
• Section 232 Tariffs: Duties on steel and aluminum remain at 25% for specified HTS codes.

Future Trade Talks Between the U.S. and China

According to the White House fact sheet, both countries will "establish a mechanism to continue important discussions about trade and economics" during the 90-day period. Key priorities include:

• Addressing Trade Deficits: Targeting the $295.4 billion U.S. goods trade deficit with China (2024 figures).
• Market Access: Negotiating improved access for American exports to Chinese markets
• Supply Chain Security: Strengthening and securing critical supply chains

• U.S. Representatives: Treasury Secretary Scott Bessent and United States Trade Representative Jamieson Greer
• Chinese Representative: Vice Premier of the State Council He Lifeng

Treasury Secretary Bessent stated at a press conference in Geneva that these talks aim to "substantially move down the tariff levels" and establish a sustainable framework for bilateral trade relations.

The Administration's Perspective on the Agreement

According to the White House, this agreement represents a strategic win for American interests.

"This trade deal is a win for the United States, demonstrating President Trump's unparalleled expertise in securing deals that benefit the American people," states the official fact sheet released on May 12.

The administration emphasizes that the maintained 10% baseline tariff "continues to set a fair baseline that encourages domestic production, strengthens our supply chains, and ensures that American trade policy supports American workers first, instead of undercutting them."

Impact of the Trade Agreement on the Electronic Component Market

The recently enacted trade agreement—reducing tariffs on key electronic components from 125% to 10%—is expected to significantly enhance supply chain stability and cost efficiency across the industry. Manufacturers and suppliers of semiconductors, integrated circuits, and other critical components anticipate meaningful cost savings, potentially improving pricing and availability throughout the supply chain.

While most distributors remain cautious—delaying major adjustments to sourcing strategies or pricing models until it’s clear whether the agreement will extend beyond the initial 90-day window—the temporary nature of the tariff relief may trigger a wave of front-running purchases. Companies looking to take advantage of lower costs before a potential reversion to higher tariffs could accelerate buying activity in the near term. If this occurs at scale, it could have the greatest immediate impact on the market, driving short-term demand surges, tightening lead times, and affecting pricing dynamics well before any long-term trade policies are finalized.

What’s Next With U.S.-China Trade?

While this agreement represents a significant step toward stabilizing trade relations, it is designed as a temporary measure with a defined 90-day window. Establishing a formal dialogue mechanism suggests both sides recognize the need for longer-term solutions to address persistent trade imbalances.

The U.S. goods trade deficit with China stood at $295.4 billion in 2024—the largest with any trading partner. The administration has indicated that continued discussions will focus on concrete measures to address these imbalances and deliver "real, lasting benefits to American workers, farmers, and businesses."

Tariff Implications for Importers & Exporters

For businesses engaged in U.S.-China trade, this agreement provides temporary relief from escalating tariffs. The 90-day time frame creates planning challenges, as tariffs could change later.

Importers should prepare for multiple scenarios after the 90 days, including potential extension of current rates or implementation of new terms based on bilateral discussion outcomes.

To view the most up-to-date tariff rates and stay informed on what’s changing, visit our Tariff Rate Guide or contact us to learn more.