On August 11, 2023, the United States and China announced a significant extension of their tariff truce, prolonging it for another 90 days. This move effectively postpones the implementation of triple-digit tariffs on Chinese goods, providing a much-needed reprieve for U.S. retailers as they prepare to increase inventories ahead of the crucial end-of-year holiday season.
U.S. President Donald Trump took to his Truth Social platform to declare that he had signed an executive order suspending the imposition of higher tariffs until 12:01 a.m. EST on November 10, 2023. All existing components of the truce will remain intact during this period. In a parallel announcement, China's Commerce Ministry confirmed early Tuesday that it would implement necessary measures to suspend or eliminate non-tariff barriers impacting trade.
Despite Trump's previous demands for China to quadruple its purchases of U.S. soybeans, the executive order did not contain any stipulation for additional purchases. The United States continues to engage in discussions with the People's Republic of China (PRC) aimed at addressing the imbalance in trade reciprocity and associated national and economic security concerns. Trump's executive order emphasized that China is making significant strides toward correcting non-reciprocal trade arrangements.
The extension of this tariff truce was crucial, as it was initially set to expire on Tuesday at 12:01 a.m. EDT (0401 GMT). The new deadline allows for the seasonal surge of imports in anticipation of the Christmas shopping season, covering essential categories like electronics, apparel, and toys while maintaining lower tariff rates. This extension prevents U.S. tariffs on Chinese goods from escalating to an alarming 145%, while Chinese tariffs on U.S. goods were poised to reach 125%. Such drastic increases would have effectively created a trade embargo between these two economic giants.
As a result of the extension, the existing tariff rates will continue: a 30% tariff on Chinese imports and a 10% tariff on U.S. goods exported to China. “We'll see what happens,” Trump remarked during a news conference on Monday, pointing to his reportedly positive relationship with Chinese President Xi Jinping. Last week, Trump indicated that the U.S. and China were nearing a trade agreement, expressing a willingness to meet with Xi before the year's end if a deal materializes.
Wendy Cutler, a former senior U.S. trade official and current vice president at the Asia Society Policy Institute, described the news as “positive.” She pointed out that the recent de-escalatory actions from both nations suggest a mutual interest in reaching a deal that could pave the way for a meeting between Xi and Trump this fall.
The trade truce was first established in May after discussions in Geneva, Switzerland, which led to a 90-day period for further negotiations. Subsequent meetings in Stockholm, Sweden, in late July prompted U.S. negotiators to recommend a deadline extension to Trump. Treasury Secretary Scott Bessent has consistently stated that the triple-digit tariffs imposed by both countries earlier this year were unsustainable and had effectively created a trade embargo between the two largest economies in the world.
Kelly Ann Shaw, a senior White House trade official during Trump's first term, noted that the negotiation style typical of Trump often leads to last-minute decisions. She mentioned that it is likely Trump sought further concessions from China before agreeing to the extension. Although Trump had pushed for increased soybean purchases from China over the weekend, he refrained from repeating this demand during the Monday announcement.
Recent data from the Commerce Department indicates that U.S. imports from China surged earlier this year to avoid impending tariffs but saw a steep decline in June. The U.S. trade deficit with China decreased significantly by approximately one-third in June, reaching $9.5 billion, the narrowest since February 2004. Over five months of consecutive declines, the deficit has reduced by $22.2 billion, marking a 70% drop compared to the previous year. Additionally, the U.S. administration is pressing Beijing to halt purchases of Russian oil, with threats of secondary tariffs looming over China.
The ongoing trade negotiations between the U.S. and China highlight the complexities of their relationship and the challenges that lie ahead as both countries work toward a more balanced trade framework.
