The trade tensions between the U.S. and China that began as a dispute under the first Trump Administration have evolved into a deeper geopolitical rivalry that encompasses technology, national security and global leadership.
To stay competitive, U.S. businesses must understand the implications of this new reality and develop strategies to adapt and thrive in this shifting global trade environment.
President Trump entered his first term in the White House as a political outsider with no prior government experience and a bold promise to reshape the U.S. trade relationship with China. However, without a cohesive and experienced team, Trump’s “America First” trade policy focus on China was marked by abrupt decisions and uncertainty for American industries.
The administration came back into office for a second term with a much more coherent and methodical trade plan. That plan? To prioritize strict enforcement of U.S. trade laws against China. This was made clear Nov. 26, 2024, when then-President-Elect Trump promised to sign an executive order that would impose additional 10% tariffs on all imports from China his first day in office. These threats were realized Feb. 1, when Trump signed an order imposing 10% tariffs in addition to the existing 25% tariffs on imports from China. The additional tariffs were thereafter increased to 20% March 5.
The tariffs were issued amid two executive orders (EOs) that aimed to define the strategies underpinning Trump’s trade policies. The first of those instructed the U.S. Trade Representative to, within 180 days:
review on a country-by-country basis and identify those countries that imposed higher import tariffs than the U.S. in their bilateral trade dealings;
and recommend tariffs on a country‑specific basis
The second EO outlined the administration’s goals and parameters for crafting its “America First” trade policy. It instructed key agencies to investigate specific concerns, including the persistent trade deficit; the U.S. export control system; and the feasibility of establishing an External Revenue Service to collect tariffs, duties and other foreign trade-related revenues, and to present their findings. These findings, along with other trade actions — such as restrictions on the sale of certain critical technologies to China and several trade investigations against China — would form the basis for the Trump Administration’s choice of trade actions and remedies for redressing perceived economic grievances.
The first of such trade actions occurred April 2 — the so-called Liberation Day — and signaled a new phase in U.S. trade policy with the implementation of significant reciprocal tariffs on all imports from various countries to the U.S. These tariffs ranged from a baseline rate of 10% on imports of most goods to higher rates based on trade imbalances. In the case of China, those tariffs were assessed at 34% and led to retaliation with China’s own reciprocal tariffs. Moreover, in response to ongoing export restrictions on certain critical technologies to China, the Chinese government imposed export control restrictions on select critical minerals destined for the U.S. This tit-for-tat retaliation escalated, increasing costs for U.S. businesses and consumers, disrupting global supply chains and injecting uncertainty into the economy. The ensuing chaos led to an effective embargo between the U.S. and China. As a result of the disruption to the U.S. economy, both sides agreed to reduce reciprocal duties to 10% for a 90-day period and temporarily eased the restrictions on rare earth minerals and certain semiconductor chips pending further negotiations. These facts remain unchanged as of press time.
In the near term, companies must retool their import and export strategies by exploring inbound and outbound tariff mitigation based on business and sales transaction flows.
While these measures may not eliminate the impact of tariffs altogether, they can significantly soften the blow and preserve their competitiveness. In the long run, U.S. companies need to address the mounting challenges associated with their China-based operations and customers. That similarly requires balancing the cost advantages of operating in China with the rising risks to make proactive, informed decisions that align with their long-term global strategies.
The trade war between the U.S. and China has reshaped the way U.S. companies must operate on the global stage. While the challenges are substantial, so too are the opportunities for those who act decisively. The path forward requires adaptability, innovation and a pragmatic implementation of long-term strategy.
