U.S. Tariffs on China: Latest Developments

I. Tariff Structure Overview: Three Layers, Theoretical Rate of 33%–37.5%

U.S. tariffs on Chinese goods have become increasingly complex due to years of escalating trade actions and policy shifts. With multiple measures overlapping—Section 301 tariffs, Section 122 temporary tariffs, and most-favored-nation (MFN) baseline rates—understanding tariff applicability and changes is critical for supply chain management.

As of early June 2026, the theoretical combined tariff rate on Chinese goods entering the United States is approximately 33%–37.5% (after accounting for exclusions and actual import composition, the weighted average effective rate is around 21.6%). U.S. Trade Representative Jamieson Greer has acknowledged that U.S. tariffs on China will "likely always be higher than for other countries." This rate is composed of three core tariff layers:

·                      MFN Baseline Rate: Approximately 3.4% (weighted average)

·                      Section 301 Tariffs: Ranging from 7.5% to 100% on listed HS codes, covering approximately $360 billion in Chinese goods exported to the U.S.

·                      Section 122 Temporary Tariff: 10%, effective February 24, 2026, replacing the IEEPA fentanyl tariff (originally 20%) that was struck down by the Supreme Court as unconstitutional.

Certain HS codes—such as those for electric vehicles, batteries, and solar products—face combined rates exceeding 145%. This is not a simple sum of the three layers, as Section 301 tariffs apply only to covered HS codes and vary widely by product. Importers should always verify final duty rates based on the specific HS code of their product.

II. Recent Policy Easing & Targeted Escalation: Limited Reductions, Structural Divisions Remain

Tariff Reduction Track: In mid-May 2026, The U.S. and China agreed in principle to establish a joint "Board of Trade" targeting reciprocal tariff cuts on $30 billion worth of non-strategic goods each. USTR Jamieson Greer confirmed that U.S. tariff reductions will likely target items like apparel, toys, yarn, and textiles. While specific goods on the U.S. list are not finalized, the USTR initiated the process to gather public input, and the cuts have not yet taken effect.

On June 1, 2026, the White House issued a proclamation under Section 232 of the Trade Expansion Act of 1962, temporarily adjusting tariffs applicable to specific industrial, agricultural, and metal products:

== The proclamation reduces the ad valorem tariff on combine harvesters and certain other agricultural machinery from 25% to 15%.

== Foreign companies can qualify for a reduced 10% duty on capital equipment if the product contains at least 85% U.S. steel/aluminum by weight (lowered from the previous 95% threshold).

The adjusted tariff measures will take effect June 8, 2026, and will revert to current rates on December 31, 2027.

Tariff Escalation Track: on May 28, 2026, the U.S. launched an antidumping and countervailing duty (AD/CVD) investigation into China-origin N-cyclohexyl-2-benzothiazole sulfenamide (CBS, commonly known as rubber accelerator CZ). Preliminary dumping margins are alleged at 285.94%–338.51%. No duties have been imposed yet, with final rates expected around October 2026.

III. Section 301 Investigations Intensifying: New Global Supply Chain Risks Ahead

In the coming weeks, the results of ongoing USTR Section 301 investigations warrant close attention.

1. Structural Overcapacity Investigation (16 Economies)On March 11, 2026, USTR initiated a Section 301 investigation into "structural excess capacity and government support policies" in 16 economies (including China, the EU, Japan, Korea, India, Mexico, Vietnam, and others), targeting critical manufacturing sectors: metals (steel, aluminum), automotive, energy & electronics (semiconductors, batteries, critical minerals, solar modules), advanced machinery, and materials (chemicals, plastics, construction). A tariff decision is possible by July 24, 2026. The investigation remains in the information-gathering stage, but any resulting tariffs would deeply impact global supply chains, and several countries have stated they "reserve the right to retaliate."

2. Forced Labor Investigation (60 Economies)On March 12, 2026, USTR initiated a Section 301 investigation into 60 economies regarding the alleged failure to effectively ban imports of forced labor goods. On June 2, 2026, USTR formally determined that all 60 economies have failed to impose and effectively enforce such a prohibition, and proposed additional duties of 10%–12.5% on all products from these economies (with limited exceptions). China is among the 54 economies listed as having "failed to impose" a forced labor import ban, placing it in the higher-risk category for the proposed tariff action. USTR will accept written comments until July 6, 2026, with a public hearing on July 7, 2026. U.S. Trade Representative Jamieson Greer said the failure forces American workers to compete on an unlevel playing field. If implemented, industry analysts believe China’s high-priority sectors — including new energy vehicles (NEVs), solar, lithium batteries, and textiles — could be significantly impacted.

IV. Vietnam Section 301 Investigation: Supply Chain Diversification Requires Rethinking

Notably, on May 29, 2026, USTR initiated a Section 301 investigation into Vietnam's intellectual property protection and enforcement practices—the third Section 301 investigation targeting Vietnam, following the overcapacity and forced labor probes. In April 2026, USTR's annual IP report designated Vietnam as a "Priority Foreign Country," the first such designation in 13 years.

Vietnam is a major U.S. trading partner. Its trade surplus with the U.S. expanded to $178.2 billion in 2025, an increase of approximately $54.7 billion from the prior year, driven by electronics, apparel, furniture, and footwear—sectors heavily reliant on U.S. exports.

The imposition of tariffs would directly raise the landed cost of Vietnamese goods, compressing profit margins for companies in Vietnam's supply chain. In general, Vietnam remains a competitive manufacturing destination for many sectors; the key is to monitor and prepare for potential IP and traceability compliance requirements as needed.

V. Conclusion & Outlook

The U.S.-China trade relationship is currently in a complex phase of "limited easing + systemic decoupling." While some consumer goods tariffs show signs of loosening, Section 301 investigations are expanding beyond China to Vietnam, Southeast Asia, and the EU—key manufacturing and export economies. Tariff structures have evolved from a single bilateral friction point into a multi-layered, multi-issue systemic trade tool. For companies reliant on Asian supply chains, structural risk — requiring proactive portfolio and supply chain adjustments today.

VI. Supply Chain Recommendations for Companies

Against this backdrop of escalating complexity, proactive risk mitigation is essential. The following five recommendations are designed to help companies navigate the current uncertainty.

CCA-IM (www.cca-im.com) is a US and Asia-based team with offices in Cleveland, Ohio, China, Taiwan, and Vietnam. Since 2003, CCA-IM has helped 300+ North American companies and 40+ PE firms across over 500 projects to develop and execute business strategies in China and Asia.

Based on our on-the-ground insights and ongoing client work, we recommend the following actions:

1.               Establish a tariff monitoring mechanism.Consider creating a dedicated trade compliance and tariff analysis function to track USTR Section 301 investigation progress, exclusion lists, and AD/CVD cases in real time, avoiding passive exposure to sudden rate changes.

2.               Re-evaluate the "China + Vietnam" dual dependency.Vietnam is becoming a new focus of USTR Section 301 investigations. Companies are advised to expand supply chain diversification beyond China and Vietnam to a broader set of regions, such as Mexico, India, Central Europe, or other nearshoring destinations.

3.               Adopt a tiered supply chain strategy.

o                  For high-tariff, high-tech sensitive products (e.g., semiconductors, EVs, batteries): consider partial capacity reshoring or repositioning to third countries (e.g., Mexico, Eastern Europe).

o                  For low-risk, low-value-added consumer goods: leverage the current $30 billion tariff reduction window while building in flexibility for tariff restoration.

4.               Strengthen trade risk clauses in contracts.Explicitly include tariff change cost-sharing mechanisms, origin adjustment options, and suspension/termination provisions in procurement and logistics contracts.

5.               Plan for the 2027–2028 policy reversion window.Several temporary tariff reductions (e.g., steel, aluminum, agricultural machinery) will revert to original rates as early as January 1, 2028. Advance capacity and procurement cycle planning is recommended to avoid abrupt cost spikes.