President Donald Trump last week took to Truth Social to tout a new tentative trade agreement with China, albeit one that only really takes things back to square one and leaves the tariff rate against Beijing at historically high levels.
“WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%,” Trump’s post to Truth Social read, with a later post adding, “President Xi [Jinping] and I are going to work closely together to open up China to American Trade. This would be a great WIN for both countries!!!”
Under this new arrangement, if it stands, the US tariff rate against China will be set at 55%, which is actually an increase from the 30% rate set when the two countries declared a truce in May at the start of their negotiations. It is seemingly just bringing the rate back in line with what Trump first announced in April on the so-called “Liberation Day,” which saw the rate against China set at 54%.
That initial announcement was followed by multiple rounds of escalation, which saw the import taxes against China hiked all the way to a rate of 145%. As part of this new arrangement, Trump said that the US will get access to rare earth minerals from China — including ones vital to the production of technology like smartphones — while in return, Chinese students will be allowed to attend American colleges and universities.
During his first term, Trump’s trade war with China saw the average tariff rate against China increase to about 20%, which remained largely unchanged during Joe Biden’s presidency. Given how much the US has traditionally imported from China, increased tariffs on goods from there will have a much greater impact on the cost of goods than tariffs against other countries.
It is unclear at this point when this 55% rate would take effect. The earlier 30% rate was supposed to remain in effect until August while negotiations continued. It is also unclear if this rate will effect all imports from China the same, or if some will be spared.
What do these tariffs do to prices?
As I’ve touched extensively elsewhere here on CNET, a tariff is essentially a tax placed on imports from a certain country. A 55% tariff rate on China, therefore, means any company or entity looking to import goods from there will be charged 55% of the order’s cost in order to do so — think a $100,000 shipment now costing $155,000.
Now, you, an average consumer, maybe don’t do a lot of bulk importing of construction materials or cheap T-shirts from China, but that extra cost for importers will more than likely get to you anyway. To offset tariffs, companies almost always pass on their increased import costs to the end consumer — making homes made with those construction materials or those T-shirts now sold at a major chain store more expensive. That sort of phenomenon is why many economists and finance experts have characterized Trump’s tariffs as a major new tax on the working class.
