US and China Settle on Three-Month Extension of Tariff Treaty

The United States has agreed to extend their tariff treaty with China for another three months, with the move coming just after US President Donald Trump decided to impose a 15% tax on all Nvidia and AMD shipments to the East Asian country.

The truce has been extended to allow Trump more time to negotiate a trade deal with Chinese President Xi Jinping, with the two world leaders taking time over the past few weeks to speak about an agreement to lower China's reciprocal tariffs.

Earlier in the year, Trump announced a 10% baseline tariff, a 20% tariff due to the illegal Chinese fentanyl trade, and several additional tariffs on specific products. This triggered a retaliation tariff from China, which Trump also responded to. Eventually, a trade war between the two countries begun, with potential US tariffs on Chinese goods reaching as high as 145%, forcing them to agree to a temporary treaty.

During that time, US tariffs on most Chinese goods have stayed stagnant around 30% – with higher levies on specific items – while Chinese tariffs on American goods were imposed at around 10%.

However, that deal was set to expire at midnight last night– until President Trump's latest executive order, which was decided upon by his administration during talks with China in Sweden last month. The order states that the US will extend the treaty by 90 days, lasting until November 10, which gives the two countries more time to negotiate and finalize an agreement to lower tariffs with each other.

Without the extension, US tariffs would have spiked to 54%, while China would have retaliated with an equally large increase to 34%. While Trump is confident that the current negotiations are going well, the details of their discussions are still unknown, and exactly when an agreement will be reached is also uncertain. Nevertheless, the White House has confirmed that the US faced a trade deficit of almost $300 billion with China in 2024 alone, suggesting that reducing the deficit will likely be one of the focal points of a potential deal.

Additionally, several American officials have confirmed that they are looking to strengthen China's relations with the US while weakening their economic ties with Russia; Trump has taken similar action with India, who could face a 50% tariff in several weeks if they refuse to stop buying Russian oil.

The deal is also expected to include details involving Chinese exports of rare earth minerals – an industry which it has a tight hold on – and recent advances in technology. Trump recently allowed major American chipmakers Nvidia and AMD to resume exports to the East Asian country, though he has also forced both companies to pay 15% of their revenues from Chinese sales to the US government.

In April, Trump banned the sale of Nvidia and AMD's advanced chips to China out of fear that they had been utilizing the technology to bolster their own artificial intelligence projects, moving them ahead of the US in the global AI race. The tax has sparked serious controversy among American politicians, though, citing the fact that the US Constitution explicitly bans taxes on exports.

Looking to read more into the global AI race? Check out this article on the rise of Nvidia, AI, and how the technology is impacting markets across the world from our member-exclusive Business collection, The Profit Playbook.

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