Trump Weighs 7.5% Tariff on China, to Meet Xi Ahead of Overcapacity Action

The Trump administration is considering a new 7.5% tariff on Chinese goods, targeting China's overcapacity while seeking to preserve a fragile trade truce with Beijing.

Trump Weighs 7.5% China Tariff

According to the Associated Press on Monday, citing sources familiar with the matter, Trump is considering a 7.5% tariff on Chinese imports, stemming from a U.S. investigation into China's industrial overcapacity.

This potential tariff would stack on top of existing duties, with its size carefully calibrated to avoid disrupting the year-long U.S.-China trade truce and Trump's planned meeting with Chinese President Xi Jinping in late September.

The U.S. government argues that China produces more goods than its domestic economy can absorb, prompting manufacturers to push exports onto global markets at low prices.

China's embassy in Washington stated that economic and trade issues should be resolved through bilateral negotiations, and dismissed claims that China has an overcapacity problem.

China's Trade Surplus Heightens Tensions

The U.S. investigation was launched under Section 301 of the Trade Act of 1974, which allows the president to impose tariffs in response to unfair trade practices.

The move follows a Supreme Court ruling that overturned Trump's earlier broad tariff strategy.

China's manufacturing capacity in industries such as automobiles, solar panels, steel, and cement has drawn growing concern from trading partners.

Last year, China's trade surplus reached nearly $1.2 trillion, with weak domestic demand prompting companies to expand overseas operations.

U.S.-China Trade Tensions and Agreements

Earlier this month, the Trump administration accused China of using third countries to circumvent U.S. tariffs, estimating the practice costs Washington $19 billion to $26 billion annually.

In May, Trump and Xi established the U.S.-China Trade Committee and the U.S.-China Investment Committee to strengthen economic ties.

China also agreed to purchase at least $17 billion in U.S. agricultural products annually through 2028, while approving an initial purchase of 200 Boeing aircraft and restoring market access for certain U.S. beef and poultry products.

The two countries also discussed lowering tariffs and easing trade barriers, with Trump and Xi expressing optimism about bilateral relations.

China's Move Amid Canada Tariff Escalation

Trump has also threatened a 50% tariff on Canadian cars, auto parts, and steel, escalating trade tensions after failed negotiations.

The dispute also threatens U.S. liquor makers, whose exports to Canada have already fallen more than 70% after Canadian provinces pulled American spirits from shelves.

Brown-Forman Corp.'s Canadian sales have dropped 59%.