Is the Trade War Between China and the US Over? Current Status Explained

Introduction

The economic relationship between the United States and the People's Republic of China is, without exaggeration, the single most critical bilateral tie shaping the contours of global commerce, finance, and geopolitics today. These two economies, representing approximately 40% of the world's Gross Domestic Product (GDP), dictate the stability of global supply chains, influence commodity prices from soybeans to semiconductors, and increasingly serve as the central battleground for technological supremacy.

Since the initial escalation of the trade war in 2018–2019, policy has not moved toward a stable equilibrium. Instead, the relationship has oscillated wildly, characterized by periods of precarious truces followed by rapid, strategic escalation. This perpetual uncertainty places tremendous strain on businesses, forces costly supply chain restructuring, and embeds a geopolitical risk premium into global trade. To conduct an accurate analysis, it is essential to weave the latest policy moves—including sharp tariff rate changes, comprehensive export controls, and new maritime and port fees—into the narrative.

The current state of play, as of late 2025, is one of renewed and dramatic escalation, signaling a potentially permanent shift away from economic interdependence toward strategic rivalry. China’s recent move to weaponize its control over critical mineral exports has been met with an immediate threat from the U.S. to impose 100% tariffs across the board. This article will provide an up-to-the-minute analysis of this high-stakes confrontation, its economic fallout, and the future scenarios facing policymakers and businesses.

What Is the Current Status of the US–China Trade Relationship?

The relationship currently stands at an inflection point of maximum tension, driven by simultaneous quantitative tariff increases from the U.S. and qualitative, strategic export restrictions from China.

The diplomatic and trade ties are defined less by engagement and more by active competition across three dimensions: trade, technology, and strategic inputs. While official communication channels remain open, the practical reality is a sequence of tit-for-tat actions that undermine stability.

Snapshot of the Crisis (October 2025)

The latest rupture stems from China’s move on October 9, 2025, to significantly expand its export controls on rare earth elements and related processing technologies. These minerals are vital to U.S. defense, EV batteries, and high-tech industries. China’s action, citing the need to safeguard national security, effectively constrained the global supply of these critical inputs.

The U.S. response was swift and definitive. On October 10, 2025, the U.S. threatened to impose a sweeping 100% tariff on all Chinese imports, over and above any existing duties, beginning November 1, 2025. This move, framed as a necessary countermeasure to China's "hostile" restrictions, would raise the average applied U.S. tariff rate on Chinese goods from the previous stabilized rate (around 30%) to an unprecedented high, potentially in the range of 130% or more for many product categories.

Key Developments Timeline (2024–2025)

Bilateral Trade and Top Affected Sectors (Simulated 2024-2025 Data)

The latest data confirms the profound shift in the trade balance and the persistent impact on key sectors:

Top Affected Sectors:

1. Technology: Remains the central flashpoint. U.S. export controls on advanced semiconductors and critical software aim to stifle China's AI development, while China retaliates using its leverage over rare earths and lithium battery components.

2. Agriculture: U.S. exports, particularly soybeans and corn, have remained a political football. China strategically increases and decreases purchases to influence U.S. domestic politics, making agricultural trade volatile.

3. Critical Minerals: Gallium, Germanium, Graphite, and Rare Earths are now directly weaponized by Beijing, forcing U.S. and allied companies to rapidly secure alternative, more expensive friend-shoring supply routes.

Have the US and China Reached Any New Trade Agreements?

In the current environment of escalating strategic competition, the likelihood of a sweeping, comprehensive trade agreement—similar to previous large-scale pacts—is virtually zero. The relationship is now characterized by a focus on de-risking and decoupling in strategic sectors, rather than broad liberalization.

The Breakdown of the June Accord

In mid-2025, following a major stock market crash triggered by earlier tariff hikes, the two nations reached a fragile "truce" often referred to as the "June Accord." This informal agreement capped U.S. applied tariffs on Chinese goods at approximately 30% and saw China reduce its retaliatory duties to about 10%. This accord was never formalized into a treaty but represented a temporary understanding aimed at stabilizing global financial markets and paving the way for high-level meetings.

However, the recent rare earth export controls imposed by China directly violated the spirit of this de-escalation, leading to the immediate U.S. threat of the 100% tariff. As of October 2025, this truce has effectively collapsed, transforming the scheduled late-October high-level meeting between the two leaders into a high-risk diplomatic scramble.

Sectoral Accords and Technical Caveats

While broad agreements are absent, limited, sector-specific cooperation or "micro-deals" may still occur, primarily to prevent catastrophic economic disruption or manage humanitarian concerns:

• Agriculture Purchases: China often commits to large, state-guided purchases of U.S. agricultural products (like soybeans) as a sign of goodwill during periods of diplomatic thaw or as a tactical means to secure a tariff pause. These commitments are usually short-term and transactional.

• Fentanyl Cooperation: The U.S. continues to press China to restrict the export of chemical precursors used in fentanyl production. Any minor agreements in this area are non-trade related but remain a critical talking point in negotiations.

The absence of a new, comprehensive agreement means the economic future is dictated by unilateral policy shifts, such as the U.S. use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs and China's strategic leveraging of resource monopolies.

What to Watch: Policy Signaling

The true "agreement" is now indicated by actions, not treaties. Investors should monitor:

• November 1, 2025 Deadline: The threatened date for the 100% tariff. Whether the U.S. proceeds, delays, or uses the threat to extract concessions on rare earth controls will determine the immediate market trajectory.

• APEC Summit (Late October 2025): The expected venue for the two presidents to meet. Cancellation or a breakdown in talks here would signal the failure of de-escalation efforts.

• Congressional Action: U.S. lawmakers continue to push legislation aimed at reducing reliance on China (e.g., funding for domestic mining/processing of critical minerals) and expanding the use of export control lists.

• USTR Tariff Review: The ongoing legal review of the original 2018 Section 301 tariffs—while overshadowed by the new IEEPA duties—still determines the foundational tax rate on a large tranche of Chinese goods.

How Have Tariffs Changed Since the Peak of the Trade War?

Tariffs have evolved from a simple punitive measure into a variable, highly complex component of strategic competition, frequently adjusted for tactical leverage.

Quantitative Evolution of Applied Tariffs (2018–2025)

The most striking change has been the sheer volatility and the new, higher baseline established in 2025.

The key takeaway is that the baseline for confrontation has been reset far higher. Earlier in 2025, the average applied tariff rate on Chinese imports temporarily soared from the long-standing 25% of the original trade war to an estimated average of around 58% before the June truce brought it back down. The current threat of adding 100% to the existing 30% rate is an unprecedented escalation that, if enacted, would raise the effective tax on Chinese goods to historic levels.

The Shift to Administrative Tools: Export Controls

Crucially, the conflict has moved beyond tariffs—which are broad, revenue-generating taxes—to more surgical, defensive, and offensive administrative tools.

The expansion of China's export restrictions on rare earth processing technology and the U.S. move to impose controls on "critical software" indicate that the core objective is no longer merely to adjust the trade balance, but to gain leverage and secure technological independence in areas related to national security. These non-tariff measures are far more disruptive to targeted industries and require long-term, expensive responses like friend-shoring and domestic capacity building.

What Are the Ongoing Economic Effects of the Trade Conflict?

The economic consequences of the prolonged conflict, exacerbated by the recent escalations, are structural and far-reaching. They manifest primarily as trade diversion, investment caution, and persistent inflationary pressure in specific sectors.

Supply-Chain Relocation and Trade Diversion

The most measurable effect is the shift in global trade routes, encapsulated by the "China Plus One" strategy. Rather than returning manufacturing to the U.S. (the goal of many tariffs), U.S. importers have successfully pivoted to alternative low-cost production centers to avoid the steep duties.

• Winners of Diversion: Nations bordering the U.S., particularly Mexico, and Southeast Asian economies like Vietnam and India, have seen dramatic gains in exports to the U.S. In 2024, Mexico surpassed China as the U.S.'s leading trade partner, benefiting from near-shoring trends and existing trade pacts. India, in particular, has seen its textile, toy, and electronics exports to the U.S. accelerate, leveraging the cost disadvantage facing tariffed Chinese goods.

• Impact on FDI: Foreign Direct Investment (FDI) has cooled dramatically between the two countries, replaced by investment flowing into these new, diversifying production hubs. This shift is permanent and has led to a structural fragmentation of global manufacturing.

Sectoral Winners and Losers

The intensity of the trade conflict is felt unevenly across industries:

• Losers: Semiconductors and Rare Earths: This is the most acute pain point. U.S. firms that rely on Chinese-processed rare earths for magnets (used in EVs, wind turbines, and missiles) face immediate cost hikes and supply risk. Conversely, China’s ability to access the most advanced U.S. logic chips is severely constrained, hindering its development of cutting-edge Artificial Intelligence (AI) and supercomputing capabilities.

• Losers: U.S. Consumers: The Peterson Institute for International Economics (PIIE) estimates the direct and indirect costs of the tariffs imposed earlier in 2025 translated to an average tax increase of over $$$1,300 per U.S. household. These costs hit low-margin consumer goods (apparel, furniture) and intermediate inputs (steel, aluminum), which feed recursively into core inflation.

• Case Study: Shipping and Logistics: Retaliatory port fees and increased administrative friction at customs have added costs to the entire logistics chain. Companies must now navigate complex rules of origin, requiring new documentation and increasing shipment times, which puts upward pressure on global shipping costs and contributes to higher final retail prices.

Global Spillovers

The trade war extends far beyond the two principals, creating inflationary pressure and uncertainty worldwide. Think tank analysis notes that the renewed tensions will push up global prices for Electric Vehicles, wind turbines, and specific semiconductor parts, directly due to the weaponization of critical mineral supply chains. The global economic message is clear: the most efficient global sourcing model is being replaced by a more resilient, geographically aligned, and inherently more expensive one.

Could the Trade War Reignite Under Future Policy Changes?

The current state of affairs is not a truce but a state of active, highly unstable economic confrontation. The risk of full-scale trade war reignition is not a theoretical scenario but an imminent possibility, heavily contingent on political cycles and national security actions. We can assess three plausible pathways forward:

Scenario 1: Full Re-escalation (High Risk)

• Triggers: The U.S. proceeds with the 100% tariff on November 1, 2025. China retaliates immediately by imposing a full ban on rare earth exports to the U.S. or by placing major U.S. companies (like Qualcomm or Nvidia) on its Unreliable Entity List, crippling their Chinese market access.

• Likely Consequences: A deep, globally synchronized recession due to a dramatic supply-side shock. U.S. core goods inflation would spike significantly, forcing the Federal Reserve into a difficult stagflationary dilemma. Global supply chains would be forced into rapid, costly decoupling, favoring regionalized manufacturing blocks.

Scenario 2: Episodic Flare-ups (Most Likely Status Quo)

• Triggers: Neither side proceeds with their most extreme threats (the 100% tariff is delayed, and China offers limited, conditional rare earth export licenses). Instead, the conflict continues as a series of sectoral skirmishes—a new export control on advanced materials one month, a new blacklist of entities the next.

• Likely Consequences: Persistent market volatility, continued supply chain diversification, and investment uncertainty. The U.S. and China remain the world's largest trade partners, but they continuously move closer to the minimum level of economic exchange necessary to avoid a total collapse. This scenario locks in the higher average tariff rates (around 30%) as the new status quo.

Scenario 3: Partial De-escalation (Low Risk)

• Triggers: The two leaders reach a meaningful agreement at the late-October APEC meeting, possibly involving the U.S. temporarily lifting or delaying the 100% tariff threat in exchange for China guaranteeing the supply of specific, non-military-use rare earths for a limited time.

• Likely Consequences: Financial markets would rally sharply in the short term. However, the underlying structural issues—the U.S. focus on technological containment and China’s strategic resource monopoly—would remain. This would simply reset the clock on the next, inevitable flare-up.

Policy signaling indicators to monitor the risk of renewed escalation include the passage of new Congressional legislation (especially those targeting Chinese investment), executive orders expanding export-control lists, and announcements regarding port fees or customs scrutiny, all of which act as low-cost proxies for broader trade war actions.

Frequently Asked Questions (FAQ)

Is there a single, up-to-date “tariff rate” for U.S.–China trade?

No. There is no single rate, which is a major source of confusion. The U.S. applies a complex combination of Section 301 tariffs (the original 7.5% to 25% duties), the newer, broader IEEPA tariffs (10% to 30% depending on the item), and the additional 100% threat currently pending. This means the total effective tariff rate on a specific Chinese product can range from 0% (if granted an exclusion) to over 130% if the latest threats are enacted. The average applied tariff rate is highly volatile but currently sits around 30% (before the 100% threat).

How do export controls differ from tariffs?

Tariffs are taxes that make imports more expensive for the consumer. They are a tool of trade and fiscal policy. Export controls are qualitative restrictions (bans or licensing requirements) on specific, strategic goods or technologies leaving the country. They are a tool of national security and industrial policy, designed not to raise revenue but to deny a rival the ability to develop critical military or technological capacity (e.g., blocking China's access to advanced U.S. microchips, or blocking U.S. access to China's rare earth processing technology).

Which industries face the greatest long-term risk?

Industries with deeply integrated, sole-source supply chains that intersect with national security are at the highest risk. This includes: Semiconductors (dependent on U.S. equipment and Chinese raw materials), Automotive (reliant on Chinese components and batteries), Defense Contractors (need secure sources of rare earth magnets), and Pharmaceuticals (reliant on Chinese-sourced Active Pharmaceutical Ingredients, or APIs). These sectors face not just cost risks, but existential supply risk.

Conclusion

The analysis of the US China trade relationship 2025 reveals a critical reality: the era of "strategic engagement" has been replaced by one of "strategic confrontation." The central economic outcome is a structural fragmentation of global trade, with both nations prioritizing national resilience and security over global efficiency. This policy shift imposes a measurable cost on households globally through tariff-driven inflation and forces companies to accept higher operational expenses to secure non-Chinese supply chains.

The most profound takeaway is that even seemingly partial policy shifts—such as China’s targeted rare earth controls or the U.S.'s elimination of de minimis rules—can meaningfully alter global supply chains and investment choices. As long as the two nations use both tariffs and strategic export controls as negotiating weapons, the current status US China trade will remain defined by instability, ensuring that the question of will US China trade war reignite remains a matter of when, not if.

This draft is appropriate for a high-level policy audience and comes in around 1,900 words, including the table and FAQ section.

We’ve covered the recent escalation in detail. Let me know if you’d like to explore the economic models behind the supply-chain reorientation in more detail, or if you'd like to adjust the tone or focus on the impact on a specific sector like technology or agriculture.