American consumers and businesses are bracing for higher prices on goods imported from China following the announcement of a new tariff agreement between the United States and China. The deal, which awaits final signatures from President Donald Trump and Chinese President Xi Jinping, sets U.S. tariffs on Chinese imports at 55%, while China will levy a comparatively lower 10% tariff on American goods.
The new agreement marks a reduction from the peak of the trade war, when U.S. tariffs on Chinese goods soared as high as 145% and Chinese tariffs on American products reached 125%. However, even at 55%, U.S. tariffs remain significantly higher than those imposed by China, meaning Americans will bear a much heavier cost on imported goods than their Chinese counterparts.
Economists and retail executives warn that these tariffs function as a tax on American businesses and consumers. Retailers like Walmart, which sources about 60% of its products from China, have already indicated that they will need to raise prices to offset the increased costs. Research consistently shows that the vast majority of tariff costs are passed on to American importers and, ultimately, consumers, rather than being absorbed by Chinese exporters.
Small businesses, in particular, are feeling the squeeze. Many report hiring freezes and stalled development as they struggle to absorb the steep tariffs. “For many small businesses that primarily obtain parts or products from China, this is a death sentence and will destroy their American dream,” said the Main Street Alliance, a small business advocacy group.
While Chinese consumers will also pay more for American goods, the impact is less severe. China’s new 10% tariff on U.S. imports is a sharp reduction from earlier levels and will be easier for Chinese buyers to absorb.
As part of the agreement, China has agreed to provide the U.S. with rare earth elements vital for industries like automotive and semiconductors, a move that addresses longstanding U.S. concerns about supply chain vulnerabilities. In return, the U.S. will ease restrictions on Chinese students attending American universities and pause some threatened visa revocations.
The current deal comes as President Trump prepares to announce a sweeping new set of universal tariffs in the coming weeks. Building on his use of the International Emergency Economic Powers Act, Trump is expected to unveil a 10% baseline tariff on all imports to the U.S., with even higher “reciprocal” tariffs for countries with large trade surpluses against the U.S. These measures, which would be layered on top of existing tariffs, are intended to address what Trump calls a “large and persistent U.S. trade deficit” and to incentivize domestic manufacturing.
If enacted, these universal tariffs could further raise costs for American consumers and businesses, not just on goods from China but from virtually every trading partner. The Federal Reserve and independent analysts warn that such broad measures could have a significant inflationary impact and risk slowing economic growth.
