The On-Going Tariff War Against China

Over the past several months, the tariff landscape between the United States and China has been in a constant state of flux. What started as a dramatic escalation in early April dubbed “Liberation Day” by President Trump saw tariffs spike to unprecedented levels. At the peak, US duties on Chinese imports reached 145%. China responded with levies as high as 125% on American goods. The tension sent shockwaves through global markets and created headaches for manufacturers trying to plan around the uncertainty.

After a few volatile weeks, both countries agreed to dial things back. Today, tariffs on Chinese goods have been reduced to 30%. Chinese tariffs on US exports now sit at 10%. That’s still historically high, but it marks a notable de-escalation from the brink of a full-blown trade freeze. Even with this softening, the tariff environment is still punishing for many small and mid-sized businesses that depend on Chinese supply chains.

The stock market, which took a hit during the initial escalation, has largely recovered thanks to the 90-day pause in tariff hikes. The S&P 500 is back in positive territory for the year, and firms with less exposure to global sourcing, or those aligned with domestic policy goals, have benefited. One clear winner is Nvidia, which stands to profit from expanded AI infrastructure development in the Middle East. On the other side, Foxconn, the world’s largest electronics contract manufacturer, downgraded its outlook due to lingering uncertainty and softening demand driven by trade barriers.

The broader goal of these tariffs appears to be forcing a shift in global supply chains, by nudging certain kinds of manufacturing back to the United States. Administration officials have pointed to pharmaceuticals, electronics, and semiconductors as sectors where the country needs to lessen its reliance on China. While the rhetoric paints a picture of revitalized American factories, the path to that reality is far from smooth.

US manufacturing has not yet seen the kind of resurgence promised at the outset of the trade war. That being said, there are signs of increased interest in domestic production capacity. Industrial real estate demand is up. Equipment dealers are reporting stronger inquiries for fabrication machinery and assembly automation. A 30% tariff on imports makes previously marginal re-shoring decisions more appealing, especially for mid-volume producers who were relying on just-in-time shipments from Asia.

At the same time, the economic impact is still playing out. Tariff costs are being passed to consumers. Even after the cuts, households will pay an estimated $2,800 in added annual expenses due to tariff-related price increases. While inflation has eased in recent weeks, the Federal Reserve remains wary of stagflation, a mix of slow growth and rising prices triggered by distorted supply chains and policy whiplash.

In the near term, the temporary tariff pause gives businesses a window to adjust. Whether this leads to long-term investment in American manufacturing depends on what comes after the 90 days are up. Equipment demand may rise if companies believe the higher tariffs are here to stay. But if this turns into another short-lived political maneuver, most will hold their wallets until the dust settles.

What’s clear is that the so-called trade war is far from over. It’s just changing shape.