US plans 7.5% ‘overcapacity’ tariff on Chinese goods, to take overall tariffs to about 20%

The US is reportedly planning to impose a 7.5% tariff on Chinese goods, citing concerns over excess manufacturing capacity. This move comes ahead of a scheduled summit between US President Donald Trump and Chinese President Xi Jinping next month, according to sources familiar with the matter.

If implemented, the new tariff would raise Trump's second-term duties on China to about 20%, a level Beijing has said aligns with the existing trade truce between the two countries. These additional tariffs would be in addition to those imposed during Trump's first term and maintained under the Biden administration.

According to a report in Bloomberg, the exact tariff rate has not been finalised. One option being considered is to announce a higher duty but suspend part of it, effectively reducing the tariff to 7.5%. The rate and duration of any suspension are still under negotiation.

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This move represents another attempt by Trump to advance his protectionist trade agenda after the US Supreme Court invalidated his earlier import taxes on goods from China and other countries.

The Trump administration began a Section 301 investigation in March into over a dozen major trading partners over concerns about excess manufacturing capacity. Officials aim to release the findings before the meeting between Trump and Xi in Washington on September 24.

In July, the administration imposed a 12.5% tariff on Chinese goods, citing insufficient action on forced labour. China criticised this but did not retaliate, noting that Washington had agreed to cap additional duties on Chinese exports at 20%.

Both countries are also working to extend their trade pact, which established a one-year truce set to expire on November 10.

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The White House stated that tariff announcements will come directly from the administration and described other reports as speculation.

The proposed tariffs come amid broader legal challenges to the administration's trade policies. A coalition of 25 US states, including New York, California and Illinois, has filed a lawsuit alleging that Trump unlawfully used Section 301 to replace tariffs struck down by the Supreme Court.

China has urged Washington to keep tariffs within the levels agreed upon during trade consultations.