After months of escalating trade tensions, the United States and China have announced a tentative agreement aimed at stabilizing their trade relationship. This announcement follows two days of negotiations in London, during which U.S. and Chinese officials focused on easing China’s export restrictions on critical industrial components while addressing the steep tariffs imposed by the U.S. earlier this year.
While the framework still awaits final approval from President Trump and President Xi, key provisions outlined in the agreement include:
- A continued U.S. tariff rate of 55% on Chinese imports—a total figure reflecting a 25% base duty, 20% in punitive measures added earlier this year, and a 10% reciprocal tariff imposed in April.
- China’s ongoing 10% tariff on U.S. goods, with no additional increases.
- Temporary easing of China’s export restrictions, providing temporary relief for industries reliant on rare earth minerals, magnets, and other advanced manufacturing materials.
Potential Impact on U.S. Businesses
Although improved access to critical materials is expected, ongoing tariffs continue to contribute to cost pressures and complicate supply chains. Trade negotiations with other nations remain active, and businesses across sectors should assess their operational and procurement strategies to adapt to evolving regulations and supply chain risks.
Businesses across sectors should anticipate broader implications, including:
- Tariff and Regulatory Volatility: Tariffs are expected to remain a significant cost factor, with the potential for sudden changes as global negotiations continue.
- Ongoing Supply Chain Disruption: Companies with exposure to global inputs should prepare for continued sourcing challenges and logistical uncertainty, even as material access could improve.
- Market Sensitivity: Financial markets, input costs, and commodity pricing may remain volatile as more agreements with U.S. trading partners are finalized.
Industries Most Affected by the Agreement
Due to their reliance on Chinese imports, including rare earth minerals, magnets, semiconductors, batteries, and other critical components, the following industries are likely to experience notable effects from the tentative trade agreement:
- Manufacturing & Distribution
- Construction
- Technology & Electronics
- Automotive (particularly electric vehicles)
- Consumer Goods
- Aerospace
- Industrial Equipment Manufacturing
Given the interconnectedness of international trade, developments in one sector often have cascading effects across multiple industries. Organizations that rely on complex global supply chains are likely to continue being affected by evolving tariffs, export controls, and supply chain uncertainties.
Recommended Actions to Mitigate Ongoing Tariff Impacts
As trade tensions and regulations continue to evolve, businesses should continue taking deliberate steps to manage risks and maintain supply chain stability:
- Diversify Suppliers: Broaden your supplier network across multiple regions to reduce reliance on a single market, minimizing exposure to tariffs and disruptions.
- Optimize Procurement and Material Strategies: Regularly evaluate and refine procurement processes and material sourcing for flexibility and efficiency.
- Fabricate Parts In-House: Where possible, purchase raw materials sourced domestically and consider fabricating parts in-house that are usually imported to save on escalating costs.
- Strengthen Compliance and Contract Management: Routinely review trade-related contracts and continue to strengthen internal controls for classification, licensing, and regulatory compliance.
- Facilitate Open Communication: Maintain consistent dialogue with suppliers, customers, and internal teams to anticipate risks and coordinate swift responses.
- Implement Scenario Planning: Use scenario planning and financial forecasting to prepare for multiple outcomes and adapt business strategies accordingly.
- Stay Informed and Proactive: Continuously monitor the latest developments, including regulatory changes, market trends, and supply chain risks.
This tentative agreement is not final and may be modified before becoming official. Grassi will continue to monitor the agreement and will provide updates as they become available.
How Grassi Can Help
A strategic response to trade fluctuations is crucial for achieving long-term business success in a global marketplace. For personalized guidance on navigating ongoing trade risks and optimizing your supply chain, procurement, and overall business strategy, contact a Grassi Advisor today.
