History doesn’t repeat itself, but it does rhyme. While the US has reached deals with Japan, the EU, and other countries, the US-China Trade War is still very much ongoing. The US and China held “constructive” talks on Tuesday in Stockholm, but failed to reach a trade deal. There is now a possibility of US tariffs snapping back to as high as 80% on certain Chinese imports if a deal is not reached by the August 12th deadline. The current impasse is creating uncertainty for businesses that will require careful planning.
Here, I break down the main issues and what it means for your business.
How did we get here?
As with the other trade conflicts, the US-China discussions emerged from the tariffs announced on April 2, 2025 (“Liberation Day”). The reciprocal tariffs, combined with the 10% universal tariff, resulted in a combined effective tariff rate of up to 145%. Unlike many other countries subject to Liberation Day tariffs, China was quick to retaliate, escalating its retaliatory tariffs from 34% to 84% and then 125%.
A temporary pause came after the Geneva talks, with the US lowering its rates to 30% (10% universal duty, plus a 20% “fentanyl” tariff) and China’s to around 10%. The parties also agreed to extend the deadline to August 12th. Rare earth metals—where China holds a globally dominant position—became a major point of negotiation. At the June 11 London talks, the US agreed to ease some export restrictions and relax student visa policies. That set the stage for yesterday’s Stockholm talks, which ended without resolution.
What businesses should watch for:
- Higher for longer tariffs. Your business should plan for higher tariffs to remain in place. It is essential that pricing and Incoterms account for the existing tariffs and the possibility of further escalation in rates should a deal not be reached.
- Critical Materials. Depending on your company’s location, this may affect you differently. At a minimum, however, you’ll want to ensure adequate inventories of key inputs to sustain ongoing operations and fulfill upcoming orders.
- Investment. US-China investment flows have been in decline in recent years for a variety of factors. Given the lingering uncertainty, it likely makes sense to continue proceeding with caution on any investment plans.
- Currency and Payment Risk. Trade tensions often lead to exchange‑rate volatility and tighter banking controls. You will want to ensure that you account for any exchange rate fluctuations, capital controls, delays in payment, or additional documentation requirements.
- Contractual risk management. Firms will want to review their contract clauses—particularly force majeure and dispute resolution—to ensure that they are protected in the event of further trade tensions. You should ensure that these clauses account for escalation and provide for sufficient recourse in the event that things go wrong.
The global trading system is being remade. Tariffs are likely to remain a feature of the new global trade order for some time to come. Companies should plan accordingly. With the August 12 deadline approaching and structural issues unresolved, businesses should plan not only for this round of talks, but a longer period of sustained uncertainty.
Disclaimer: This blog is for informational purposes only and does not constitute legal advice. Reading or interacting with this content does not create an attorney–client relationship. You should consult a qualified attorney for advice regarding your specific situation. Mehaffy, PLLC disclaims all liability for actions taken or not taken based on this blog.