
Claire E. Reade provides clients with strategic counsel regarding issues affecting international trade and investment, including in the relationship between the US and China. She also advises clients on complex business issues, trade negotiations, litigation, and dispute settlement at the World Trade Organization (WTO), with more than three decades of experience handling these issues. She is Senior Associate, Trustee Chair for Chinese Business & Economics, at the Center for Strategic and International Studies, Washington, DC. Ms. Reade returned to Arnold & Porter in 2015 after an eight-year tenure at the Office of the United States Trade Representative (USTR), where she served as the Assistant US Trade Representative for China Affairs (2010-2014) and Chief Counsel for China Trade Enforcement (2006-2010).
Kevin Wang ’27 interviewed Claire E. Reade on Thursday, March 6, 2025.
On February 4, 2025, President Donald Trump imposed a 10% tariff on all Chinese imports into the United States. A month later, he raised tariffs by 10 percentage points to 20%. This is less than the 60% across-the-board tariffs that Trump promised on the campaign trail. How do you interpret this decision?
Well, the first round of tariffs in Trump’s second administration imposed 35% tariffs in total on many goods coming from China. This is not a trivial burden. There may have been some concerns about the reaction within the United States if Trump went directly to an effective 50% tariff,, which he could achieve by applying against China the 25% tariffs he had been threatening against Canada and Mexico. Ratcheting up by adding an additional 10% tariff on Chinese goods is now an indication that Trump is using the tariffs in some negotiating process. It is very difficult to understand exactly what his goals are regarding China, but it does feel like the ratcheting up of tariffs is intended to pressure China and reach some of his aims. This is a long-term game between China and the United States, and it's not just about fentanyl or illegal immigration. We will see different developments in this space coming up.
In the February 2025 executive order, Trump abolished the de minimis exemption, but he paused the repeal before it came into effect. Is this another concession that Trump is making?
I am not sure that is a concession. I think this is a temporary situation that is described as such in his executive order. A large number of small packages are being shipped by Chinese e-commerce companies to the United States, and without the de minimis rule, they will all now be subject to the U.S. tariffs that they were previously exempt from. In pausing the repeal, he said he accepted the reality that the U.S. Customs and Border Protection had been flooded with these small packages and does not have the resources right now to review all of them quickly. Once the mechanisms are put in place to handle such a large volume of packages, which is much larger than it was even a few years ago, then the de minimis exception will be pulled. This is not a concession to China.
On February 10, 2025, China’s retaliatory tariffs on U.S. goods, mainly energy and agricultural products, took effect. Another round of retaliation took effect on March 10. However, China’s tariff rates have been less than those of the United States, and Chinese tariffs took effect almost a week after U.S. tariffs did. Does China have flexibility on how to respond to U.S. tariffs and what message is China trying to send, if any?
China is definitely trying to send messages. First, the delay could have permitted negotiations between China and the United States in a short time, if the U.S. side was interested in a conversation. It is evident that the United States is not interested in a discussion right now, but China's approach has been a careful one, rather than a stupid one. China, with what they have done so far, is signaling that they are going to respond to U.S. tariffs; they are not going to just sit by and absorb the additional tariffs. Further, China is signaling it has multiple ways other than tariffs to take action against the United States that can be painful to the latter. For example, China is adding U.S. firms, mainly technology companies, to its export control and “unreliable entity” lists, with all the implications of what can happen to the companies on these lists. China is imposing export controls on critical minerals in China, launching antitrust investigations into U.S. companies like Google, pursuing anti-dumping cases against U.S. firms, and doing other things of this nature. At the same time, China's assessment seems to be that there is no advantage to provoking Trump and starting a cascade of tit-for-tat retaliations, where each side races to put more tariffs on each other. In fact, a rational deal, if there is a deal to be made, might be better.
Trump has also been talking about how he wants to make a “grand deal” with China without going into the details as to what the bargain will be like. Are both sides probing each other to understand what the other side wants? Has China been sending any messages as to what terms China might be willing to accept and that the United States might be willing to consider? Has there been major progress towards a negotiated settlement?
It does not appear that Trump has put China on the top of his list for negotiations. It is hard to know why, but he might view other countries, like Canada and Mexico, as ones where he can get a quick win and quick headlines. These two countries also tie to his campaign promises about both fentanyl and immigration, since restricting the flows of both into the United States are his priorities. China is a much more complex situation. Despite his businessman’s instincts for finding a deal, there are very committed China hawks in the United States. Trump does not have as much political room because he cannot be seen as soft on China. Cutting a deal that involves concessions to China can be quite dangerous for him politically.
In his executive order, Trump said that if other countries retaliate against U.S. tariffs, the U.S. government will reserve the option of raising tariffs further. Trump has put tariffs on Canada, China, and Mexico. Of the three, China’s retaliatory tariffs have come into force. Canada’s tariffs were briefly in force, and Mexico also said it was going to impose its own countermeasures before Trump delayed U.S. tariffs against both countries. Is a trade war inevitable? What would be the overall effect more specifically on the Chinese and the U.S. economy?
I am not sure if a long-term across the board trade war is likely. Trump likely pays attention to economic metrics like the stock market and their effects on his own wealth. These metrics matter to him, and they will potentially constrain him. This might mean that tariffs for Canada and Mexico are shorter term rather than longer term. In fact, on March 6, Trump again paused tariffs on Canada and Mexico. With China, it might be a different situation. We need to look at the long term. There will likely be reduced trade with China, but the degree of reduction is open. In high tech industries and those strategic industries tied to national security, the economy, or future technologies, we are going to see more constraints. The overall impact on the Chinese and U.S. economies is hard to assess. Shutting down China–U.S. trade entirely will probably not happen. Even if it happens, China’s exports to the United States do not comprise such a huge percentage of its overall exports such that China will be shaken fundamentally. However, China may be concerned if the U.S. posits rationales for shutting down particular trade that resonate with other trading partners, for example, in spaces like national security. If bilateral trade in one sector gets shut down, there can be also be reactive shutdowns in other markets, causing a ripple effect and more problems for China's economy. Most other markets in the world are more inclined to find a balance in terms of trading with China, rather than being aggressive about shutting things down, but they will have to respond to the effects of closing the U.S. market and that could increase the harm to China.
This is not the first time that Trump has tried to impose tariffs on China and much of the world. How did China navigate these challenges during the first Trump administration?
The personal relationship between Chinese President Xi Jinping and Trump did play a role. Trump did not push too hard against Xi’s constraints on how much change he was willing to tolerate in the structure of the Chinese economy, so the China–U.S. Phase One Trade Deal did not leave Xi in a difficult place in China’s internal politics. The deal was all acceptable to Xi; in fact, overall, the changes that were put in place were helpful to China. We will see how China’s Xi-driven decision making and political savvy are going to play out this time. This is an open question. Xi’s personality and relationship with Trump played an important role in the China–U.S. trade dispute during the first Trump administration. This can still be the case during the second Trump administration, but given the different environment in 2025, it may or may not work out as well.
China had its annual Two Sessions in early March, and one of the messages was that China’s economy is doing well, despite claims to the contrary. China’s leadership does not want to be seen as pandering to the Americans, in the same way that Trump does not want to be seen as giving concessions to anyone without receiving something in return that he could claim as a major victory. Could the fact that neither country wants to be seen as unnecessarily pandering to the other side make a negotiated settlement more difficult?
This dynamic was in play in the first Trump administration, and I do not think anything has changed. The question is more who has what cards and what goals. Trump is sending mixed messages about what his goals vis-à-vis China are. He wants to take advantage of Chinese money coming into the United States to create jobs and industries, but he does not want Chinese capital in sensitive industries because this raises national security problems. He also does not want U.S. money and technology flowing to China to help its strategic industries, particularly its military-industrial complex. It is unclear what he thinks there is to gain from a deal with China. He cares about fentanyl and immigration for political reasons, but outside of the business space, which is his background and where he tends to focus, I do not know what other goals he is trying to achieve.
China does not know what Trump is trying to achieve or what to expect with regard to US trade policy moving forward. How has the structure of trade relationships changed since the first Trump presidency? How has China's ability to withstand and respond to U.S. tariffs and export restrictions changed over the past decade or so?
China is now more experienced with what you need to do to tolerate the uncertainty and stress created by Trump’s policies. China is a large country with a large number of talented and hardworking people. There will be renewed efforts to have China do what Xi has talked about, which is to try to depend on self-reliance. There will not be a collapse of China because of Trump's policies. If you look at DeepSeek and China’s ongoing progress in developing new technologies, this level of creativity and effort will continue. Many observers say it is a shame if China and the United States cannot find some ways to collaborate effectively with each other. The people in each country have great ideas, and if you exchange knowledge, you get even better ideas. Instead, we are in a rough patch. I am unsure where this will come out, but neither country will collapse because of the tension between the two countries. It is going to create stresses for certain industries and areas that can lead to major changes in them, however.
Trump professes to have a good personal relationship with Xi, yet at the same time, he is appointing many China hawks to his administration. He is also accusing China of everything from causing the fentanyl crisis, to controlling the Panama Canal. How much do personal relationships matter for international trade negotiations between countries?
I think personal relationships can make a big difference but not all the difference. You have pointed out some factors that create parameters for what a relationship can accomplish. The United States is more suspicious of China's motives and goals now. On the economic side, there is a suspicion that China sees the world economy as a zero-sum game, and they want to be the ones on top, which the United States does not want. On the national security side, there are cyber hacking concerns. It does not feel like China is a friend or ally. That means there will be limits to what a personal relationship between two leaders can accomplish, but it matters, and for Trump, it matters quite a bit. We are still in very early days, but relationships can make a difference in how policies come out. It is just that we may not be able to see it, since the difference can be in terms of what does not happen. That said, we know that Trump enjoys the spotlight, and for any deal to work, it will need to be one that he can tout as his triumph. But Xi, too, cannot lose face. So that will be another challenge.
The White House, Public domain, via Wikimedia Commons