I. Policy Background
Since 2026, US-China economic and trade relations have undergone a significant transition from tariff confrontation to institutionalized consultation. In February 2026, the US Supreme Court ruled that tariffs imposed by the US government under the International Emergency Economic Powers Act (IEEPA) were unlawful. Subsequently, both sides conducted multiple rounds of consultations on tariff issues, gradually de-escalating the "tariff war".
From May 12 to 13, 2026, the US-China economic and trade teams held consultations in South Korea, preparing the economic and trade groundwork for the summit meeting between the two heads of state. From May 13 to 15, US President Trump paid a state visit to China, and the two heads of state held a summit in Beijing, establishing a new positioning of "constructive strategic and stable relations" between China and the US.
II. Tariff Developments: Trade Council and Reciprocal Tariff Reductions
(I) Establishment of a Trade Council
According to the consensus reached in the US-China economic and trade consultations, both sides have agreed to establish a trade council, under which they will discuss cooperation including reciprocal tariff reductions. The economic and trade teams of both sides will conduct further consultations on this matter. Additionally, both sides have agreed to establish an investment council, transitioning US-China economic and trade consultations from "crisis-driven responses" to "institutionalized management".
(II) $30 Billion Reciprocal Tariff Reduction Arrangement
Both sides have agreed in principle to discuss, under the trade council, a framework arrangement for reciprocal tariff reductions on products of equivalent scale, with each side covering $30 billion or more in goods. Products of mutual concern as agreed by both sides are expected to enjoy most-favored-nation tariff rates or even lower rates.
Chinese Ambassador to the US Xie Feng stated that China and the US are negotiating a $30 billion reciprocal tariff reduction arrangement. Many American companies have expressed that the $30 billion basket is not large enough and hope to include more of their products. Xie Feng noted that given the scale of US-China trade, the exemption list could be extended further and the scale made larger.
On June 2, 2026, the US Trade Representative's Office announced the initiation of a public comment period on this matter. The US-China reciprocal tariff reduction arrangement has now entered the implementation phase.
(III) Aircraft and Agricultural Trade Cooperation
Trade cooperation between China and the US in the aircraft and agricultural sectors is mutually beneficial and win-win. The two teams will continue to maintain communication, encourage and guide their respective enterprises to strengthen linkages and expand trade cooperation in relevant fields.
III. Export Controls and Countermeasures
(I) China's Countermeasures Against the US "Chinese Military Companies List"
In response to the US government's addition of entities to the so-called "Chinese Military Companies List," China's Ministry of Commerce issued a notice on June 22, 2026, legally placing 10 US entities, including Avox, on the export control list, prohibiting the export of dual-use items to them. On the same day, the Ministry of Finance issued a notice stipulating that in government procurement activities, products from 46 US companies shall not be purchased.
(II) Export Controls on Rare Earths and Other Critical Minerals
China has further strengthened export controls on rare earths to the US. The US entities included in the control list include rare earth companies MP Materials and USA Rare Earth. Given China's dominant position in the global rare earth supply chain, the market is closely watching whether these restrictions will impact the US defense industry and high-tech industrial supply chains.
IV. Key Deadline
August 10, 2026 — A Critical Deadline
Under the previously reached agreement, both sides must negotiate a more comprehensive agreement to ease trade tensions by August 10, 2026. If an agreement is not reached by then, US tariffs on Chinese goods will snap back from approximately 30% to 145%, while Chinese tariffs on US goods will snap back from 10% to 125%.
Recommendations for Businesses
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Monitor tariff relief opportunities: The $30 billion reciprocal tariff reduction arrangement is being implemented. Relevant businesses should closely monitor whether their products are included in the exemption list and apply for tariff relief in a timely manner.
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Strengthen compliance management: The US issued an executive order on "Strengthening Customs Enforcement" on June 3, 2026, comprehensively strengthening the customs enforcement system and increasing importer compliance responsibilities and penalties. Chinese exporters need to strengthen customs clearance compliance management.
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Monitor supply chain risks: Export control measures involve critical areas such as rare earths and semiconductors. Businesses should assess supply chain risks and pursue diversified sourcing strategies.
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Seize the August 10 window: Before this deadline, both sides may still reach further agreements. Businesses should stay closely informed and flexibly adjust their trade strategies.
