Trade Tensions Rise
- Ahead of a potential U.S.-China summit, officials expect tariffs, industrial policy and rare earths to top the agenda. - The U.S. has imposed a 25% tariff on certain re-exported semiconductors and is investigating pharmaceutical tariffs. - Analysts say the Iran war is now hurting China's factory orders, costs and jobs, adding immediate pressure on exporters ( ).
Washington and Beijing are heading into a possible leaders’ meeting with tariffs, chip controls and rare earths back at the center of the relationship. (federalregister.gov) The Trump administration imposed a 25% tariff on certain semiconductors, chipmaking equipment and derivative products in a January 14, 2026 proclamation published January 20. The order said the action followed a Section 232 national-security investigation completed on December 22, 2025. (federalregister.gov) That semiconductor case is broader than a customs dispute. The proclamation says the United States lacks enough domestic capacity in chips and some manufacturing tools, and ties the issue to defense systems, data centers and 16 critical infrastructure sectors. (federalregister.gov) Pharmaceuticals are now on the same track. Commerce opened a Section 232 investigation on April 1, 2025, sought public comments in a notice published April 16, 2025, and President Donald Trump issued a pharmaceuticals proclamation on April 2, 2026 that was published April 9. (federalregister.gov; federalregister.gov) The drug order says the United States produced about 47% of patented pharmaceutical products distributed domestically in 2025 and only 15% of patented active pharmaceutical ingredients by volume for the U.S. market. The administration used those figures to argue import reliance had become a national-security risk. (federalregister.gov) Rare earths matter because they are the processed minerals used in magnets, motors, batteries and military hardware, and China dominates much of that supply chain. When U.S. officials talk about summit leverage, they are talking about access to inputs that sit upstream of cars, electronics and weapons production. (whitehouse.gov; federalregister.gov) China is also facing pressure from outside the bilateral trade fight. At the Canton Fair in Guangzhou, Reuters reported on April 17 that one plastics exporter’s raw-material costs had jumped 20% since the Iran war began, cutting margins to 5% to 6%. (marketscreener.com) Other exporters at the same fair said orders were slowing and output was falling as plastic, copper and aluminum costs rose. Reuters reported that one appliance maker’s output had been cut in half and that the company was still losing money after a 15% price increase. (marketscreener.com) China’s first-quarter gross domestic product still grew 5.0% from a year earlier, but Reuters reported on April 16 that March exports slowed to 2.5% after 21.8% growth in January and February. The same report said higher energy prices from the Iran war were exposing China’s dependence on export demand and open shipping lanes. (usnews.com) That leaves both governments heading toward any summit with fresh incentives and fresh constraints. Washington is pressing industrial policy through tariffs and security law, while Beijing is trying to protect factories already hit by weaker orders, higher costs and supply-chain risk. (federalregister.gov; federalregister.gov; usnews.com)
