Trump Considers New 7.5% Tariff on China for Cheap Goods

President Donald Trump is moving toward levying a new tariff on China that would penalise the world's second-largest economy for flooding the global market with underpriced goods, according to AsiaOne and Boston Herald reporting based on sources familiar with the matter.

Two of the people who spoke on condition of anonymity to discuss internal deliberations still being finalised said Trump is considering setting the new tariff at 7.5 per cent. Administration officials believe this specific level would not endanger the one-year trade truce between Washington and Beijing. Nor would it threaten a planned White House meeting between Trump and Chinese President Xi Jinping expected to take place in late September.

Navigating Legal Obstacles

The move, if finalised, appears to be a calibrated effort by the White House to work around a Supreme Court decision earlier this year. That court ruling struck down Trump's plan to implement a sweeping, high-tariff scheme not seen since the 1930s. Following that defeat, the administration announced in March that it was launching formal investigations targeting excess industrial capacity and forced-labour regulations in China and other nations.

The excess industrial capacity probe of China was initiated under Section 301 of the Trade Act of 1974. This legislation allows the president to levy tariffs against nations that discriminate against US companies or commerce. Yet, sources familiar with the deliberations stressed that Trump could still change his mind on the new tariff.

It remains unclear if the US administration is also nearing its decision in probes of other economies announced for unfair trade practices. Those targeted investigations include the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, South Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan and India.

Broader Global Pressures

The potential 7.5 per cent levy would come on top of tariffs ranging from 10 per cent to 12.5 per cent announced last month. Those levies targeted 60 economies around the globe that the Trump administration accused of failing to effectively enforce a ban on goods produced with forced labour. Many countries, including China, protested that move. Those measures took effect just as the clock ran out on temporary tariffs Trump had turned to after the Supreme Court struck down his sweeping reciprocal tariffs in February.

Massive capacity in a slew of Chinese industries—from autos and solar panels to cement and steel manufacturing—has drawn increased attention from trading partners. Although China's own leaders have prioritised rebalancing the economy, slowing domestic demand has prompted companies to expand into overseas markets. Surging exports pushed China's trade surplus to a record of nearly $1.2 trillion last year.

The Chinese embassy in Washington rejected the idea that it has an issue with overcapacity. In a statement, the embassy said economic and trade issues should be resolved through bilateral talks rather than unilateral tariff actions. Similarly, the Chinese Ministry of Commerce argued in a recently published report titled China's Position on the So-called Excess Capacity Issue that China has never sought a large trade surplus.

At the same time, the Treasury Department warned countries doing trade with Iran that new secondary sanctions are in the pipeline. These measures aim to ostracize nations that continue to do business with Tehran. China serves as Iran's biggest trade partner. Treasury Secretary Scott Bessent announced the move on Monday, providing little detail and omitting which countries could face secondary sanctions.

Key Trade and Sanctions Context

• Proposed China Tariff: 7.5 per cent under consideration for flooding global markets with underpriced goods.
• Legal Mechanism: Section 301 of the Trade Act of 1974, following earlier Supreme Court setbacks.
• Prior Actions: 10 per cent to 12.5 per cent tariffs on 60 economies over forced-labour regulations.
• Wider Geopolitics: Treasury warnings of secondary sanctions affecting nations trading with Iran.

The White House and the US Trade Representative's office did not respond to requests for comment on the tariff deliberations.