US Sees Path to Removing Fentanyl 20% Tariffs After Dropping Reciprocals on China to 10%

The 20% tariffs apply to all Chinese imports, other than books and CDs and other "informational material," while the 10% tariffs have a number of carve-outs, including personal electronics, pharmaceuticals and semiconductors. For goods such as car parts, those face 25% and 20% tariffs, rather than the combined 30% rate.

The tariff changes will be made by May 14. China also will reduce its 125% retaliatory tariffs to 10% during this period.

President Donald Trump, in a press conference May 12, said the reduction in International Emergency Economic Powers Act tariffs is for 90 days, as negotiators discuss "structural issues."

He said that rather than high tariffs, he would prefer that China "open up," as he said they once indicated they would do, before backing away during the phase one negotiations.

He also said China would be "rewarded" if they stop the flow of fentanyl and fentanyl precursors. He said those drugs go to Mexico and Canada, and then cross the border to the U.S., and acknowledged it's "much more through the southern border." He did not say what would happen to the 25% tariffs on some goods from Mexico and Canada levied under the same rationale if China is granted a reprieve.

"I take them at their word, they're going to work on that," he said, adding that "when they work on something, they get it done."

As he talked, so did former U.S. trade representatives -- though not including the most recent two holders of the office. The former USTRs said they don't think it's likely that these talks will remake the trading relationship between the world's two largest economies. They were speaking on a panel hosted by the Center for Strategic and International Studies think tank.

Charlene Barshefsky, who served as a USTR during President Bill Clinton's administration, said Trump officials will claim at the end of the 90 days that they have transformed the relationship, but that it won't happen.

Similarly, a former USTR under President George W. Bush, Susan Schwab, said, "The challenges we have with China have not gone away, and what was agreed over the weekend does not address them."

But she said the previous tit-for-tat escalation was shooting oneself in the foot, and she said it was "a group of adults" who negotiated in Geneva.

Mike Froman, who was a USTR during President Barack Obama's second term, said the U.S. and China de-escalated because China saw sharply declining exports, and, for the U.S., small businesses that rely on importing from China were beginning to close, and "shelves were about to be empty."

Froman said he expects a surge of imports over the next three months, as there were at the beginning of the year. He said businesses don't know what supply chains will be reliable. "The 30 [percent] could go to 10, or it could go up to 50 or 100 down the road," he said.

After Trump's presentation, a reporter asked what would happen to the tariffs at the end of the 90-day pause if an agreement hasn't been reached -- would the total IEEPA tariff return to 145%? Trump said they wouldn't, "but they would go up substantially higher." He added: "I think you will have a deal, however."

A reporter also asked Trump if he would be open to changing the 25% tariffs on steel and 25% tariffs on cars and car parts for any country. He has made exceptions for the U.K. for both actions, and, in his previous administration, excluded Canada and Mexico from steel and aluminum tariffs.

"We're not even talking about that," Trump said.

The American Iron and Steel Institute praised the step-down in tariffs, and said the group is glad the tariffs on Chinese steel didn't change.

Trump said on car tariffs, if the Japanese firms "want to sell cars in the United States, they're going to have to build factories in the United States."

National Retail Federation CEO Matthew Shay applauded what he called "a significant de-escalation."

“This temporary pause is a critical first step to provide some short-term relief for retailers and other businesses that are in the midst of ordering merchandise for the winter holiday season," he said.

American Apparel and Footwear Association CEO Steve Lamar said the remaining 30% total IEEPA tariff, stacked on Section 301 tariffs and most favored nation tariffs, "will still make for an expensive back to school and holiday season for most Americans. If freight rates spike due to the tariff-induced shipping disruptions -- which will take months to unwind -- we could see costs and prices creep up even further. What’s needed now is a long-term deal -- not just with China but with all our trading partners -- so we can predictably make long term trade, investment, and sourcing decisions."

In Switzerland, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer, who led the negotiations with China, told reporters that they see a good path to solve the fentanyl precursor smuggling from China.

"The upside surprise for me from this weekend was the level of Chinese engagement on the fentanyl crisis in the United States," Bessent said, noting that China's deputy minister for public safety, "who is not traditionally part of the negotiating team," came, and had a highly detailed and constructive conversation with a U.S. official who is an expert on the issue.

Bessent said that there are five or six strategic supply chain vulnerabilities or strategic industries where the U.S. is still seeking to lessen its dependence on China, including medicines, semiconductors, and steel, but that "neither side wants a decoupling."

While the Section 301 tariffs led to a reduction in the bilateral trade deficit, the men said, they are still seeking Chinese action to reduce the trade deficit in goods, and Bessent said purchase agreements are possibly a part of that.