UPDATE: U.S.–China Tariff Cuts Effective May 14, 2025: What Businesses and Importers Need to Know

On May 12, 2025, the United States and China announced a significant de-escalation in trade tensions. The two countries agreed to a 90-day period of tariff reductions that begins on May 14, 2025 and will last through August 11, 2025. This temporary truce is designed to create space for longer-term negotiations, while immediately reducing the financial burden on importers and exporters.

For small and mid-sized businesses (SMBs), particularly those sourcing goods from China, this announcement creates a window of opportunity. With steep tariffs temporarily rolled back, many businesses can reduce landed costs, restore suspended supplier relationships, and reassess sourcing strategies

Key Details of the Agreement

Tariff Reductions:

• The U.S. will reduce the additional ad valorem rate A tariff or tax calculated as a percentage of the total value of imported goods. on Chinese goods (including Hong Kong and Macau) from 125% to 34%, as set in Executive Order 14257 (April 11, 2025).

• Of that 34%, 24% will be suspended for 90 days, resulting in an effective tariff rate of 10% for entries made between May 14, 2025 and August 11, 2025.

• On August 12, 2025, the tariff rate will automatically revert to 34%, unless extended by the administration.

Tariffs That Still Apply:

Products of China, Hong Kong, and Macau that do not qualify for an exception remain subject to the additional ad valorem rate of duty of 20% imposed by those orders.

• 20% Fentanyl-Linked Tariff: Applies to products associated with the synthetic opioid supply chain. These products also no longer qualify for de minimis exemptions.

• Section 301 (China Tariffs): These remain in effect for many goods unless exclusions are granted.

• Section 232 Tariffs: Continue to apply to automobiles, steel, and aluminum.

Effective Dates:

• The agreement takes effect at 12:01 a.m. EDT on May 14, 2025, and concludes on August 11, 2025.

• The tariff reduction is not retroactive. Goods that entered before May 14 remain subject to the previous 125% tariff.

• There are no provisions for refunds or duty adjustments for shipments entered prior to May 14, 2025

• Any shipment with an ETA of May 14 that clears customs on or after that date qualifies for the 10% rate.

What’s China Doing in Return?

• China will reduce tariffs on U.S. goods from 125% to 10%.

• It will also suspend or remove non-tariff countermeasures imposed since April 2, 2025.

These changes underscore the need for importers to carefully assess each product’s classification, country of origin, and applicable exceptions when planning shipments.

What SMB Importers Should Do Now

With the U.S.–China tariff reductions in effect from May 14, 2025 through August 11, 2025. Businesses that rely on imports from China have a narrow window to reduce costs, realign sourcing strategies, and prepare for what may come next. Here’s how to respond:

1. Accelerate Shipments and Purchase Orders: Move high-priority goods now to benefit from the temporary 10% tariff rate.
   • Only entries made on or after May 14 qualify be sure to confirm with your broker.
   • Secure vessel space early to avoid peak congestion and Q3 delays.

2. Recalculate Landed Costs: China sourcing may now be more viable, even for SKUs previously shifted elsewhere.
   • Run fresh landed cost models.
   • Compare pricing against Southeast Asia or domestic vendors.
   • Use this data to inform PO timing and product strategy.

3. Revisit Supplier Relationships: Use this window to renegotiate or reopen conversations with past suppliers in China.
   • Consider short-term re-engagements or use the leverage to push better terms with current partners.
   • Diversify sourcing to stay nimble post-August.

4. Verify Customs Classifications and Documentation: Lower tariffs don’t reduce compliance risks.
   • Confirm HTS codes and country of origin details.
   • Ensure certificates of origin are in place for USMCA and other programs.
   • Check eligibility for duty drawback or 301 exclusions.

5. Review Tariff Stacking Risk: Some goods may still be subject to overlapping duties:
   • Section 301 (25%)
   • Fentanyl-Linked Tariff (20%)
   • Section 232 (autos, steel, aluminum)
     Work with your broker to calculate total landed cost per SKU.

6. Reallocate Freed-Up Capital: With lower upfront customs costs, reinvest that working capital:
   • Expand inventory
   • Boost marketing
   • Service short-term debt (Factoring or PO Funding)
   • Build flexibility into Q3 procurement

7. Align Logistics & Compliance Teams: Timing is everything. Make sure your:
   • Freight forwarder understands timing sensitivity
   • Customs broker has correct tariff codes and deadlines
   • Finance team is modeling cash flow scenarios under both 10% and 34% rates

What to Watch for Over the Next 90 Days

• Negotiation Progress:
  Monitor trade talks between U.S. and Chinese officials. If negotiations stall, tariffs could be reinstated as early as August 12, 2025.

• HTS Code Changes & Enforcement:
  Tariffs remain in place for certain sensitive categories, including autos, steel, and some chemicals. Double-check whether your product lines are impacted.

• Ongoing Geopolitical Risks:
  Broader tensions around national security, intellectual property, and fentanyl-related trade may reintroduce volatility to tariffs or port inspections.

• Supply Chain Adjustments:
  A temporary drop in tariffs may cause short-term shifts in global sourcing. Businesses should remain alert to changes in lead times, freight capacity, and pricing fluctuations.

A Closer Look: How to Calculate Import Duties and Fees

To help businesses assess their true landed costs, here’s a breakdown of the common duties and fees that may apply when importing goods from China, even during a tariff reduction window.

Types of Tariffs and Fees

Original China Tariff – 25% (Section 301): This tariff was introduced in 2018 and continues to apply to many Chinese-origin goods unless explicitly excluded. It is calculated on the customs value of the goods.

HTS (Harmonized Tariff Schedule) Duty – Varies by Product (Typically 2%–10%): This is the standard import duty based on a product’s classification code under U.S. customs law.

MPF (Merchandise Processing Fee) – 0.3464%: A fixed rate fee on the value of merchandise, with a minimum charge of $31.67 and a maximum of $614.35.

HMF (Harbor Maintenance Fee) – 0.125%: Applies to ocean freight imports, based on the cargo’s entered value when arriving at a U.S. port.

Fentanyl-Linked Tariff – 20%: A new additional tariff targeting goods linked to fentanyl manufacturing or transport. Applies on top of other duties.

Reciprocal Tariff – 10%: Another additional duty, likely sector-specific or retaliatory. Calculated on the customs value of the goods.

Sample Calculation

Let’s assume you are importing $10,000 worth of goods from China with a 5% HTS duty. Here’s how the cost could look (under new May 2025 conditions):

Note: In practice, not all tariffs stack. This example assumes all listed tariffs apply for illustrative purposes. Check HTS codes and CBP guidance to confirm specific applicability.

However, it is important to work with a qualified customs broker to assess your product-specific duty liability under current law.

Looking Ahead

This 90-day period is not a resolution, it’s a negotiation window. Businesses should treat this as a chance to reassess, prepare, and build resilience in their supply chains. For many SMBs, this is the time to not only reduce costs but also invest in smarter sourcing, cash flow planning, and compliance strategies.

How Express Trade Capital Can Help

At Express Trade Capital, we support businesses and importers with:

• Customs Brokerage & Compliance Support
• Trade Finance Solutions: including factoring and PO funding
• End-to-End Shipping and Logistics Management
• Strategic Tariff Planning and Supplier Diversification

If you’re unsure how these tariff changes affect your business or want help seizing the opportunity reach out to our team for a free consultation.