US and China launch tariff reduction talks targeting 2026 detente

China and the United States have begun soliciting public feedback on tariff reduction arrangements, the first concrete step toward unwinding trade barriers that have reshaped global supply chains.

China and the US are soliciting opinions on tariff reduction arrangements and will push for implementation as soon as possible, China's Ministry of Commerce said Wednesday, marking the most concrete step toward de-escalating a trade conflict that has weighed on global growth.

"This is the first time both sides have moved from general statements of intent to an actual administrative process for reducing tariffs," said Paul Triolo, a partner at DGA-Albright Stonebridge Group. "The mechanism matters as much as the outcome."

The announcement follows the Trump-Xi summit in May, where the two leaders agreed to establish intergovernmental dialogue on trade and technology issues. The US currently maintains an average tariff rate of about 19 percent on Chinese goods, according to the Peterson Institute for International Economics, up from roughly 3 percent before the trade war began in 2018. Bilateral trade in goods totaled $488 billion in 2025, down from a peak of $636 billion in 2018, US Census Bureau data show.

A meaningful reduction in tariffs could boost corporate profits across sectors exposed to China trade — from semiconductors and industrial machinery to agriculture and consumer goods — while potentially easing inflationary pressures in the US. The process faces significant hurdles, including unresolved disputes over technology transfer, intellectual property, and national security restrictions on AI chips.

The Scope of Potential Cuts Remains Undefined

The Commerce Ministry did not specify which tariff lines are under review or the magnitude of potential reductions. The solicitation process will gather feedback from businesses and industry associations before formal negotiations proceed, according to the Xinhua report. The timeline for implementation was not disclosed.

The US currently applies Section 301 tariffs on roughly $350 billion of Chinese imports, with rates ranging from 7.5 percent to 25 percent depending on the product category. Additional Section 232 tariffs on steel and aluminum, as well as national security-based restrictions on advanced technology, further complicate the tariff structure.

The US Trade Representative's office has not commented on the Chinese announcement. In recent weeks, USTR Jamieson Greer cited concerns over forced technology transfer and intellectual property issues when asked about possible trade actions against China, telling CNBC the US was "taking a very close look at how China is propagating its AI development."

Markets Price in a Dovish Trade Outcome

Chinese equities rallied on the news, with the CSI 300 index rising 1.8 percent in afternoon trading, while Hong Kong's Hang Seng Index gained 2.1 percent. US-listed Chinese ADRs also climbed in pre-market trading. The offshore yuan strengthened 0.3 percent against the dollar to 7.12, reflecting optimism that reduced trade friction could support China's export sector.

The positive sentiment extended beyond China. S&P 500 futures rose 0.4 percent as investors bet that lower tariffs would benefit US multinationals with China exposure, particularly in the semiconductor, industrial, and consumer discretionary sectors. Emerging market currencies broadly strengthened, with the Mexican peso and South Korean won each gaining about 0.5 percent against the dollar.

The last time Washington and Beijing pursued a major tariff de-escalation was in early 2020 under the Phase One trade deal, which saw China pledge to increase purchases of US goods by $200 billion over two years. That agreement largely unraveled after subsequent technology restrictions and pandemic-related disruptions. This time, the stakes are higher: the World Bank estimates that prolonged trade fragmentation could reduce global GDP by as much as 7 percent over the long term.

Technology Restrictions Complicate the Path Forward

While tariff reduction represents progress, the US has maintained and even expanded export controls on advanced semiconductors and AI technology since the 2018 trade war began. The Biden administration imposed additional chip export restrictions in October 2022 and October 2023, and the Trump administration has continued those policies. The US has also held off on blacklisting Chinese AI startup DeepSeek and memory chipmaker CXMT in an effort to avoid escalating tensions, Reuters reported in June.

Any tariff agreement would need to address the disconnect between trade liberalization and technology containment — a tension that has no precedent in modern trade relations. China's foreign ministry has said it is willing to work with Washington to implement the consensus reached by the two leaders, but Beijing has also made clear it expects reciprocal treatment on technology access.

This article is for informational purposes only and does not constitute investment advice.