The US and China Trade Opening Barbs

• David Ross, Lester Ross, Neena Shenai, Lauren Mandell, Jake Laband
• 2.7.2025

On February 1, 2025, the Trump Administration announced that it would impose tariffs on imports of certain goods from Canada, Mexico and China, to be effective February 4, 2025. Although the Trump Administration reached agreements with Canada and Mexico to forestall the onset of tariffs for 30 days, it has not reached a similar agreement with China. Accordingly, a 10 percent tariff on all imports of Chinese goods went into effect at 12:01 a.m. on February 4, 2025.

In response, China instituted a series of restrictive trade measures and, in so doing, flexed the retaliatory legal muscles it has worked to develop since US-China trade tensions began during the first Trump Administration. In addition to tariffs on imports from the United States, China initiated antitrust investigations into US companies, imposed export controls on exports of critical minerals and added two US companies to its so-called Unreliable Entity List.

Opening Moves: US Tariff Measures

On February 1, President Donald Trump declared a national emergency with respect to the “sustained influx of illegal aliens and illicit opioids and other drugs” from Canada, Mexico and China and, pursuant to the International Emergency Economic Powers Act (IEEPA), issued three executive orders imposing tariffs on imports from each country.

The Canada order announced a duty of 25 percent on all products, except for a lower 10 percent rate for “energy and energy resources,” which was defined as “crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals, as defined by 30 U.S.C. 1606 (a)(3).” The Mexico order announced a duty rate of 25 percent on all products, and the China order announced a duty rate of 10 percent.

The orders stated that these new duties were in addition to other existing duties, such as those imposed under antidumping/countervailing duty orders and the existing Section 301 tariffs imposed on products from China, which range from 0 to 100 percent (depending on the product). Additionally, this new tariff applies to the so-called List 4b products (mainly consumer products, including cellphones and toys) that Trump excluded from coverage in the China Section 301 actions in his first term, subjecting these products to increased tariffs for the first time. However, because the tariffs have been imposed pursuant to IEEPA, the president does not have authority to include so-called informational materials, among other carveouts, within the scope of the tariffs.  Further details about the product coverage of the tariffs can be found here.

In addition, the orders removed duty-free de minimis treatment and customs drawback for imports from each country. The de minimis program generally allows shipments worth $800 or less to enter the United States duty-free and with minimal customs checks. Duty drawback on the additional duties imposed by the executive orders will also not be available.

The Trump Administration issued these orders with an effective date of 12:01 a.m. on February 4, 2025—leaving three days for Canada, Mexico and China to make offers to the White House to avert their implementation.

Canada and Mexico were both able to delay implementation by 30 days by committing on February 3—within hours of the tariffs entering into force—to reinforce their respective borders with the United States. No agreement was reached with China, and subsequently, the Chinese order came into effect as initially announced.

China’s Retaliation

China has enacted four categories of measures in response to the US tariffs.

1. Export Controls on Critical Minerals

China imposed licensing requirements on the export of certain critical minerals—namely, tungsten, tellurium, bismuth, indium and molybdenum, effective February 4, 2025. The Bureau of Industry, Security and Import and Export Control under China’s Ministry of Commerce (MOFCOM) is responsible for administering export controls, including the licensing of dual-use items subject to control.

As a formal matter, the license requirements effective February 4, 2025, are not specific to exports to the United States but rather apply to all exports of such items. This general restriction is contrasted with MOFCOM’s December 3, 2024 announcement, which specifically targeted exports of certain items to the United States. However, as a practical matter, MOFCOM may implement the February 4, 2025 measures in such a way as to authorize exports to non-US parties, but requests for exports to US parties may be denied.

2. Restrictions Pursuant to the Unreliable Entity List

China added PVH Corp. and Illumina, Inc., to its Unreliable Entity List (UEL). MOFCOM adopted the Provisions on the Unreliable Entity List (UEL Provisions, 不可靠实体清单规定) in 2020. These provisions authorize MOFCOM to investigate and place particular foreign companies on the UEL based on their purported endangerment of China’s national development, sovereignty or development interests and the damage they are deemed to inflict on the rights and interests of Chinese parties, compliance with internationally accepted economic and trade rules, and other relevant facts.

MOFCOM had previously investigated PVH for inclusion on the UEL in September 2024, but it did not impose any official penalties pursuant to the UEL until now. The announcement did not specify which restrictive measures would apply to the newly designated entities, stating only that China would “take corresponding measures against the [listed] entities in accordance with relevant laws and regulations.”

The restrictive measures available for use against companies pursuant to the UEL Provisions include:

• restrictions or prohibitions on China-related import or export activities;
• restrictions or prohibitions on investment in China;
• restrictions or prohibitions on the company’s personnel from entering China as well as the restriction or revocation of work permits, status of stay or residence permits; and
• fines.

3. Antitrust Investigations

China’s state media announced on February 4, 2025, that the State Administration for Market Regulation (SAMR), China’s antitrust regulator, opened a probe into Google. Western media reports indicate that SAMR may be considering also initiating investigations into other American companies.

Since China’s Anti-Monopoly Law took effect in 2008, China’s regulators have increased their scrutiny of mergers between foreign parties and acquisitions of a domestic party by a foreign party. For example, regulators have subjected many acquisitions by foreign parties, particularly acquisitions deemed strategic, to a yearslong conditional clearance process.  The risk for US companies lies in the ability of Chinese regulators to reopen and even upset previously approved mergers and acquisitions if, for example, the surviving entity’s government restricts or prohibits the export of products or technologies to China during the conditional approval period.

4. Tariffs on US Imports

China’s General Administration of Customs imposed a 15 percent tariff on imports of US coal and liquefied natural gas and a 10 percent tariff on crude oil, agriculture machinery, and certain cars and pickup trucks. These heightened tariffs will be effective February 10, 2025, leaving some time for negotiations between China and the United States.

What the Future May Hold

The executive orders all state that if China (or Canada or Mexico) retaliates against the US tariffs, “the President may increase or expand in scope the duties imposed under this order to ensure the efficacy of this action.” Thus, it is possible that a cycle of retaliation and counter-retaliation would result, similar to what occurred when Trump imposed the Section 301 duties on China in his first term—a cycle that was insufficient to spur an agreement between the United States and China to eliminate their respective tariffs at the time. In any case, Trump stated that this set of tariffs is just “an opening salvo."