US-China trade war – More tit-for-tat: China’s comeback - April 2025

In recent weeks, the global trade environment has experienced an unprecedented level of volatility and uncertainty due to a series of new trade policies announced by the United States (US).  Those actions have triggered responses by the US’ key trading partners, including the People's Republic of China (PRC or China), the world’s largest exporter and the country that has so far been most penalised in the Trump Administration’s global trade war.

Shortly after China introduced a new regulation expanding its counter-sanctions regime, the US announced reciprocal tariffs against all its trading partners, imposing an individualised 34% reciprocal tariff on China (on top of the 20% tariff already imposed by the Trump Administration on Chinese imports).  China responded with a suite of broad measures and actions, which were met with an additional 50% tariff by the US.  As China vowed to ‘fight till the end’ and imposed its own additional tariff of 50% (overall tariffs of 84%) on US imports, the US has now escalated the situation further by proposing to raise the cumulative tariff rate on Chinese imports to 125%.

In this legal alert, we provide a summary of the relevant measures as at 9 April 2025 and their potential impact on businesses.

1. China’s new regulation implementing the PRC Anti-Foreign Sanctions Law

• The  Anti-Foreign Sanctions Law of the People’s Republic of China  (AFSL) was introduced by the PRC in 2021 as the PRC established a ‘counter-sanctions’ regime, whereby foreign individuals or organisations that directly or indirectly participate in the formulation, decision-making or enforcement of ‘discriminatory restrictive measures’ against the PRC may be sanctioned and subject to a range of restrictive measures.  Over the years, the AFSL has been a key retaliatory instrument utilised by the PRC Government as it sanctions US individuals and companies as part of the ongoing trade war between the PRC and the US.
• On 24 March 2025, the State Council of the PRC published the new  Regulation on the Implementation of the Anti-Foreign Sanctions Law of the People's Republic of China  (AFSL Regulation), which came into effect immediately.
• The key effects of the  AFSL Regulation are as follows:
  • Expanding the bases on which a person may be sanctioned and the type of countermeasures that may be imposed against them as a result of sanctions being imposed.  Specifically, while the AFSL has targeted foreign individuals or organisations involved in the formulation, decision-making or enforcement of 'discriminatory restrictive measures' against the PRC, the AFSL Regulation now broadens the relevant scope to include those threatening PRC's ‘national interests’, which may be interpreted broadly.  
  • Expanding the scope of countermeasures that may be imposed.  In particular, in addition to asset freezes, travel bans and restrictions on dealings in the PRC, potential countermeasures that may be imposed under the AFSL now include restrictions or prohibitions on the ability of the designated persons in conducting import and export activities in relation to the PRC, or investment activities in the PRC, bringing the regime closer to that governing the Unreliable Entity List, which has also been frequently utilised by the PRC Government in recent years.  PRC individuals or organisations may also be restricted or prohibited from exporting certain items to, or sharing data and personal information with, designated persons.
  • Introduction of a mechanism whereby designated persons may apply for the suspension, amendment or revocation of countermeasures imposed, as well as a consent mechanism whereby in certain circumstances one may apply to the relevant department of the State Council for the approval to engage in activities with designated persons which are otherwise prohibited or restricted.

2. US announces global reciprocal tariffs and revokes the de-minimis tariff exemption for PRC goods

• On 2 April 2025, the US President Trump issued an  executive order  imposing reciprocal tariffs on all imports into the US (with exemptions for specific products).  Specifically, effective from 5 April 2025, imports from all countries are subject to a baseline tariff of 10% on top of any other existing tariffs.  For countries with which the US has the largest trade deficits, this baseline rate has increased to a country-specific reciprocal tariff rate, effective from 9 April 2025.
• Under this action, Chinese goods would be subject to a reciprocal tariff of 34%. According to the  Office of the US Trade Representative, the US’s trade deficit with each country is the predominant factor in the calculation, stating that ‘[the Reciprocal Tariff] calculation assumes that persistent trade deficits are due to a combination of tariff and non-tariff factors that prevent trade from balancing.’
• Separately, the President issued another  executive order, revoking the de minimis treatment (which allowed for goods valued at or under USD 800 to enter the US duty-free) for imports from the PRC and Hong Kong, citing the needs to address alleged deceptive shipping practices by shippers in the PRC that hide illicit substances and conceal the true contents of shipments.
• Accordingly, effective from 2 May 2025, imports of low-value products from the PRC and Hong Kong sent outside the international postal network will be subject to all applicable duties; whereas imports sent through the international postal network would be subject to an ad valorem duty of either 30% of the value of the shipment or a specific duty of USD 25 per postal item, with that rate increasing to USD 50 from 1 June 2025.

3. China strikes back with a suite of (initial) retaliatory responses

China has so far responded extremely quickly and in a targeted manner to the US’ trade measures.  On 4 April 2025, the PRC implemented a series of new trade measures and regulatory actions targeting US goods and US companies in response.  These include:

• Additional 34% tariff on US goods –  The PRC Ministry of Finance (MOF)  announced the imposition of a 34% blanket tariff  on all products imported from the US, in addition to the existing applicable tariff rates, effective from 12:01 PM on 10 April 2025.  Goods that have departed from their ports of origin before this time and are imported by 13 May 2025 will be exempt from this tariff.
• Export controls on specific medium and heavy rare earth materials – The PRC Ministry of Commerce (MOFCOM) and General Administration of Customs (GACC)  announced new export control measures  on specific medium and heavy rare earth materials, citing national security concerns and non-proliferation goals.  Those measures are effective immediately.  Shipments involving the export of seven types of rare earth materials (specifically samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium) and their respective oxides, alloys, compounds and mixtures out of the PRC without a valid licence are now prohibited. 
• Further regulatory investigations against US businesses – The PRC State Administration for Market Regulation  initiated an investigation against the Chinese subsidiary of a US chemicals company for alleged violations of the Anti-Monopoly Law.  This adds to the antitrust investigations newly launched by the PRC Government against various other US companies, which is an indication that the PRC Government is prepared to take action leveraging its existing regulatory enforcement frameworks. Additionally, the PRC MOFCOM launched an anti-dumping investigation into CT medical tubes imported from the US and India.
• Designation of US companies – The PRC MOFCOM  added 11 US companies  to the Unreliable Entity List, subjecting them to restrictions or prohibitions on import/export and investment activities within China.  Additionally, the PRC MOFCOM  added 16 US companies  to the Export Control List, prohibiting the export of dual-use items from the PRC to these companies unless approval is obtained for 'necessary' exports under 'exceptional circumstances'.
• Suspension of import qualifications of US companies – The PRC GACC suspended the import qualifications of six US companies, including:
  • one company  importing sorghum to the PRC, due to the detection of excessive levels of zearalenone and total mold count;
  • three companies  importing poultry meat and bone meal to the PRC, following the detection of salmonella; and
  • two companies  importing poultry products to the PRC, due to the repeated detection of furazolidone, a prohibited drug under Chinese law.

4. US imposes an additional 50% tariff

• Shortly after China’s retaliatory responses, on 8 April 2025, the US  announced  an additional 50% tariff on China, effective from 9 April 2025.This brings the total additional tariffs imposed on all Chinese imports to 104%, which consists of:
  • a 20% tariff previously imposed under a separate  executive order  in March for the alleged failure of the PRC to prevent the sustained influx of synthetic opioids into the US; and
  • an additional 84% reciprocal tariff, revised upward from the 34% rate originally imposed.
• The same executive order instructs that the ad valorem duty imposed on low-value products from the PRC and Hong Kong entering the US will be adjusted upward from 30% to 90%, while the duty rate per postal item will be adjusted upward from USD 25 to USD 75, and increasing to USD 150 from 1 June 2025.

5. Further retaliation from China

• Following the US’s tariff increase, on 9 April 2025, the PRC MOF announced an additional 50% tariff on all US products, bringing the cumulative additional tariff on US imports to 84%.  Other provisions, including the effective date, remain unchanged from its announcement of 4 April 2025.
• Additionally, the PRC MOFCOM further added  six US companies  to the Unreliable Entity List and  12 US companies  to the Export Control List.

6. Further responses from the US

Within hours of the PRC’s latest tariff increase, President Trump  posted on his Truth Social account that the US would raise its tariff on Chinese imports to 125%. The post also stated that the US would pause the individualised reciprocal tariff rates for other countries for 90 days, during which period an additional 10% tariff rate would apply instead. These changes will have the force of law when they are published in an official Executive Order and implementing regulations. Until then, the precise effective date and time, and whether the 125% tariffs on China already include the earlier 20% tariff, remain unclear.

7. Implications to global business

In our previous  legal briefing issued in early January this year, we highlighted that the tit-for-tat between China and the US is likely to continue throughout 2025, with both sides continuing to utilise export controls, import controls, foreign investment controls, sanctions and trade remedies, including tariffs and anti-dumping actions, as part of their respective trade policies.   There have been concerns that antitrust investigations are increasingly being politicised. 

This latest round of measures and retaliatory actions, as summarised above, have evolved beyond the historical use of these trade tools; the two economic powers are also leveraging measures such as reciprocal tariffs, revocations of trade rights and import privileges, and regulatory investigations. These actions are affecting both the legality and economic viability of business transactions in significant and often unpredictable ways.

Given the increasingly clear shifts from globalisation and free trade towards protectionism, it is imperative for multinational companies to monitor these developments, analyse the specific implications for their businesses, and engage in strategic planning on a timely basis as they prepare their response plans, in anticipation of further changes and potential trade disruptions.