US plans 7.5% China overcapacity tariff before Sept. 24 Xi-Trump summit

Investing.com -- The United States is preparing to impose a 7.5% tariff on Chinese goods under a Section 301 excess manufacturing capacity investigation, a move that would push Trump’s second-term duties on China to roughly 20%, Bloomberg reported Monday, citing people familiar with the matter.

The proposed levy carries direct implications for companies with deep China supply-chain exposure.

China’s Commerce Ministry confirmed on July 27 that Washington had committed to capping its replacement tariffs on Chinese goods at 20%, with the current replacement rate standing at 12.5%, leaving exactly 7.5 percentage points of headroom before that ceiling is reached, according to Investing.com reporting. The new measure would fill that gap precisely, keeping the US technically inside the agreed threshold while maxing out the truce’s tolerance.

Exact rates have not been finalized, Bloomberg’s sources cautioned. One option under consideration is announcing a higher headline duty rate for China but suspending part of it to arrive at an effective rate of 7.5%. The details of what rates would be suspended and for how long remain under negotiation.

The move follows the Supreme Court’s invalidation of Trump’s earlier IEEPA-based tariffs, which forced the administration to pivot to Section 301 of the Trade Act of 1974 as its primary tariff vehicle. The US has since refunded roughly $81-100 billion in duties collected under the struck-down authority, according to Investing.com. The USTR launched its excess capacity investigation into more than a dozen major trading partners in March 2026, running it in parallel with a separate forced labor probe that concluded in June with tariffs of 10-12.5% on 60 economies.

Administration officials are hoping to publish the results of the overcapacity inquiry before Trump and Chinese President Xi Jinping meet in Washington on September 24. The report has proven legally challenging to finalize, Bloomberg noted. US Trade Representative Jamieson Greer told Bloomberg Television in July that the excess capacity investigation would take longer than the forced labor probe due to its complexity, adding that the delay had nothing to do with efforts to maintain the truce with Beijing.

Beijing and Washington are also negotiating an extension of their bilateral trade truce, which is set to expire on November 10, according to Bloomberg’s sources. China’s Commerce Ministry, in its July 27 statement, signaled continued vigilance: "We will continue to closely monitor and fully assess subsequent US measures, and reserve the right to take all necessary measures."

Two dates now define the near-term arc of US-China trade relations. The September 24 summit in Washington is the immediate pressure point: if administration officials can publish the overcapacity report beforehand, the tariff announcement is likely to be timed around that meeting, setting the tone for whether talks move toward a deeper accord or stall. The November 10 truce expiry is the larger structural deadline; failure to agree on an extension would remove the ceiling that has kept effective tariff rates at 12.5% and open the door to a broader escalation that markets have not yet priced in.

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