Executive Summary
US-China trade policy changed materially in 2026 and remains fluid. US actions under the International Emergency Economic Powers Act were affected by a Supreme Court ruling, while other tariff authorities, Section 301 reviews and export controls continue. China and the United States also reported consultations and temporary arrangements affecting selected measures.
Foreign companies should not use one average tariff rate across their business. The relevant exposure depends on product classification, origin, destination, exporter, end user, technology, sanctions and the transaction date. Market entry into China and exports from China to the United States require separate compliance models.
Current Policy Environment
China’s Ministry of Commerce reported that the United States stopped collecting specified IEEPA-based tariffs after the 2026 court decision and used other statutory authority for a general import surcharge. At the same time, existing and proposed Section 301 measures and Section 232 sector measures remain relevant.
USTR began a second four-year review process for China Section 301 actions in May 2026. Export controls administered by the US Bureau of Industry and Security continue to change for semiconductors, computing, manufacturing equipment and other controlled items. Companies need the current legal text and license policy at the time of the transaction.
Four Exposure Tests
Tariff Classification and Origin
Tariffs attach to classified goods and origin, not the nationality of the shareholder. Relocating invoicing or establishing a China entity does not change origin without substantive production that meets the applicable rule.
Export Controls
A US or multinational company may need to assess US-origin items, software, technology, end users and foreign-produced direct-product rules. China market entry can create deemed-export and remote-access questions when local engineers receive controlled technology.
China Countermeasures
China’s tariff, export-control, unreliable-entity, anti-sanctions and trade-remedy measures require product and counterparty review. A company should not assume US and China controls are mirror images.
Supply-Chain Concentration
The strategic risk may be lead time or access to a critical component rather than the tariff itself. A product-level bill of materials should identify controlled, single-source and origin-sensitive inputs.
Entry-Model Implications
Local production can reduce exposure to tariffs on finished imports into China and improve customer service, but it creates capital, compliance and technology-transfer obligations. Exporting from a third country may be appropriate when substantial production and origin rules support it; simple transshipment is not a lawful strategy.
A distributor can test demand but does not remove export-control responsibility. A joint venture can provide market access but may complicate technology governance. A WFOE provides more control but still needs licenses and a compliant supply chain.
Action Plan
- Map products by tariff code, origin, destination and value.
- Classify technology and check end-user and end-use restrictions.
- Model current, escalation and de-escalation scenarios.
- Review contracts for tariff, license, delay and change-in-law allocation.
- Approve alternate suppliers before a disruption.
- Monitor USTR, BIS, MOFCOM and customs notices directly.
Management Conclusion
Trade tension should be treated as a set of product-level legal and supply-chain exposures. Companies with accurate classifications, controlled technology and alternate sourcing can make a China entry decision without relying on broad political forecasts.
Contract and Pricing Controls
Sales and procurement contracts should identify which party is responsible for tariff classification, origin evidence, export licenses, customs valuation and new government charges. Incoterms alone do not allocate every regulatory risk. Price-adjustment clauses need an objective trigger, a calculation method and a right to terminate or renegotiate when a required license is denied or a material tariff changes.
Intercompany prices also require discipline. Moving margin between entities does not eliminate tariffs or export controls and can create customs-valuation and transfer-pricing questions. Finance, customs and tax teams should use the same product and transaction data rather than maintain conflicting models.
Technology Access Governance
Before hiring engineers or connecting a China operation to global systems, classify source code, design files, semiconductor tools, encryption functions and technical support. Access should be granted by role and jurisdiction, with license conditions reflected in identity management and repositories. Distributors and joint-venture partners need separate controls because contractual confidentiality does not satisfy an export-control requirement.
Quarterly Monitoring Record
A quarterly record should capture changes in tariff schedules, exclusions, entity restrictions, licensing policy and China countermeasures. Each change should be linked to affected products, contracts and customers. The objective is not to predict the political relationship, but to identify a change quickly enough to reprice, obtain a license, shift an approved source or pause a prohibited transaction.
Responsibility should be assigned by legal regime: customs owns classification and valuation evidence, trade compliance owns licenses and restricted-party screening, procurement owns supplier continuity, and commercial teams own contract notifications. Senior management should receive only material exposures, quantified by revenue, margin, inventory and customer commitment, together with a recommended action and decision date.
