Trax Technologies

US-China Tariff Reduction Agreement: What It Means for Supply Chains

Key Takeaways

  • The US and China have agreed to reduce tariffs to 10% for 90 days, down from rates that exceeded 100%
  • Supply chains experienced severe disruption with imports from China dropping 43% week-over-week before the agreement
  • Companies have a limited window to recalibrate operations before the potential return of higher tariffs
  • Data management and digital technologies like supply chain digital twins are essential for scenario planning
  • Businesses must develop contingency strategies for multiple potential outcomes after the 90-day period ends

The United States and China have reached a significant agreement to reduce escalating tariff rates for 90 days. Starting May 14, both countries will charge a baseline duty of 10% while removing retaliatory levies that had pushed rates over 100%. This marks a crucial shift from the April 2 announcement of a 34% tariff on Chinese imports, which later escalated to a combined burden of at least 145%. China will similarly pause its matching 34% tariff on U.S. goods in favor of a 10% duty.

This temporary reprieve offers businesses a critical window to recalibrate operations, restore supply lines, and implement strategic planning for potential future scenarios. Treasury Secretary Scott Bessent stated that "substantial progress" was made during weekend negotiations in Switzerland, while U.S. Trade Representative Jamieson Greer noted how quickly the agreement was reached, suggesting "the differences were not so large as maybe thought."

Supply Chain Impacts: What the Tariff Reduction Means for Global Trade

The impact of this 90-day reduction is already reverberating through global supply chains. Recent data shows U.S. imports from China had plummeted by 43% week-over-week through April 28, with ocean freight from China to the U.S. dropping by 60% since the tariff implementation in early April. Many companies simply paused importing goods from China while trying to determine their next steps.

The agreement offers a critical opportunity to restart stalled transportation networks. According to a CNBC Supply Chain Survey, over half of businesses (57%) cited cost as the biggest headwind in relocating supply chains to the U.S. For many, shifting to lower-tariffed countries proves more cost-effective than reshoring production. The tariff reduction provides breathing room to assess these options without immediate financial pressure.

Companies utilizing digital supply chain twins can now leverage simulation capabilities to better model the impact of changing tariff scenarios. These virtual replicas of physical supply chains enable testing of various network configurations to determine optimal sourcing strategies during this 90-day window.

Operational Implications for Businesses: Short-term Tactical Response

Businesses must act swiftly during this 90-day window. The sudden trade policy change creates both opportunities and challenges. Companies that had canceled orders or diverted shipments need to reassess their immediate supply needs. The key challenge now lies in avoiding disruptions similar to those experienced during the 2022-2023 supply chain crunch when a rapid booking surge created container shortages and shipping bottlenecks.

Transportation Management Systems (TMS) will be essential tools during this period. These platforms help optimize routes and consolidate shipments, which becomes critical as businesses restart Chinese imports. According to industry experts, logistics and supply chain management typically account for 5-50% of a product's total landed cost. The ability to quickly adjust freight strategies during this window can yield significant cost advantages.

At Trax, we've observed clients implementing freight audit and payment solutions to gain better visibility into their transportation spend during periods of tariff volatility. This approach provides real-time insights into changed costs and helps identify potential savings opportunities as supply chains recalibrate.

Data Management Priorities During the 90-Day Window

The tariff reduction creates an urgent need for enhanced data management. Companies must gather and analyze accurate information about current inventory levels, in-transit shipments, and demand forecasts to make informed decisions. Poor data quality can cost businesses over $600 billion annually, making this a crucial time to improve data hygiene.

Organizations should prioritize normalizing and centralizing data from disparate sources. This includes supplier information, transportation costs, and compliance requirements. According to a Deloitte report, 65% of procurement leaders have limited visibility beyond Tier-1 suppliers. This limitation becomes particularly problematic when trying to assess the full impact of changing tariff structures on the supply chain.

Implementing transportation data management capabilities that centralize, normalize, and analyze freight data helps organizations identify exactly where cost impacts occur across their transportation network. Such visibility enables quick adjustments to routing, carrier selection, and mode choices based on the new tariff landscape.

Strategic Planning: Preparing for Uncertainty Beyond the Pause

Looking beyond the 90-day window requires strategic foresight. The temporary nature of this agreement means businesses must prepare for multiple scenarios after August 12, 2025. According to a recent study from the Center for European Policy Research, even with partial tariff suspensions, global trade could still see contractions and significant welfare losses, especially for the U.S.

Companies should develop contingency plans for different tariff outcomes. These might include:

  1. Diversifying supplier networks across multiple regions
  2. Investigating nearshoring options to reduce exposure to trans-Pacific trade tensions
  3. Implementing AI-driven demand forecasting to better anticipate inventory needs
  4. Exploring digital twin technology for scenario planning and risk assessment

Research from BCG suggests that digital twin technologies enable companies to reduce inventory costs, improve EBITDA, and increase throughput while reducing risk. These virtual replicas of supply chains help businesses model different tariff scenarios and their impacts on costs and operations.

Leveraging Data for Agile Supply Chain Management

The US-China tariff reduction agreement provides a critical opportunity for businesses to reset their supply chain strategies. While the 90-day window offers temporary relief, long-term success requires data-driven decision-making and technological advancement.

Companies that leverage comprehensive data management, implement digital supply chain technologies, and develop flexible contingency plans will emerge stronger regardless of future tariff developments. The key lies in using this brief window not just for immediate cost savings, but for building more resilient and adaptive supply networks.

Ready to gain better visibility into your transportation spend during this uncertain trade environment? Contact Trax today to learn how our data-driven solutions can help you navigate changing tariff projections with confidence and precision.