US trade deals progress with focus on investment and eased tensions

The US and mainland China have announced trade and tariff modifications effective until Nov. 10, 2026. Key US Section 232 tariffs appear unchanged, and the US has not agreed to revive the de minimis exemption for packages from China valued less than US$800 in value.

The US and China have not established a new trade framework or deeper cooperation. The agreement does potentially ease tensions surrounding semiconductors, critical raw materials and rare earths. China’s export restrictions have affected global trade and could cause significant disruption in multiple industries. This agreement reduces risk for the next year, though reliance on mainland China sourcing remains a concern.

These are issues of particular interest to the automotive industry, 
however there remains risk thatone side or the other may not comply, or that other complications could lead to different outcomes.

China has agreed to several actions addressing NTBs that benefit agricultural products and the shipbuilding sector. China will suspend the global implementation of export controls on rare earths and related measures it had announced on Oct. 9, 2025. China will also issue general licenses for exports of rare earths, gallium, germanium, antimony, and graphite “for the benefit of US end users and their suppliers worldwide.” This effectively removes controls China imposed in October 2022 and April 2025.

Regarding chipmaker Nexperia, the White House stated that China will ensure the resumption of trade from Nexperia’s facilities in China, allowing production of critical legacy chips. China also agreed to end various investigations targeting US companies in the sector’s supply chain, including antitrust and anti-dumping investigations.

Actions unrelated to the auto industry focus on agriculture, maritime shipping, and the flow of fentanyl to the US. China will stop shipments to North America of certain chemicals used in fentanyl production and strictly control exports of specific chemicals globally.

China will suspend all retaliatory tariffs announced since March 4, 2025, and suspend or remove other non-tariff retaliatory countermeasures imposed since that date. China agreed to purchase certain amounts of US soybeans and resume purchases of US sorghum and hardwood logs. In retaliation for the US’s Section 301 investigation into China’s maritime and logistics activities, China had imposed sanctions on various shipping entities, which it will now lift.

The US has agreed to several actions, but sectoral tariffs on metals (steel, aluminum and copper) and the auto industry (auto parts and vehicles) remain unchanged. The 100% tariff on electric vehicles imposed under the previous US administration remains unchanged.

In response to China’s new measures regarding fentanyl-related chemicals, the US will lower the fentanyl tariff by 10%. Initially set at 25%, it had been raised to 35%. The heightened 34% reciprocal tariffs imposed on China in April and suspended in May remain suspended, while a 10% reciprocal tariff stays in place. Both suspensions will last until Nov. 10, 2026.

The US also extended certain Section 301 tariff exclusions to Nov. 10, 2026 (originally set to expire Nov. 10, 2025), including measures related to the Section 301 investigation into China’s maritime, logistics and shipbuilding activities. Additionally, the US will suspend the expansion of end-user controls covering affiliates of certain listed entities for one year.

The US and China have not established a new trade framework or deeper cooperation. Instead, the agreement eases tensions and addresses issues around semiconductors, critical raw materials and rare earths.

China’s export restrictions and other barriers have affected global trade and could significantly disrupt multiple industries. Although the agreement reduces risk for the next year, reliance on mainland China remains a concern.

The most significant impact may depend on whether agreements regarding rare earths and semiconductors hold. Meanwhile, the US has established agreements with Australia, Japan and Malaysia to develop supply chains for these resources. Automakers are also working to reduce the need for these metals in electric vehicles. The payoff is likely to take several years.

A full Nexperia shortage would affect all OEMs globally, though through Nov. 4, 2025, impacts have been modest. While the risk is significant, the potential impact differs from the 2021 microcontroller unit (MCU) shortage.

The 2021 MCU shortage affected nearly all MCU and most analog suppliers. Itwas driven by limited front-end wafer fabrication capacity at the Taiwan Semiconductor Manufacturing Company (TSMC) and other global facilities. Because changing MCU sourcing involves both software and hardware, switching to an alternate supplier required extensive redesign and requalification, which slowed OEMs’ ability to change suppliers. Short-term alternatives were limited, as most MCUs relied on TSMC for similar products.

In contrast, the potential 2025 Nexperia shortage is caused by geopolitical factors and backend packaging and testing issues at its Dongguan facility in China. Only Nexperia products being assembled and tested at this plant are affected, including approximately 70% of certain discrete components. Switching to alternative suppliers would mainly involve hardware changes, potentially allowing for faster qualification if supply chains can respond quickly. Short-term sourcing options exist outside China which may help address the Nexperia issue, including tapping inventory in distribution channels. 

Despite these differences, unknowns remain. In 2021, a key concern was who would fund the expansion of capacity in more regions—though the US Chips Act provided a partial answer. With the potential Nexperia shortage, uncertainties include whether sufficient backend capacity exists outside China for legacy packages and how long it would take to scale production if needed.