China has warned it will take “firm countermeasures” if the United States moves ahead with fresh trade investigations targeting Chinese strategic industries, escalating tensions just days after the US Supreme Court curtailed President Donald Trump’s authority to impose tariffs under emergency powers.
The warning came after Trump signaled plans to launch new investigations under Section 301 of the Trade Act of 1974 that could pave the way for tariffs on sectors including electric-vehicle batteries, rare earth materials and advanced artificial-intelligence chips — industries Beijing considers central to its long-term economic and national security strategy.
The dispute has entered a new and legally complex phase. On February 20, the US Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose tariffs. The 6-3 decision undercut Trump’s legal basis for a series of sweeping duties he had imposed under emergency authority.
Beijing swiftly welcomed the ruling as a vindication of its long-standing position that unilateral tariffs violate international trade norms. But that initial optimism was tempered by Trump’s rapid pivot to alternative legal tools — and his suggestion that the tariff campaign was far from over.
At a regular briefing on Monday, a spokesperson for China’s Ministry of Commerce said Beijing was “conducting a comprehensive assessment” of the court’s ruling while reiterating its opposition to unilateral tariff increases.
“The unilateral measures taken by the US, including the reciprocal tariffs and fentanyl-related tariffs, not only violate international trade and economic rules but also contravene US domestic law, and they do not serve the interests of any party,” the spokesperson said.
He added that China had noted Washington’s preparations to adopt “alternative measures, such as trade investigations, in an attempt to maintain tariffs on its trading partners.”
“China will closely monitor these developments and firmly safeguard its legitimate rights and interests,” he said, emphasizing that cooperation between the two powers benefits both sides while confrontation harms both.
The remarks underscore Beijing’s dual-track approach: welcoming legal constraints on US executive power while preparing for a new wave of trade friction.
The current chapter in the tariff saga traces back to what Trump called “Liberation Day” last April, when he invoked IEEPA to levy so-called “reciprocal tariffs” ranging from 10 percent to 50 percent on major economies. Duties on Chinese goods at one point surged to 145 percent, prompting Beijing to retaliate with tariffs of up to 125 percent on US imports.
Although both sides later reached a temporary truce — reducing Washington’s reciprocal tariff on China to 10 percent while retaining a separate 10 percent duty linked to fentanyl concerns — the broader architecture of tariffs remained intact. Apart from the 20 percent IEEPA-based duties, Chinese exporters have faced average US tariffs of around 25 percent since the first trade war erupted in 2018.
The Supreme Court’s February 20 ruling dismantled the emergency legal basis for those IEEPA tariffs. Yet within hours, Trump signed an executive order invoking Section 122 of the Trade Act of 1974 to impose a new temporary 10 percent tariff on all countries for 150 days. Two days later, he said the global tariff rate would rise to 15 percent.
He also directed officials to initiate new Section 301 investigations — a move widely interpreted as laying the groundwork for sector-specific tariffs aimed squarely at China’s high-tech industries.
“All IEEPA-related tariffs will be canceled from Tuesday,” Trump said. But he added that courts would ultimately decide whether roughly $130bn in previously paid tariffs must be refunded.
The president is expected to visit Beijing in early April for talks with Chinese President Xi Jinping, raising the prospect of high-level diplomacy even as trade tensions simmer.
In the short term, Chinese exporters stand to benefit from a modest reduction in duties. The scrapping of the 20 percent IEEPA-based tariff and its replacement with a 15 percent temporary tariff translates into a 5 percent reduction.
For companies operating on razor-thin margins, that shift is significant. But few in China’s export sector believe it signals a lasting thaw.
Chinese commentators initially described the Supreme Court decision as a symbolic victory — evidence that US institutional checks could constrain executive overreach. Yet analysts quickly warned that Washington retains multiple legal avenues to reimpose tariffs under different guises.
Yuyuan Tantian, a social media account affiliated with China Central Television, noted that Section 122 — rarely used in recent decades — requires a finding of a fundamental imbalance in overall international payments.
“The legal threshold for invoking Section 122 is a fundamental imbalance in overall international payments, including capital flows, trade in services, and goods,” she wrote. “From this perspective, the new tariffs could face legal challenges again.”
Chinese analysts have identified at least three mechanisms the Trump administration could use to sustain or expand tariff pressure.
First is Section 122 of the Trade Act of 1974, which allows the president to impose temporary surcharges to address balance-of-payments concerns. Though designed as a stopgap measure, it provides immediate authority.
Second is Section 232 of the Trade Expansion Act of 1962, which permits restrictions on imports deemed threats to national security. Trump relied heavily on this provision during his first term to impose tariffs on steel and aluminum. US courts have historically granted the executive broad discretion under Section 232, making successful legal challenges difficult.
Third is Section 301 of the Trade Act of 1974, authorizing the Office of the US Trade Representative to investigate and respond to what Washington deems unfair trade practices. Section 301 formed the backbone of the 2018 trade war.
A Shandong-based columnist writing under the title “Global Watch” argued that Section 232 investigations could expand significantly in 2026 to cover strategic sectors such as EV batteries, rare earths and advanced AI chips.
“By framing tariffs under national-security justifications, the administration is trying to build a more durable legal foundation for long-term duties that will be harder to challenge,” the columnist wrote.
Such sectors are not incidental. China dominates global processing of rare earth elements essential for advanced electronics and defense systems. It is also a leading producer of EV batteries and is investing heavily in AI semiconductor capabilities.
The potential targeting of EV batteries and AI chips reflects broader strategic competition between the world’s two largest economies.
Washington has increasingly framed supply chains for advanced technologies as national security issues. Beijing, for its part, has made technological self-reliance a central pillar of its industrial policy.
Rare earths occupy a particularly sensitive space. China controls a large share of global refining capacity, giving it potential leverage in export controls. Any US attempt to restrict imports from Chinese rare earth processors could provoke retaliatory measures affecting American manufacturers.
Similarly, tariffs on Chinese EV batteries would intersect with US efforts to build domestic clean-energy supply chains while reducing reliance on Chinese inputs.
In this context, Section 301 investigations could become vehicles for broader strategic decoupling.
The shift to a 15 percent temporary tariff has implications beyond China. Exporters in Malaysia, Cambodia, Pakistan, Indonesia and Thailand had previously faced tariffs of around 19 percent, while those in Vietnam and Bangladesh paid 20 percent and India 25 percent.
The new uniform rate narrows those gaps, potentially easing pressure on Southeast Asian exporters. But if new Section 301 probes single out Chinese firms, more companies may accelerate relocation of production to neighboring countries.
Cross-border compliance expert Wang Lei has urged Chinese businesses to adopt what he calls a “three-step strategy”: compile proof of duties paid since 2018 and register refund accounts with US Customs and Border Protection; monitor class-action cases before the US Court of International Trade; and adjust supply chains by shifting part of production to Southeast Asia.
Supply chain diversification has already been underway for years. Vietnam and India have emerged as key alternative manufacturing hubs, though neither can replicate China’s scale overnight.
The Supreme Court ruling opens a new legal front: whether previously collected IEEPA-based tariffs — estimated at $130bn — must be refunded.
Businesses that paid those duties are watching closely. One plaintiff in the case was Learning Resources Inc, a Chicago-based educational toy company.
Its owner, Rick Woldenberg, said his company paid about $10m in duties last year. Most of its products are imported from China, including those produced by its sister company, Hand2Mind.
Woldenberg argued that reshoring an entire supply chain from China would be prohibitively costly and time-consuming. Yet he acknowledged that his firms had already relocated much of their production to Vietnam and India.
Despite a 20 percent drop in revenue and net profit in 2025, he said the businesses are hiring in Chicago this year — effectively demonstrating the adaptation Trump has encouraged: shifting production, absorbing tariffs and sustaining domestic employment.
At a February 20 press briefing, Trump dismissed the companies that challenged the IEEPA tariffs as “China-centric,” accusing them of undermining US policy.
“We’ve taken the uncertainty of tariffs out,” he said. “We got sued by sleazebags that are very outside-country, China-centric.”
The rhetoric signals that trade policy will remain central to Trump’s political messaging.
Chinese analysts warn that US allies are increasingly adopting similar unilateral trade tools. The European Union has launched probes into Chinese electric vehicles, raising fears of a tit-for-tat cycle of tariffs.
Japan and South Korea have also tightened scrutiny of imports linked to strategic sectors. If Section 232 investigations expand, they could affect not only China but also allied exporters.
The convergence of national security and trade policy marks a structural shift in global commerce. Tariffs are no longer framed solely as economic instruments but as tools of geopolitical competition.
Trump’s planned visit to Beijing in early April introduces a diplomatic dimension. High-level talks between Trump and Xi could produce temporary understandings or confidence-building measures.
Yet expectations remain cautious. The structural drivers of competition — technological supremacy, supply chain resilience, and strategic rivalry — are unlikely to dissipate quickly.
For Beijing, the Supreme Court ruling provided a brief opening to argue that US institutions recognize limits on executive power. But Trump’s pivot to alternative statutes underscores the resilience of American trade enforcement mechanisms.
For Washington, the decision may have narrowed one legal path but left others intact. By invoking Section 122 and preparing Section 301 investigations, the administration signals that tariff leverage remains central to its strategy.
In the near term, the 5 percent duty reduction offers marginal relief to Chinese exporters. But the broader trajectory points toward sustained friction.
If Section 301 investigations target EV batteries, rare earths and AI chips, the dispute could escalate into a more technology-focused confrontation. Retaliatory measures from Beijing — potentially including export controls or counter-tariffs — would deepen the divide.
Markets have reacted cautiously. Investors see the legal tug-of-war as reducing some uncertainty while introducing new complexities.
Ultimately, the Supreme Court ruling has not ended the trade conflict. It has merely shifted the battlefield from emergency powers to statutory trade remedies.
As Beijing conducts its “comprehensive assessment” and Washington prepares new investigations, both sides appear poised for another round in a contest that has reshaped global supply chains, altered corporate strategies and redrawn the contours of economic globalization.
Whether diplomacy in April can arrest that momentum remains uncertain. For now, the message from both capitals is clear: cooperation is preferable, but strategic competition is here to stay.
