US-China trade deficit falls 32% in 2025 as soybean deal holds but new tariff threats loom
America's goods trade deficit with China fell by nearly a third last year as the November 2025 trade agreement took effect, but fresh Section 301 investigations signal a new phase of economic confrontation in 2026.
Economy — March 8, 2026
The United States goods trade deficit with China fell by 32% year-over-year in 2025, according to figures cited in the US Trade Representative's 2026 Trade Policy Agenda, as the punishing tariff regime imposed during 2025 and the November bilateral agreement began to reshape trade flows between the world's two largest economies.
The November 10, 2025 US-China agreement suspended the most elevated reciprocal tariffs through November 2026 in exchange for a Chinese commitment to purchase 25 million metric tonnes of US soybeans annually in 2026, 2027, and 2028 — a significant volume that would support American agricultural exporters in Midwest states.
Despite the apparent progress, the USTR's March 2026 report indicated that the administration viewed the deficit reduction as insufficient. An internal USTR analysis estimated that a 68% effective tariff on Chinese goods would be required to fully balance bilateral trade, compared with current effective rates of roughly 30-40%.
The administration's launch of new Section 301 investigations in March, including a focus on Chinese forced labour practices, signalled that the November truce was more of a pause than a resolution. Chinese state media described the investigations as 'provocative' and warned that Beijing retained the right to respond.
US imports from China had already fallen to roughly half their year-earlier levels by June 2025 following the initial tariff escalation, as American manufacturers scrambled to source from Vietnam, India, Mexico, and domestic suppliers. China retaliated by raising average tariffs on US goods from 8% to 22%.
Economists noted that the 32% deficit reduction had come at a cost: higher prices for American consumers and disrupted supply chains that US businesses were still adjusting to. A National Retail Federation survey found that retailers expected goods prices to rise 4-8% in 2026 as tariff costs were passed through to consumers.
China's own economy showed signs of strain, with export growth slowing sharply. However, Beijing had partially offset the loss of US export markets by increasing exports to Southeast Asia, Africa, and Latin America — a diversification strategy that USTR Greer described in his report as a challenge requiring a 'coordinated allied response.'
