U.S. President-elect Donald Trump has made it clear that trade is at the top of his agenda when he reclaims the White House in January, and at the top of that agenda is China. Last week, he said that he would immediately impose 10 percent tariffs on all Chinese goods. That may only be the start; on the campaign trail, he pledged to jack up tariffs on Chinese imports to 60 percent.
Trump has also threatened to take more sweeping action: rescinding the “permanent normal trade relations” (PNTR) status that the United States granted China more than two decades ago as Beijing prepared to enter the World Trade Organization (WTO).
Doing so would not only be a symbolic break, but it would also immediately put China in a different tariff bracket, substantially increasing the average tariff on Chinese imports from the current baseline in key sectors.
The idea of revoking China’s status has grown popular among congressional Republicans since the first Trump term—in their eyes, granting China “normal” status and letting it into the WTO was a catastrophic blunder for the U.S. economy. In recent months, both chambers have put forward legislation to reverse that decision.
“We must pursue the best policy for the American people and not allow the fear of what China might do stop us from rebuilding U.S. manufacturing capacity, securing critical supply chains, building up our military, and enriching our economy,” said Rep. John Moolenaar in a statement to Foreign Policy. Moolenaar is the chairman of the House select committee on the Chinese Communist Party and introduced a bill last month that would revoke China’s PNTR status,.
However, some trade economists have warned that revoking China’s status could end up hurting rather than helping the U.S. economy.
“If we take it away, it does more than raise the tariff—it sets the political economy back 25 years,” said Marcus Noland, the executive vice president at the Peterson Institute for International Economics. “This is a kind of an atomic bomb.”
Congressional action is required to change a country’s trade status, and on this, the United States has recent practice. After Russia’s full-scale invasion of Ukraine in 2022, Congress stripped Russia and Belarus, the latter of which aided Moscow in its invasion, of their privileged status. Today, only four countries lack an NTR designation: Cuba, North Korea, Belarus, and Russia.
By default, when a country loses its PNTR status, its imports to the United States are moved to a new—or one might say old—tariff bucket, which uses the rates set under the 1930 Smoot-Hawley Tariff Act. However, some lawmakers have concluded that the 1930s playbook needs an update for today’s competition with China.
Moolenaar’s bill—as well as a companion bill from Sens. Tom Cotton, Josh Hawley, and Marco Rubio (the Neither Permanent Nor Normal Trade Relations Act)—take a different approach. The bills call for stripping China’s status followed by imposing baseline 35 percent tariffs on most Chinese goods and 100 percent tariffs on strategic goods such as critical minerals and pharmaceuticals (but not apparel, which was one of the industries that Smoot and Hawley set out to insulate in 1930). These tariffs would be phased in over five years.
Of course, trade with China has already been less than normal in recent years—China faces substantial tariffs imposed under both Trump and his successor, outgoing President Joe Biden. But the new bills would further denormalize trade by establishing the across-the-board 35 percent tariff rate for all Chinese goods.
Trump and his advisors endorsed the idea of revoking China’s PNTR or “most favored nation” status (the WTO’s term for the concept) during his campaign. It was also featured in the 2024 Republican Party platform, and Trump’s nominee to become the next U.S. trade representative, Jamieson Greer, has called for it as well.
Asked whether Trump will follow through on his pledge, Trump-Vance transition team spokesperson Karoline Leavitt told Foreign Policy in a statement: “The American people elected President Trump to stand up to China, enforce tariffs on Chinese goods, and Make America Strong Again. He will deliver.”
But the status change ultimately must come from Congress, where the drumbeat for action has been building even beyond the Republican legislation. The U.S.-China Economic and Security Review Commission, a bipartisan group that advises Congress on China, recommended revoking Beijing’s status in its recent annual report.
Many questions remain, though. The draft legislation doesn’t address the issue of how the new tariffs would interact with the current ones imposed on Chinese goods.
“There’s a growing recognition in Congress that granting China PNTR status was a mistake. I think that the challenge is, how do we find consensus on what to do about it?” a congressional aide told Foreign Policy, speaking on condition of anonymity to discuss the negotiations. “This is one proposal that we think is a good opportunity to negotiate with different colleagues on both the Republican and Democrat side to see if we can get to some kind of consensus in the future.”
“I would not anticipate that this would pass this year, certainly, but I do anticipate that this is going to be one of the most important debates that occurs next Congress,” the aide added.
If Congress decides to take action, how lawmakers move forward will have significant economic implications.
If China is simply dumped into the Smoot-Hawley tariff bucket, the move would have real economic bite—not just for China, but also the United States. The Peterson Institute modeled that straightforward revocation path and found that the change would cause China’s GDP to fall by 0.6 percent and U.S. GDP to fall by 0.1 percent in 2025.
The model also projected that it would also lead to an increase in inflation by 0.2 percent—and double that if China retaliated. The increased cost of imports would not only hike up inflation, but also hit output and jobs in the sectors most impacted, including agriculture and mining.
Imports from China would fall substantially, according to the study, but imports from other countries would fill the gap, and U.S. exports would decline as the dollar appreciated. “Ironically, the policy damages the US industrial sector and contributes to a widening of the US trade deficit—the exact opposite of what proponents of this policy intend to achieve,” the report authors wrote.
The pieces of legislation proposed by Moolenaar, Rubio, Hawley, and Cotton are designed to counteract the economic costs of changing China’s status by gradually increasing the tariff rates and providing compensation to impacted sectors, as Trump did during his first-term trade war with China.
“The five-year phase in gives a great deal of time for industry to adapt. Also the certainty of the statute would give them the confidence to know what products are and are not within certain thresholds. And the combination of both those things, we think, would have a lesser economic impact than a full repeal, which could be devastating for some industries,” the congressional aide said.
However, the Peterson Institute’s Noland, one of the modeling report’s authors, argued that the United States does not have to blow up the entire trade relationship with China to combat real trade issues with Beijing.
“We should be dealing with them on a case-by-case basis, looking at each issue individually and coming up with tailored solutions, not just reaching for this very dramatic and undifferentiated weapon of removal of PNTR or imposition of 60 percent tariffs,” Noland said.
The post Trump’s Threat to Revoke China’s Trade Status, Explained appeared first on Foreign Policy.
