Trade tensions between the United States and China have once again reached a boiling point, as the U.S. launched a sweeping investigation into Beijing’s compliance with a landmark 2020 trade agreement. The move, announced on Friday, October 24, 2025, by U.S. Trade Representative Jamieson Greer, sets the stage for potential new tariffs on Chinese imports and comes just days before a high-stakes meeting between President Donald Trump and Chinese President Xi Jinping.
The investigation centers on the so-called “Phase One” Economic and Trade Agreement, a deal brokered at the end of Trump’s first term in office. Under its terms, China pledged to purchase an additional $200 billion of U.S. goods and services over a two-year period, compared to 2017 levels. The agreement, which was intended to rebalance the trade relationship between the world’s two largest economies, also included commitments from Beijing to address longstanding U.S. concerns over intellectual property protections, forced technology transfers, and market access for American businesses.
Yet, according to the Office of the U.S. Trade Representative (USTR), China has fallen dramatically short of its promises. A Federal Register notice issued by the USTR alleges that Beijing has not only missed its purchase targets—falling short by an estimated 60 percent, according to U.S. data—but has also failed to enact meaningful reforms to protect American intellectual property or open its markets as agreed. The notice specifically points to ongoing issues with non-tariff barriers, discriminatory regulations, and lack of progress on financial services and agricultural commitments.
“The initiation of this investigation underscores the Trump Administration’s resolve to hold China to its Phase One Agreement commitments, protect American farmers, ranchers, workers, and innovators, and establish a more reciprocal trade relationship with China for the benefit of the American people,” Greer said in a statement reported by Reuters.
China, for its part, has firmly denied any wrongdoing. A spokesperson for the Chinese embassy in Washington insisted, “China has scrupulously fulfilled its obligations in the Phase One Economic and Trade Agreement.” The spokesperson further argued that China’s actions have benefited investors from all countries, including American companies, and accused Washington of escalating economic and other forms of pressure against China through “false accusations and related investigation measures.”
The probe, conducted under Section 301 of the Trade Act of 1974, gives President Trump additional legal authority to impose tariffs or other trade restrictions on Chinese imports. This is particularly significant as the U.S. Supreme Court is set to hear arguments next month on a challenge to earlier tariffs imposed under the International Emergency Economic Powers Act. Should the Court strike down those duties, the new investigation could provide the Trump administration with a fresh legal foundation to revive tariffs—potentially impacting a wide range of Chinese goods currently facing around 30 percent tariffs.
The timing of the investigation is no coincidence. It comes just as President Trump embarks on an Asia tour, with a pivotal summit with President Xi Jinping scheduled for October 30, 2025, in South Korea. Other U.S. officials are holding parallel talks with Chinese counterparts in Malaysia in an effort to reset relations before the leaders meet. Still, the investigation and the threat of new tariffs could cast a long shadow over these diplomatic efforts.
Adding fuel to the fire, recent weeks have seen a flurry of harsh economic measures on both sides. On October 9, China announced sweeping restrictions on exports of goods containing more than 0.1 percent rare earths mined or processed in China—a move likely to disrupt global supply chains, as China accounts for about 90 percent of rare-earth processing worldwide. In response, President Trump has threatened to slap an additional 100 percent tariff on Chinese products starting November 1, 2025, bringing the total tariff rate to a staggering 155 percent if Beijing follows through with its restrictions.
As trade war rhetoric escalates, the stakes for American farmers and manufacturers are especially high. September 2025 marked the first month since 2018 that China imported no soybeans from U.S. farmers—a blow to an industry that was supposed to benefit from the Phase One deal. The Trump administration has indicated it will provide financial relief to farmers suffering from lost sales, while also using the investigation as leverage to push China to ramp up purchases of American products, especially soybeans. Wendy Cutler, vice president at the Asia Society Policy Institute and a former U.S. trade negotiator, told the Associated Press, “The administration seems to be looking for new sources of leverage to use against Beijing, while adding another pressure point to get China to buy more U.S. soybeans as well as other goods.”
But it’s not just soybeans at stake. The original 2020 deal also included commitments from China to purchase American airplanes, energy products, and services, and to open its markets to American companies. Yet, as the USTR and independent analysts have pointed out, China has consistently fallen short on these promises, citing the COVID-19 pandemic as a major obstacle to fulfilling its obligations. U.S. officials, however, remain skeptical, noting that Beijing’s regulatory environment continues to present unreasonable or discriminatory barriers to U.S. commerce.
“Despite repeated U.S. engagement with China to address implementation concerns, China appears not to have lived up to its commitments under the Phase One Agreement with respect to non-tariff barriers, market access issues, and purchases of U.S. goods and services,” the USTR’s announcement stated.
The investigation opens a formal process for public input, with comment submissions invited from October 31 through December 1, and a public hearing scheduled for December 16. This process will help determine whether China has indeed violated the agreement and, if so, what penalties—such as tariffs or other restrictions—should be imposed.
Meanwhile, President Trump has laid out a series of conditions for China if it wants to see tariffs reduced. These include cracking down on fentanyl precursors and drug trafficking, committing to purchase U.S. soybeans, curbing purchases of Russian energy, and settling the persistent U.S.-China trade deficit. Trump and his officials have expressed confidence that Beijing will ultimately back down, but have warned of “significant consequences” if China follows through with its rare-earth restrictions.
As the world watches, the outcome of this latest U.S.-China standoff will have ripple effects far beyond the negotiating table. With global supply chains and entire industries hanging in the balance, both sides have much to lose—and perhaps even more to gain—if a new understanding can be reached. For now, though, the prospect of escalating tariffs and deepening mistrust looms large over the world’s most important economic relationship.
