Overview

The United States today opened a new investigation into China’s compliance with the 2020 “Phase One” trade deal. The review, launched under Section 301, signals a deliberate move to apply pressure on Beijing ahead of possible leader‑level talks. This piece explains how Washington can convert the probe into leverage, what concessions are most likely, and how global supply chains and the U.S. outlook could be affected.

What the Investigation Covers

  • Scope: China’s shortfalls on purchases and policy reforms tied to IP protection, tech transfer, agriculture, financial services, and market access—core pillars of the 2020 deal.
  • Process: A Section 301 fact‑finding phase with public comments and a hearing, followed by potential tariff actions or targeted licenses.
  • Context: Independent trackers show China met only ~58% of the 2020–21 purchasing commitments (PIIE).

How Trump Builds Pre‑Summit Leverage

  1. Tariff overhang with snap‑backs: Keep the threat of new or higher duties if Beijing fails to offer concrete steps on purchases and IP enforcement; pair any relief with automatic snap‑backs if milestones slip.
  2. Sequenced asks: Front‑load agriculture and energy buys (soybeans, sorghum, LNG) within 30–90 days; sequence structural reforms (IP, data access, fintech licenses) over 6–12 months.
  3. Licensing as a valve: Offer narrow export licenses for mature‑node chips or EDA features if China restores targeted purchases and renews industry registrations (e.g., meat plants) stalled in 2025.
  4. Allied alignment: Lock in Japan/EU coordination on export controls and standards so substitution options are limited.

Data Points to Watch

  • Phase One scorecard: PIIE estimates China purchased only 58% of the 2020–21 commitment total; none of the promised +$200B materialized as net new exports.
  • Tariff baseline: About $370B in Chinese imports remain under tariffs; a new 301 action could add coverage or increase rates on targeted categories.
  • Agriculture sensitivity: China’s pullbacks in U.S. soybeans/sorghum have historically pressured Midwestern prices; restoring volumes is a fast‑track concession.
  • Processing bottlenecks: 2025 lapses in U.S. meat‑plant registrations for China risk several billions in annual exports if not renewed.

Global Supply‑Chain Impact

Near term: Elevated uncertainty around tariff lines and licensing decisions adds inventory buffers and freight repricing for electronics, machinery, and food commodities. 6–12 months: If enforcement tightens, expect faster supplier migration to U.S./ally hubs (Korea/Japan/Taiwan/ASEAN/Mexico) for components subject to 301 actions or Chinese export curbs. Multi‑year: A deal‑plus‑enforcement path shifts sensitive nodes—AI chips, advanced materials, and EV batteries—into allied territories.

U.S. Outlook

  • Capex: Continued investment in CHIPS‑adjacent fabs and data centers; upside if China commits to LNG/Ag buys (supporting Gulf/East‑Coast ports and rail).
  • Inflation: Tariffs keep goods inflation sticky, but supply‑chain re‑routing reduces volatility; pricing pressures are sector‑specific (electronics, furniture, food).
  • Growth: A credible enforcement‑first mini‑deal could add 0.1–0.3 pp to 2026 growth via exports and energy; failure risks a sentiment hit to manufacturing.

Sources

Reuters (Oct 24, 2025) on the new probe; AP on schedule/hearing; USTR/CRS primers on Section 301 and the Phase One text; PIIE tracker (~58% met); Reuters (Mar 17, 2025) on U.S. meat‑plant registration lapses impacting exports.