The United States is preparing to impose an additional 7.5 percent tariff on Chinese goods over allegations of excess manufacturing capacity, according to people familiar with the discussions, in a move that could raise tensions with Beijing ahead of a planned September summit between US President Donald Trump and Chinese President Xi Jinping.

If implemented, the new levy would bring the Trump administration’s second-term tariffs on Chinese goods to around 20 percent. Beijing has previously indicated that a 20 percent ceiling would be consistent with the current US-China trade truce. The new duties would be imposed on top of tariffs introduced during Trump’s first term and retained under the Biden administration.

The proposed tariff follows a Section 301 investigation launched by the Trump administration into excess manufacturing capacity in China and other major trading partners.

US officials have raised concerns that large-scale Chinese production in industries such as automobiles, steel, solar panels and other manufactured goods is contributing to lower-priced exports and putting pressure on producers in the United States and elsewhere.

The exact tariff rate has not yet been finalized. Sources said one option under consideration would involve announcing a higher headline rate while suspending part of it, resulting in an effective tariff of 7.5 percent. The duration and scope of any suspension remain under negotiation.

The White House has not confirmed the reported plan, saying that official tariff announcements would come directly from the administration.

The proposed measure comes as Washington and Beijing seek to preserve a fragile trade truce. The agreement established a one-year pause in the escalation of tariff measures and is scheduled to expire on November 10.

The two sides are reportedly discussing an extension of the arrangement, making the timing of the proposed tariff particularly significant as Trump and Xi prepare for their expected September meeting. US officials hope to release the findings of the overcapacity investigation before the summit.

In July, Washington imposed a 12.5 percent tariff on Chinese goods under a separate measure related to forced-labor concerns. China criticized the move but did not immediately retaliate, while Beijing has maintained that Washington agreed to keep replacement tariffs within a 20 percent ceiling.

The proposed tariff also marks another effort by Trump to pursue his protectionist trade policy after the US Supreme Court struck down his previous import taxes imposed under a different legal authority.

The administration has since turned increasingly toward Section 301 of the Trade Act of 1974 as a legal basis for new tariffs, including investigations into industrial overcapacity and forced labor.

While the proposed 7.5 percent tariff would remain within the previously discussed 20 percent ceiling, the measure risks adding fresh friction to US-China economic relations just weeks before the leaders are expected to meet.

The September summit is therefore likely to test whether Washington and Beijing can extend their fragile trade truce while addressing long-standing disputes over tariffs, industrial policy, market access and China's manufacturing capacity. (ILKHA)