1 How the Supreme Court’s decision on Trump’s tariffs could affect US-China relations
Supreme Court strikes down Trump’s tariffs
On Feb. 20, the United States Supreme Court ruled 6-3 that President Donald Trump had exceeded his authority in using the International Emergency Economic Powers Act (IEEPA) to impose tariffs.
“Our task today is to decide only whether the power to ‘regulate … importation,’ as granted to the president in IEEPA, embraces the power to impose tariffs. It does not,” wrote Chief Justice John Roberts. Citing a prior Supreme Court ruling, Roberts wrote that “the president must ‘point to clear congressional authorization’ to justify his extraordinary assertion of the power to impose tariffs,” and added that Trump could.
The Supreme Court ruling did not address how the U.S. government should refund the tariffs that were struck down.
***
According to Capital Economics, the Supreme Court’s ruling lowers the effective U.S. tariff rate on Chinese goods from 32 percent to 23 percent.
Trump’s response and US tariff options
President Trump said that the Supreme Court’s ruling was “deeply disappointing” and later criticized the justices who ruled against him on social media.
Within hours of the ruling, the White House issued an executive order declaring that the U.S. is experiencing fundamental international payments problems within the meaning of Section 122 of the Trade Act of 1974. Under Section 122, the Trump administration imposed a 10 percent tariff — effective Feb. 24, 2026 — for a period of 150 days (to July 24, 2026).
On Feb. 21, Trump announced on Truth Social that he was raising the tariff rate (no executive order has been issued at the time of writing) to 15 percent, the statutory maximum under Section 122. Trump also directed the launch of Section 301 and Section 232 investigations.
On Feb. 23, The Wall Street Journal reported that the Trump administration is considering issuing new tariffs covering industries such as large-scale batteries, cast iron and iron fittings, plastic piping, industrial chemicals, and power grid and telecom equipment under Section 232. Section 232 gives the president broad authority to impose tariffs based on national security risks. The tariffs, if issued, would be separate from the 15 percent tariffs that Trump has proposed.
***
Despite the Supreme Court’s ruling, the Trump administration can still apply tariffs under the following authorities:
- Section 122 (Trade Act of 1974): Allows the president to impose tariffs of up to 15 percent for 150 days (can be extended by Congress) to address “large and serious” U.S. balance of payments deficits.
- Section 232 (Trade Expansion Act of 1962): Allows the president to restrict imports through tariffs or quotas following the identification of a national security threat in a Commerce Department investigation. There is no statutory ceiling on the tariff rate under this authority.
- Section 301 (Trade Act of 1974): The president can authorize the United States Trade Representative to probe and act against unfair foreign trade practices. There is no cap on the tariff level and such actions are difficult to unwind, but investigations will take time.
- Section 338 (Tariff Act of 1930): Gives the president authority to impose tariffs of up to 50 percent of the product’s value after the U.S. International Trade Commission finds that a foreign country has discriminated against U.S. commerce. Thus far, Section 338 has not been used to impose trade restrictions.
PRC response to the Supreme Court tariff decision
On Feb. 23, the PRC commerce ministry said that it was conducting a “comprehensive assessment” of the Supreme Court ruling and urged the U.S. to cancel the tariffs. The ministry added that U.S. measures, including reciprocal and fentanyl-related tariffs, “violate both international trade rules and U.S. domestic law and do not serve the interests of any party.” The ministry also noted that “trade wars produce no winners and protectionism offers no way forward.”
Backdrop
Tariffs
President Trump spiked U.S. tariffs on Chinese imports to a high of 145 percent in April 2025 as part of his “Liberation Day” measures. Beijing responded by raising tariffs on U.S. imports to 125 percent. Both sides came to a truce weeks later, with the U.S. lowering its tariff rate to 30 percent and the PRC to 10 percent.
Rare earths
Beijing imposed export controls on rare earths in April and October 2025, partly in response to U.S. trade actions and partly due to national security concerns. The stricter October controls were subsequently paused as part of the Xi-Trump agreement in Busan later in the year.
Xi-Trump meeting in Beijing
On Feb. 20, the White House announced that President Trump would travel to Beijing from March 31 to April 2.
Our take
1. The Supreme Court’s ruling on Trump’s tariffs will not shift the trajectory of U.S.-China competition. The Trump administration has other options available to impose tariffs on Chinese goods, and will continue to push the PRC on trade, technology, nuclear arms control, security, Taiwan, and other geopolitical matters. Meanwhile, the CCP may have secured a slight tactical edge in the trade war as the U.S. is forced to “professionalize” its imposition of tariffs, but the ruling alone will not provide Beijing with substantial strategic respite in the broader rivalry.
The ruling, however, does remove some of the unpredictability of the Sino-U.S. trade war. For one, Washington will have to act within legal and constitutional constraints and Trump will have to curb his maverick measures to avoid future tariffs being struck down. Future trade escalations, if any, would likely be less volatile as Washington’s other tariff tools are either limited (Section 122) or require more time and consensus to enact (Section 301 and Section 232). Over time, the U.S.-China trade competition will likely become more regulated and less prone to wild vacillations; this, however, does not necessarily mean that the competition will drop in intensity.
2. The CCP will look to exploit the Supreme Court’s tariff ruling to promote its propaganda narratives and find leverage in future negotiations with the Trump administration.
On the narrative front, the PRC commerce department and propaganda organs could, on the basis of the Supreme Court’s decision, attempt to characterize future U.S. tariff decisions as “double unlawful,” i.e. in violation of international (World Trade Organization) rules and U.S. domestic laws. Beijing could also tap its newfound “moral” and legal leverage to double down on its calls to end “protectionism” and promote “multilateralism.”
Beijing will likely leverage the Supreme Court ruling in negotiating with Washington to secure “breathing space” in great power competition. For instance, Xi Jinping could demand in his April meeting and in subsequent discussions that the Trump administration issue tariff refunds first before proceeding with trade and other negotiations; this will be in line with the CCP’s ongoing tactic of “delaying and waiting for change” against the Trump administration. The Xi leadership could also press the U.S. for the full removal of technology sanctions and other restrictions. If Trump rejects these demands, the PRC could later initiate coordinated litigation at the WTO and potentially align with the European Union, Brazil, or other countries aggrieved by Trump’s tariffs to ramp up legal pressure on the United States.
How hard Beijing will push Trump over the tariff ruling could hinge on the Xi leadership’s assessment of where it would like the Sino-U.S. relationship to be in relation to the PRC’s present situation. If Beijing is confident in the Chinese economy and the regime’s ability to weather heightened competition, it could kick up a big fuss over the Supreme Court ruling and unilaterally end the U.S.-China “détente” that was reached after the Xi-Trump meeting in Busan in 2025. But if Beijing believes that it needs to hunker down and avoid further geopolitical turmoil, it will make stern remonstrations with the Trump administration on the issue of tariffs yet avoid making moves that could upend the “peaceful” co-existence between the two powers. The PRC’s public reaction to the ruling thus far suggests that it is either on the latter path or is still weighing its options.
2 China’s ‘kung fu’ robots more propaganda ‘noise’ than industrial ‘signal’
The annual CCTV Spring Festival gala on Feb. 16 showcased humanoid robots from four robotics startups, namely, Unitree Robotics, Galbot, Noetix, and MagicLab. The sketches featured a martial arts demonstration by Unitree humanoids engaging in sophisticated fight sequences, including “drunken boxing” style martial arts, waving nunchucks, poles, and swords close to children performers, and humanoids doing flips. Also, MagicLab robots performed synchronized dances with humans while four Noetix humanoids participated in a comedy skit with human actors.
PRC mouthpieces CCTV and People’s Daily characterized the humanoid performances as a milestone marking China’s “embodied intelligence entering the world’s top tier.” Related videos on mainland social media platforms such as Weibo and Xiaohongshu sparked widespread techno-nationalist discussions. Some commentators argued that the humanoid performances were proof that China had “overtaken the United States on a curve” in high-tech sectors.
China’s “kung fu” robots attracted Western attention, although experts noted that the display was choreographed and largely symbolic, and did not equate to real-world application. Previously, Elon Musk noted that he expects Chinese companies to be his biggest competitor as he shifts Tesla towards embodied AI and its humanoid robot Optimus. “People outside China underestimate China, but China is an ass-kicker next level,” Musk said.
Background and policy framework of China’s humanoids technology
The rapid rise of China’s humanoid robotics industry has largely relied on its capacity to perform “1-to-100” optimization and integration of the international open-source ecosystem and foundational algorithms.
- Motion control (the “cerebellum”): The mainstream industry architectures for model predictive control (MPC) and whole-body control (WBC) are largely derived from open-source foundations developed at MIT and Stanford University. These architectures have allowed Chinese firms to bypass the lengthy stage of foundational theoretical development.
- Neural systems and communication: The vast majority of Chinese firms adopt Robot Operating System 2 (ROS2) developed by Open Robotics as the standardized communication interface between sensors and actuators.
- Virtual training environments: By leveraging NVIDIA’s Isaac Gym and Google DeepMind’s open-source MuJoCo physics engine, Chinese developers can construct large-scale virtual environments, accelerating the “Sim-to-Real” transfer of motion from simulation to physical deployment.
From late 2025 to early 2026, Xi Jinping repeatedly emphasized in meetings of the Politburo and in articles published in Qiushi the need to “lead industrial upgrading through technological innovation.” Xi explicitly listed “embodied intelligence” and “future energy” as priority sectors in the next round of strategic industries. The PRC has also officially positioned robotics as a “key variable” to hedge against rising labor costs and the challenges of population aging.
Our take
Beyond the visual spectacle at the CCTV Spring Festival gala, China’s humanoid robotics industry is confronting a disconnect between systems-level engineering integration and foundational original algorithms. It is also constrained by a subsidy-driven “internal circulation” market, an industry scale insufficient to offset the void left by the real estate downturn, and potential negative effects on structural employment.
1. According to public statements made after the CCTV Spring Festival gala by Unitree’s founder and CEO Wang Xingxing and other senior executives, the so-called “kung fu” robot performance was the result of hundreds to thousands of training iterations conducted within preset boundary conditions. However, it is more likely that the performance was a one-off, choreographed affair intended for market and propaganda purposes rather than a genuine breakthrough in general-purpose robotics.
What the “kung fu” robots did was likely the outcome of being trained on a set routine with known perimeters hundreds or thousands of times. These robots will unlikely be able to repeat the performance in an unstructured environment, and therefore cannot be put to use in a factory deployment as yet. Behind-the-scenes footage circulated on social media platforms such as X and Facebook showed that some of the humanoids had to be manually carried by staff when descending steps because they were unable to autonomously avoid obstacles or maintain balance. This led some netizens to mock Unitree’s humanoids as being no more than “large remote-controlled toys.”
While Unitree could have made advances in swarm control, it is more likely that the high-dynamic martial arts movements that its humanoids displayed were the result of motion capture systems for pre-recorded trajectory replay. This approach is fundamentally different from AI systems based on real-time environmental perception and autonomous judgment, such as the objective pursued by Tesla’s Optimus.
2. The humanoid performances at the CCTV Spring Festival gala are more akin to an expensive pre-IPO marketing campaign than an actual display of capability. According to mainland media reports, the combined sponsorship and marketing expenditure of participating firms approached 400 million yuan (approximately $55 million), with Unitree alone reportedly quoting around 100 million yuan. For startups still operating at sustained losses, this represents a psychological maneuver at a time when financing conditions are tightening but capital markets still hold expectations for “new quality productive forces.”
As of 2025, China had more than 140 humanoid robotics companies, with over 330 products launched, according to mainland media. In 2026, the industry is expected to undergo consolidation. Firms lacking genuine commercial orders and surviving primarily on political procurement and research grants may face bankruptcy risks after exhausting their previous funding rounds.
Therefore, the appearance of those four humanoid robotics companies at the Spring Festival gala is an important marking event. On one hand, the performance leverages nationalist sentiment to sell expensive “large remote-controlled toys.” Within just two hours of the CCTV Spring Festival gala going live, robot-related searches on JD.com surged by more than 300 percent compared with the previous month and order volume jumped by 150 percent, according to mainland media reports. On the other hand, the display builds publicity momentum for future IPO fundraising.
3. The humanoid robot showcase appears to concretize Xi Jinping’s “new quality productive forces” narrative and give ordinary citizens a visible symbol of economic revival. However, the market size of China’s humanoid robotics sector is unlikely to fill the GDP gap left by the property downturn.
China’s humanoid robotics market is projected to reach only $1.3 billion (about 9.4 billion yuan) in 2026. Meanwhile, the negative wealth effect from the real estate collapse has led to consumption contraction in the trillions of yuan. The tech sector may be “high-end and sophisticated,” but its capacity to absorb employment is extremely limited.
Against the backdrop of a youth unemployment rate reaching 16.5 percent in December 2025, the proliferation of robots is poised to first impact low-end manufacturing jobs, which once served as a key buffer for social stability. If productivity gains cannot be translated into broad income growth, such technological progress could instead become a catalyst for economic recession.
4. According to mainland media reports, China accounted for approximately 90 percent of global humanoid robot shipments in 2025 (around 11,000 out of 13,000 units). However, the market structure shows significant policy dependence.
On the sales side, current procurement in China is driven not by factories or households, but by government-funded research institutes, university laboratories, and brand exhibition halls of large state-owned enterprises. While this model inflates shipment figures on paper, it has not yet entered a genuine economic production cycle.
At the technological level, there remains a noticeable generational gap between Chinese humanoid robots and the third generation of Tesla’s Optimus. Optimus Gen 3 relies on full self-driving (FSD) data for end-to-end training and demonstrates spatial relational understanding (such as identifying “the wrench next to the toolbox”). By contrast, most Chinese products remain at the stage of executing precise coordinate-based instructions. Their average mean time between failures (MTBF) is around 312 hours, significantly lower than Tesla’s reported 847 hours in testing.
In terms of cost, although China benefits from supply chain advantages in places such as Shenzhen that significantly reduce component costs, the return on investment for humanoid robots remains financially unattractive in most industrial settings. This is especially so given average manufacturing workweeks of 48.6 hours and stagnating labor cost growth.
5. The humanoid performances at the 2026 CCTV Spring Festival gala can be summed up as a successful act of political marketing. The display helped the PRC to cultivate a perception of a “leading China” (at least in humanoid robotics) in both capital markets and public opinion. However, unless foundational algorithmic innovation and the cost-benefit ratio of labor substitution are fundamentally resolved, the excitement over Chinese humanoids is likely to be short-lived and could struggle to conceal the harsh industry shakeout that China’s robotics sector is likely to face in 2026.
