President Donald Trump is moving toward imposing a new tariff on China that would punish the world’s second-largest economy for flooding global markets with underpriced goods, according to three people familiar with the matter.

Two of the people, who spoke on condition of anonymity because the deliberations are still being finalized, said Trump is considering setting the tariff at 7.5%. Administration officials believe that level would not jeopardize the one-year trade truce between Washington and Beijing or a planned White House meeting between Trump and Chinese President Xi Jinping, which is expected to take place in late September.

If finalized, the move would appear to be a carefully calibrated effort by the White House to work around a Supreme Court decision earlier this year that struck down Trump’s plan to impose a sweeping high-tariff system not seen since the 1930s.

After that decision, the Trump administration announced in March that it was launching formal investigations targeting excess industrial capacity and forced-labor regulations in China and other nations.

It is not clear whether the administration is also nearing a decision in the probes of other economies it said it was investigating for unfair trade practices, including the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, South Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan and India.

The White House and the U.S. Trade Representative’s office did not respond to requests for comment on the tariff deliberations, which Bloomberg News reported earlier Monday. The Chinese embassy in Washington also did not immediately respond to a request for comment.

China’s excess industrial capacity probe was launched under Section 301 of the Trade Act of 1974, which allows the president to levy tariffs against nations that discriminate against U.S. companies or commerce. It is the same statute Trump leaned on in his first term, when Section 301 duties of up to 25% were imposed on hundreds of billions of dollars of Chinese goods beginning in 2018 — tariffs that remain in place on many products today. As with those earlier levies, any new duty would be collected at the border from the importer of record, typically a U.S. company, a mechanic that fueled years of debate over who ultimately bears the cost of tariffs.

The people familiar with the discussions stressed that Trump could still change his mind on the tariff.

Any new duty would come on top of tariffs of 10% to 12.5% announced last month for 60 economies around the world. The Trump administration said those tariffs were aimed at countries that failed to effectively enforce a ban on goods produced with forced labor.

Many countries, including China, protested that move, which took effect as temporary tariffs Trump had turned to after the Supreme Court in February struck down sweeping “reciprocal” tariffs he had imposed on nearly every U.S. trade partner ran out.

China last month pushed back against claims of overcapacity, anticipating that the U.S. would soon release the results of its probe and impose new tariffs.

Large capacity in a range of Chinese industries, from autos and solar panels to cement and steel manufacturing, has drawn increased attention from Beijing’s trading partners in recent years. The European Union, for its part, imposed countervailing duties on Chinese-built electric vehicles in 2024 after an anti-subsidy investigation, a sign that concern about Chinese exports extends well beyond Washington.

Although China’s leaders have prioritized rebalancing the economy, slowing domestic demand has pushed companies to expand into overseas markets. Surging exports lifted China’s trade surplus to a record of nearly $1.2 trillion last year.

China has never sought a large trade surplus, the Ministry of Commerce said in a recently published report titled “China’s Position on the So-called Excess Capacity Issue.”

The deliberations come as the Treasury Department on Monday warned countries that trade with Iran that new secondary sanctions are in the pipeline aimed at ostracizing nations that continue doing business with Tehran. China is Iran’s biggest trade partner.

Washington has said the new sanctions would add pressure to Iran’s economy, which has already been battered by previous sanctions and a U.S. naval blockade as the U.S. and Israeli war against Iran approaches the six-month mark.

Treasury Secretary Scott Bessent’s announcement Monday provided few details and did not name which countries could face secondary sanctions.

This story was originally featured on Fortune.com