US, China all set to resume tariff talks in effort to keep sharply higher tariffs at bay

Qatar Tribune

3 days ago

Agencies
Stockholm
Senior US and Chinese negotiators meet in Stockholm on Monday to tackle longstanding economic disputes at the centre of the countries' trade war, aiming to extend a truce keeping sharply higher tariffs at bay.
China is facing an August 12 deadline to reach a durable tariff agreement with President Donald Trump's administration, after Beijing and Washington reached a preliminary deal in June to end weeks of escalating tit-for-tat tariffs.
Without an agreement, global supply chains could face renewed turmoil from duties exceeding 100 percent.
The Stockholm talks, led by US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, take place a day after European Commission President Ursula von der Leyen meets Trump at his golf course in Scotland to try to clinch a deal that would likely see a 15 percent baseline tariff on most EU goods.
Trade analysts on both sides of the Pacific say the discussions in the Swedish capital are unlikely to produce any breakthroughs but could prevent further escalation and help create conditions for Trump and Chinese President Xi Jinping to meet later this year.
Previous US-China trade talks in Geneva and London in May and June focused on bringing US and Chinese retaliatory tariffs down from triple-digit levels and restoring the flow of rare earth minerals halted by China and Nvidia H20 AI chips and other goods halted by the United States.
So far, the talks have not delved into broader economic issues. They include US complaints that China's state-led, export-driven model is flooding world markets with cheap goods, and Beijing's complaints that US national security export controls on tech goods seek to stunt Chinese growth.
'Stockholm will be the first meaningful round of US-China trade talks,' said Bo Zhengyuan, Shanghai-based partner at China consultancy firm Plenum.
Trump has been successful in pressuring some other trading partners, including Japan, Vietnam and the Philippines, into deals accepting higher US tariffs of 15 percent to 20 percent.
He said there was a 50-50 chance that the US and the 27-member European Union could also reach a framework trade pact, adding that Brussels wanted to 'make a deal very badly'.
Two of Trump's top trade officials, Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer, will attend the Scotland talks and then travel to Stockholm.
Analysts say the US-China negotiations are far more complex and will require more time. China's grip on the global market for rare earth minerals and magnets, used in everything from military hardware to car windshield wiper motors, has proved to be an effective leverage point on US industries.
In the background of the talks is speculation about a possible meeting between Trump and Xi in late October.
Trump has said he will decide soon whether to visit China in a landmark trip to address trade and security tensions. A new flare-up of tariffs and export controls would likely derail any plans for a meeting with Xi.
'The Stockholm meeting is an opportunity to start laying the groundwork for a Trump visit to China,' said Wendy Cutler, vice president at the Asia Society Policy Institute.
Bessent has already said he wants to work out an extension of the August 12 deadline to prevent tariffs snapping back to 145 percent on the US side and 125 percent on the Chinese side.
Still, China will likely request a reduction of multi-layered US tariffs totaling 55 percent on most goods and further easing of US high-tech export controls, analysts said. Beijing has argued that such purchases would help reduce the US trade deficit with China, which reached $295.5 billion in 2024.
China is currently facing a 20 percent tariff related to US fentanyl crisis, a 10 percent reciprocal tariff, and 25 percent duties on most industrial goods imposed during Trump's first term.
Bessent has also said he would discuss with He the need for China to rebalance its economy away from exports toward domestic consumer demand. The shift would require China to put an end to a protracted property crisis and boost social safety nets to encourage household spending.
Michael Froman, a former US trade representative during Barack Obama's administration, said such a shift has been a goal of US policymakers for two decades.
'Can we effectively use tariffs to get China to fundamentally change their economic strategy? That remains to be seen,' said Froman, now president of the Council on Foreign Relations think-tank.