US, China to resume tariff talks in effort to extend truce

CNA

6 days ago

STOCKHOLM: Senior US and Chinese negotiators meet in Stockholm on Monday (Jul 28) to tackle longstanding economic disputes at the centre of a trade war between the world's top two economies, aiming to extend a truce keeping sharply higher tariffs at bay.
China is facing an Aug 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, come right on the heels of Trump's biggest trade deal yet, with the European Union accepting a 15 percent tariff on its goods exports to the US and agreeing to make significant EU purchases of US energy and military equipment.
That deal struck with European Commission President Ursula von der Leyen on Sunday in Scotland also calls for US$600 billion in investments in the US by the EU, Trump told reporters.
No similar breakthrough is expected in the US-China talks, but trade analysts said that another 90-day extension of a tariff and export control truce struck in mid-May was likely.
An extension of that length would prevent further escalation and help create conditions for a potential meeting between Trump and Chinese President Xi Jinping in late October or early November.
Spokespersons for the White House and US Trade Representative's office did not immediately respond to requests for comment on a South China Morning Post report quoting unnamed sources as saying the two sides would refrain from introducing new tariffs or take other steps that could escalate the trade war for another 90 days.
Trump's administration is poised to impose new sectoral tariffs that will impact China, including on semiconductors, pharmaceuticals, ship-to-shore cranes and other products.
"We're very close to a deal with China. We really sort of made a deal with China, but we'll see how that goes," Trump told reporters before his meeting with von der Leyen, providing no further details.
DEEPER ISSUES
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's 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.
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.
TRUMP-XI MEETING?
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 Aug 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 US$295.5 billion in 2024.
China is currently facing a 20 percent tariff related to the 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.