US And China Hold Crucial Trade Talks In Stockholm, Donald Trump-Xi Jinping Summit On Cards

Stockholm: Amidst ongoing tariff tensions, the top trade officials of the US and China, in a bid to ease tensions and pave the way for a meeting between US President Donald Trump and Chinese President Xi Jinping, have convened in Stockholm for crucial talks. US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are leading the discussions, which will likely help to extend a 90-day pause on tariffs imposed on each other's goods.

As per trade experts, the stakes are high, with the current pause set to expire on August 12. Without an extension, tariffs could snap back to triple-digit levels, leading to renewed trade tensions and disrupting global supply chains. The analysts believe a short-term extension is likely, but resolving deeper structural issues will be a big challenge.

The US-China trade relationship has been strained in recent months, with Trump imposing sweeping tariff proposals, including an import tax of up to 145% on Chinese goods. China retaliated with tariffs reaching 125% against US goods, sending global financial markets into a tailspin. The trade deficit between the two nations stood at $904 billion last year, with the US deficit with China reaching nearly $300 billion.

Stockholm Talks Between US-China

The talks in Stockholm are part of an effort to stabilise the US-China trade relationship. Bessent has suggested that the situation has stabilised to the point where the two nations can start looking toward a longer-term balance between their economies. However, former US trade negotiator Wendy Cutler warned that Beijing is more prepared and will insist on movement on US tech export controls at a minimum, a difficult ask for Washington.

The outcome of the talks is a 90-day extension of the tariff truce, which would prevent further escalation and facilitate planning for a meeting between Trump and Xi Jinping. The US and EU recently reached a deal, with the EU agreeing to a 15% tariff on most goods exported to the US, along with commitments of $750 billion in energy purchases and $600 billion in investments. No similar deal is anticipated between the US and China at this time.

Structural Issues For US and China

The trade experts said that long-term progress in the US-China trade relationship will hinge on structural changes, including increased manufacturing in the US and a reduction of excess Chinese production in many industries. Sean Stein, president of the US-China Business Council, believed the talks offer an opportunity for the two governments to address structural reform issues. The businesses will watch for clues about a possible Trump-Xi summit, as any real deal will depend on a meeting between the pair.

Despite the optimism, challenges loom as China is expected to demand the removal of a 20% fentanyl-related tariff imposed by the US earlier this year. The US will also pressure China to reduce oil purchases from Russia and Iran. The analysts say the US-China negotiations are far more complex than those with other Asian countries and will require more time.