US-China Talks Set for Stockholm as Trade Truce Nears Its End

Talks Set the Stage for a Possible Fall Summit between Trump and Xi

Recent diplomatic conversations between U.S. President Donald Trump and Chinese Leader Xi Jinping indicate that these discussions are paving the way for a prospective autumn meeting.

US and China Convene in Stockholm Ahead of Presidential Summit

Stance on Tariffs

With their leaders scheduled to meet later this year, US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are expected to conclude that tariffs will remain at current rates rather than seek a more favorable arrangement. Analysts suggest the two governments are prioritizing a durable trade framework that will precede the upcoming presidential talks.

Ongoing Negotiations

This is the third round of talks between the officials in 2024, taking place in Stockholm, Sweden. It follows a four‑month gap since President Donald Trump introduced broad tariff hikes—including a 145% import levy on Chinese goods—following a sweeping trade policy overhaul.

Key Statements

During a recent interview, Bessent highlighted that the two nations had reached a status quo after consultations in Geneva and London. The current arrangement keeps the US imposing a 30% tariff on Chinese imports while China applies a 10% counter‑tariff, in addition to pre‑existing duties in place before Trump’s second term.

He noted that the next phase would involve discussing elements that could bring the economic relationship into greater balance, pointing to the US’s $295.5 billion trade deficit last year. Washington aims to secure terms that allow it to export more to China and encourages the Chinese economy to shift focus toward domestic consumer spending.

According to the Chinese embassy in Washington, Beijing is hopeful that the discussions will yield “more consensus and cooperation, with fewer misperceptions.”

Implications for Leadership Summit

• Stockholm could clarify the timeline and feasibility of a forthcoming leaders’ summit between President Trump and Chinese President Xi Jinping.
• Former US trade negotiator Wendy Cutler of the Asia Society Policy Institute predicts that the meeting will play a pivotal role in setting the stage for the fall summit. She notes that Beijing will likely demand detailed preparations before agreeing to a direct exchange between the presidents.
• Rule‑making focus areas may include: industrial overcapacity in China; regulation of chemicals used in fentanyl production; and potential commercial announcements to accompany the summit.

Opportunities for Business Interests

Sean Stein, President of the US‑China Business Council, views Stockholm as the first practical chance for governments to address structural reforms, especially concerning market access for US firms in China. He emphasizes that business outcomes hinge largely on the overall atmosphere of the discussions and any indications of a definitive leaders’ meeting.

Fentanyl-related tariffs are likely a focus for China

Beijing Aims to Have US Drop Fentanyl‑Related Tariff

At the Stockholm talks, Sun Yun, director of the China program at the Washington‑based Stimson Center, said China expects the United States to remove the 20% tariff linked to fentanyl that President Trump imposed earlier this year.

Background of the Fentanyl Trade Row

• In February, Trump slapped a 10% duty on Chinese goods, citing China’s inability to curb the export of chemicals used to produce fentanyl.
• March saw a second 10% surcharge on the same grounds.
• China retaliated with additional duties on U.S. products such as coal, liquefied natural gas, and key agricultural items (beef, chicken, pork, soy).
• Subsequent negotiations in Geneva reduced the three‑digit tariffs, yet the U.S. retained the 20% fentanyl tariff along with a 10% baseline rate.
• China matched the 10% rate on U.S. imports.
• A London meeting later focused on non‑tariff issues, like export controls on critical technologies.

China’s Viewpoint

China maintains that blaming it for the U.S. fentanyl crisis is misplaced; the country argues the problem originates domestically. The U.S., however, insists Beijing is inadequately regulating precursor chemicals that flow into the United States.

Recent Measures and Future Outlook

• In July, China placed two fentanyl precursor chemicals under enhanced control, a step seen as a response to U.S. pressure.
• Gabriel Wildau, managing director of Teneo, indicated that while he does not anticipate the tariff being removed in Stockholm, relief could feature in a final trade agreement.
• Wildau warned that any final tariff on China would likely stay within the 15–20% range, consistent with recent deals involving Japan, Indonesia, and Vietnam.

US wants China to dump less, buy less oil from Russia and Iran

China’s Industrial Overcapacity & Its Global Implications

China’s unchecked production capacity has become a major concern not only for the United States but also for the European Union. Even Beijing acknowledges the issue, hinting that an effective solution may prove difficult.

Trade Dynamics: From Imbalance to Surplus

• U.S.–China trade deficit fell from a peak of $418 billion (€358 billion) in 2018, according to the Census Bureau.
• Contrarily, China’s global trade surplus reached nearly $1 trillion last year, surpassing the U.S. trade deficit in 2024.
• The country’s rise as a leading electric‑vehicle manufacturer has amplified its financial and geopolitical influence in sectors owned by the U.S., Europe, Japan, and South Korea.

Statements from Leaders

“Manufacturing firms feel that China’s production prowess is too strong and that its workforce is exceptionally diligent, running factories 24 hours a day.” – Premier Li Qiang
— expressed concern about potential supply‑and‑demand imbalances in global production.

While acknowledging the problem, Li stressed the need for careful consideration of the resulting challenges.

Stockholm Talks: Possible Outcomes

During recent discussions, Bessent suggested focusing on Chinese purchases of Russian and Iranian oil. Wildau of Teneo hypothesized that China might seek U.S. security concessions, such as:

• Reduced U.S. military presence in East Asia
• Scaled‑back diplomatic support for Taiwan and the Philippines

These proposals, however, could meet significant political resistance in Washington.

Wildau also outlined the strategic direction of the Stockholm talks:

• Develop a trade agreement that centers on Chinese purchase commitments and investment pledges in the U.S.
• Exchange these commitments for partial relief of U.S. tariffs and easing of export controls.

He is skeptical of a sweeping deal, instead predicting a more focused agreement, perhaps targeting issues such as fentanyl. According to him, this outcome would likely align with the interests of China hawks within the Trump administration, who fear a too‑generous approach from former President Trump toward Xi Jinping.