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The United States and China are expected to decide to extend the current tariff rates they have imposed on each other for another 90 days during trade talks that will begin on Monday in Stockholm, Sweden.
According to sources close to the talks on both sides, the extension would be a continuation of the existing agreement reached in May and set to expire on August 12.
The two countries mutually suspended most of their heavy tariffs in May, buying time for talks. In the third round of talks, the parties are expected to clarify their positions on key points of contention, particularly US concerns about China's excess industrial capacity. However, sources say no concrete breakthroughs are expected from these talks.
According to three sources close to the Chinese side, while the previous Geneva and London meetings were generally focused on “reducing tensions,” Beijing will also want to bring up the 20% additional tariffs imposed on Chinese goods by US President Donald Trump in March due to the fentanyl crisis in the Stockholm talks.
The Trump administration has argued that China has not done enough to stop the flow of fentanyl into the US. However, Washington has not offered clear criteria for what constitutes “sufficient progress.” The Chinese delegation may seek further clarification on this matter.
A source familiar with the matter said Beijing “does not find the 20% tariff fair” but might accept a basic 10% tariff if the additional tariff were removed.
According to the Washington-based Peterson Institute for International Economics, the average U.S. tariff on Chinese goods currently stands at 51.1%. While the Chinese side considers this excessive, they say they have already absorbed the 25% increase implemented during Trump's first term.
The People's Daily, the Communist Party of China's media outlet, wrote in an editorial on Sunday that Beijing was ready to cooperate with Washington to achieve “meaningful progress” in the Stockholm talks. The article stated that “China has always adopted a constructive stance and advocated resolving issues through equal dialogue,” and called for strengthening mutual trust and reducing misunderstandings.
However, experts say no major outcomes should be expected from these talks. Niklas Swanstrom, director of the Stockholm-based Institute for Security and Development Policy, approached the talks cautiously, saying, “I don't expect a rupture, but I'd be happy if I'm wrong.”
Frederic Cho, vice president of the Sweden-China Business Council, also indicated that a 90-day extension would be the likely outcome of the talks. US Treasury Secretary Scott Bessent told Fox Business last week that he would work on this extension with his Chinese counterparts in Stockholm.
US Commerce Secretary Howard Lutnick told CNBC that issues such as ownership of the popular short-video app TikTok could also be indirectly discussed. If ByteDance doesn't transfer control of TikTok to an American company, the app risks being banned in the US.
According to Philippe Le Corre, head of the Asia Program at French business school ESSEC, the Stockholm talks could be a preparatory phase before a final agreement is reached. He suggested that a potential final agreement could be reached during a meeting between Chinese President Xi Jinping and Trump at the Asia-Pacific Economic Cooperation (APEC) summit in South Korea in October.
*This is not investment advice.