The United States and China will hold their third trade negotiations in Stockholm, Sweden, from the 28th (local time) for two days. In this round of negotiations, following previous meetings in Geneva, Switzerland, and London, England, the U.S. is pressuring China for structural reforms regarding its export-driven oversupply structure, while China demands the lifting of high tariffs and restrictions on technology exports. There is a prevailing expectation that it will be difficult to achieve a groundbreaking agreement. However, the two sides are likely to form a consensus to extend the tariff truce, scheduled to end in mid-next month, until November.
Since the inauguration of President Donald Trump, the two countries have been engaged in a tariff war, with suspension of retaliatory tariffs and easing of export controls being major issues during the first and second rounds of talks. In Geneva in May, the U.S. agreed to reduce tariffs imposed on China by 145% and those imposed by China on the U.S. by 125% to each lower by 115 percentage points by August 12. Subsequently, in London in June, they reached an agreement to ease export regulations, allowing China to partially lift restrictions on rare earths and the U.S. on semiconductors.
According to Reuters and the Chinese state-run Global Times on the 27th (local time), the key issues for this meeting are expected to be China's oversupply and U.S. tariffs. First, the U.S. argues that China maintains its export-dependent economic system, which induces production oversupply, and is pressuring China to transition to a domestic demand-centered economy.
U.S. Treasury Secretary Scott Bessent recently said in an interview with Fox Business, "China accounts for 30% of global manufacturing exports. It should not get any larger," noting that "this is an unsustainable, historically the most imbalanced economy, thus a shift towards a domestic consumption-centered economy is necessary." Reuters noted that "for China to transition to a domestic demand-centered economy, it must address ongoing issues such as the prolonged real estate crisis and enhance social safety nets to boost consumption, which has been the goal of U.S. policymakers for the past 20 years."
The Chinese government is also providing subsidies to boost domestic consumption in recognition of these issues. However, the situation remains sluggish due to structural problems like ongoing deflation (price decline). Moreover, some local governments and corporations are implementing excessive policies to foster industries, resulting in detrimental effects such as cutthroat competition and aggravated oversupply, making it predominantly difficult for China to meet U.S. demands in the short term.
China is expected to primarily demand the reduction of U.S. tariffs and the easing of export controls on advanced technologies. According to Reuters, China is currently subjected to a combined tariff of 30%, which includes a basic tariff of 10% and a 20% tariff on fentanyl. Furthermore, a 25% tariff maintained since the first term of the Trump administration under Section 301 is also applied to some items cumulatively, resulting in some items facing a tariff rate of up to 55%. According to the Peterson Institute for International Economics (PIIE), the average tariff rate imposed on Chinese imports remains at 51.1% even after the tariff truce.
Also, the U.S. is using exports of artificial intelligence (AI) chips as a bargaining chip in trade negotiations. Under the Biden administration, the export of low-spec chips from Nvidia was permissible, but this was blocked under the Trump administration. Recently, exports have been resumed, but in a conditional approval form.
Sung Guo-yu, deputy chief of the U.S. research center at Fudan University, noted to the state-run Global Times, "Given the high level of U.S. tariffs on China, discussions on tariff reductions or elimination, and new economic cooperation plans will be central to this negotiation." He Wei-yuan, a senior researcher at the Chinese Center for Globalization, analyzed that "the future of progress will depend on whether the U.S. responds to China's concerns, especially about abolishing high and unfair tariffs and easing export controls in advanced technology fields."
Ahead of the talks, both sides have indicated their willingness to reach an agreement. The People's Daily, the official newspaper of the Chinese Communist Party, remarked in a commentary the previous day, "China has consistently maintained a constructive stance and has sought to resolve issues through dialogue and negotiation, aiming to use this Stockholm meeting to enhance mutual understanding and build trust with the U.S. and strengthen cooperation." The state-run Xinhua News Agency also stated, "The negotiation efforts of both nations align with the expectations of the international community," adding, "While there may be challenges, seeking cooperation through dialogue is the only realistic solution."
On the same day, ahead of a meeting with the European Union (EU), President Trump remarked, "We are very close to an agreement with China. We have essentially reached an agreement with China, but we will have to see how it goes."
While it may be difficult for the two countries to resolve fundamental conflicts in this meeting, there is a high likelihood of achieving consensus to extend the tariff truce for another three months. The Hong Kong South China Morning Post (SCMP) quoted sources the previous day stating, "The U.S. and China are expected to express their views on major issues like concerns about China's overproduction in the third round of trade negotiations rather than securing a concrete breakthrough," and noted, "They are likely to extend the tariff elimination proposal set to expire on the 12th of next month by 90 days." Earlier, Secretary Bessent had also expressed a willingness to extend the tariff truce.
Meanwhile, ahead of the APEC leaders' meeting in Gyeongju in October, attention is being drawn to whether President Trump will visit China and whether a U.S.-China summit will take place. President Trump stated, "I will soon decide whether to visit China," indicating that the outcome of this meeting could impact future diplomatic schedules. Wendy Cutler, vice president of the Asia Society Policy Institute, assessed to Reuters, "This Stockholm meeting could serve as a stepping stone for President Trump's visit to China and the U.S.-China summit."