US-China Tariff Truce Under Discussion in Stockholm

The second day of intense trade discussions between Chinese and American representatives is taking place in Stockholm, a neutral setting away from their respective homelands. With a ceasefire in the ongoing trade war set to expire within the next fortnight, the goal of both delegations is, it seems, to prolong this trade respite. Chinese Vice Premier He Lifeng and US Treasury Secretary Scott Bessent are spearheading their respective delegations in the Swedish government building, the chosen locale for these potentially game-changing discussions.

There hasn’t been any explicit disclosure of the discussed details from the meetings, which commenced on Monday. The unofficial information blackout is not unexpected, as delegates frequently maintain such negotiations under a cloak of discretion until constructive outcomes are achieved. Nevertheless, the fact that the two global superpowers are in dialogue offers a glimmer of potential progress.

It’s worth noting that these meetings are taking place in the backdrop of the recently announced US-EU trade legislation. The legislation has set tariffs on a majority of EU imports to the United States at a rate of 15 percent, while paradoxically, US goods are not subject to any tariffs when headed for the EU. This parallel narrative offers an intriguing subplot to the ongoing US-China negotiations.

The provisional détente between China and the US, which happen to be the world’s two largest economies, provides the context for these negotiations. The truce temporarily imposed a 30 percent tariff on Chinese goods entering the US, with a reciprocal 10 percent tariff on US goods bound for China. This bilateral arrangement came about in Geneva in May, a measure devised to deescalate the mutual imposition of exorbitant tariffs begun during the tenure of former US President Donald Trump.

Originally set up as a 90-day freeze period set to end on August 12th, the truce served as a respite from the unsustainable cycle of an escalating tariff warfare between the two economic superpowers. It prevented further implementation of unwieldy triple-digit tariffs on respective goods that had been threatened in the heat of the original trade conflict. This sort of protective buffer allowed both economies a chance to reassess and strategize without any immediate, additional financial pressures.

However, word around the water cooler suggests that the Stockholm negotiations’ primary purpose is to attempt a further delay to the termination date of the existing trade truce. This speculation was fanned by a report on the South China Morning Post published last Sunday. Unnamed sources cited therein estimated a possible extension, by both Washington and Beijing, of their tariff ceasefire by another 90 days.

At the same time, President Trump has been forthcoming with threats to impose increased tariffs on various countries from this week onwards if they decline to establish trade deals with the US. Brazil and India are among the countries that have been explicitly warned, with 50 percent tariffs looming ominously should they not agree to terms favorable to the US.

In parallel to these threats, the US has publicised preliminary trade agreements with five countries: Britain, Vietnam, Japan, Indonesia, and the Philippines. The announcement of these deals, in conjunction with a comprehensive one with the EU comprised of 27 nations, brings the total number of recent US trade deals to six.

China’s official standpoint, however, emphasises a preference for mutual respect in its commerce with the US. China’s foreign ministry spokesman, Guo Jiakun, posits that open dialogue is vital to diminish misinterpretations between the two countries. This belief was expressed following the previous China-US trade talks held in the English capital, London.

Some analysts have expressed concern about the substance of these trade deals, suggesting they may be more a show of power than anything else. Shallow on details and high on theatrics, the agreements have drawn criticism for overpromising and possibly under delivering in the long run.

Stephen Innes, managing partner at SPI Asset Management, a consultancy firm that specialises in currency and commodities advising, shares this sentiment. According to him, the proposed extension of the temporary trade truce could further strengthen the perception that these treaties are primarily theatrical rather than substantive.

This prolonged trade ceasefire could even potentially pave the way for a friendly encounter between US President Trump and President Xi Jinping of China later in the year. This symbolic meeting may very well be another ‘risk-on’ tactic to pacify and allure the market. However, until firm details emerge from these confidential negotiations, the world can only speculate and wait with bated breath.