As China-US tariff truce talks drag on, what are prospects for a ‘big deal’ for Trump?

AUSTIN/BEIJING – The US and China face a tightening deadline to renew their tariff truce, which currently shields them from sky-high tariffs of 125 per cent and 145 per cent, respectively.

If not renewed by Aug 12, the world’s two largest economies will be back to waging their trade war, or what, in practical terms, amounts to a trade embargo as very little business can be transacted at such steep tariff rates.

The week began optimistically enough with a third round of bilateral talks in Stockholm, which was expected to pave the way for a smooth extension of the current arrangement.

This followed

an agreement in May

that suspended the triple-digit tariffs and allowed Chinese goods to enter the US with an additional 30 per cent tariff. US goods faced a lower 10 per cent tariff in China.

But that expectation was belied in Stockholm, with any extension of the truce becoming contingent on US President Donald Trump’s final approval.

Although Treasury Secretary Scott Bessent described the

July 28 and 29 talks in Stockholm

with Chinese Vice-Premier He Lifeng as “far-reaching, robust and highly satisfactory”, he also insisted that he had to take the discussions home to Washington for Mr Trump to sign off on.

At the Chinese end, Vice-Commerce Minister Li Chenggang said the two sides agreed to “continue pushing for a continued extension of the pause”.

Mr Bessent has presumably briefed the President by now, but Mr Trump has remained non-committal. All Mr Trump said at a July 30 press conference was: “We’re moving along with China... I think we’re going to have a very fair deal.”

Is the US keeping China hanging to extract some concessions? Or is the US stance a clue that it is Beijing that has a stronger hand in negotiations at this point?

Trade analysts in the US and Asia said there were signs that the negotiations had not gone as well as Washington had hoped.

“The real question is why Bessent didn’t just call him up, but instead wanted to wait to ask him in person,” said Mr William Reinsch, who analyses economics and international business at the Centre for Strategic and International Studies (CSIS) in Washington.

“That suggests there were other issues that came up in the Stockholm meetings that Bessent wanted to discuss directly with Trump, at greater length and with greater confidentiality than a call would permit.”

Mr Bessent is just doing what Mr He has probably been doing from the start, said Dr Alicia Garcia-Herrero, Hong Kong-based chief economist for Asia-Pacific at French investment bank Natixis.

“Saying that you cannot cut a deal but you need your boss always helps,” she added, noting that this is a handy way to leave room for further manoeuvres.

“But beyond the leverage gained, I do think negotiations are not going well, simply because China is emboldened with good data, especially on exports, and is telling the US that it does not need to rush,” she said.

In the first half of 2025, China’s exports rose by about 5.9 per cent year on year, supported by strong sales in South-east Asia, the European Union, Africa and India. These numbers helped offset declines in exports to the US.

To be sure, China’s exports to the US have dipped significantly in 2025 as a direct result of the US tariffs. Shipments of key items like electronics, machinery, furniture and toys dropped by between 29 per cent and 67 per cent in May compared with the previous year.

Overall, exports to the US fell 41 per cent between January and May, although there was a surge in June as Chinese exporters rushed to ship goods before the truce expires on Aug 12.

The silence following the Stockholm talks is puzzling because the bar for success was low, in that both just needed to agree to an extension of the truce, said Mr Stephen Olson, a former US trade negotiator, who is now a visiting senior fellow with the ISEAS – Yusof Ishak Institute in Singapore.

“The fact that negotiators failed to clear even that low bar suggests that a certain amount of theatrics is involved,” added Mr Olson. “It could simply be a matter of highlighting Trump’s authority and relevance.”

Or it could reflect that Beijing is “digging in its heels and being less compliant than the US expected”.

“China believes that it has considerable leverage and will not be willing to agree to a one-sided deal, as it did in the Phase One agreement reached during Trump’s first term,” Mr Olson said.

In 2020, China pledged to increase its purchases of US goods and services by at least US$200 billion (S$260 billion) over 2017 levels to ease trade tensions. It eventually bought about 60 per cent of the pledged amounts by end-2021.

In the lead-up to the Stockholm talks, the White House appeared to make conciliatory moves towards Beijing, giving the impression that China had a stronger hand this time around.

Mr Trump eased exports of Nvidia’s H20 chips to China and

cancelled a reported stopover by Taiwan President Lai Ching-te

in New York. The Americans did not allow a planned Pentagon visit by Taiwan’s Defence Minister Wellington Koo in June.

The Chinese, on the other hand, have been playing it cool. They have made no major concessions. And the pressure seems to be on the American side to carve out a win.

Asked about the biggest concession Beijing had made in trade talks so far, US Trade Representative Jamieson Greer seemed strangely subdued. “Well, I would say they blocked all of their rare earth magnets, and now we’re getting them,” he said.

Except that concession was from a previous round of talks in June. And although China has resumed the supply of rare earth materials, which are critical for products like electric vehicles, the shipments remain below the levels in 2024.

The People’s Daily, the mouthpiece of China’s ruling Communist Party, provided an indication that the country would stand its ground against the US in a July 29 editorial published even as the talks were under way.

“Differences between countries are inevitable; the key lies in how they are addressed,” the editorial said. “Sincerity, however, does not imply compromising on principles. Consultations have bottom lines, and cooperation must be grounded in clear principles.”

The sentiment was reflected in academic circles in China. The country does not bend to pressure, unlike Europe and Japan, said Professor Cui Hongjian from the Academy of Regional and Global Governance at Beijing Foreign Studies University.

“Beijing will continue to negotiate at its own pace based on its own strategy and objectives, and stick to its principle of reciprocity. That stance is quite clear and firm,” he added.

Big goals remain unachievable in the US-China talks, say experts.

China has made no real progress in meeting America’s longstanding demands, such as increasing its domestic consumption, reducing overcapacity and ending state subsidies, forced technology transfer and cyber attacks, noted Mr Reinsch in a CSIS commentary. “In turn, China’s demands of the United States – that we relax our technology and investment controls and stop taking ‘unfair’ actions against it – are not acceptable to the United States,” he said.

“That means a big deal is impossible, but a small one is not necessarily out of the question,” Mr Reinsch added.

“For Trump, the appearance of a win often matters more than the substance, so even a modest purchase agreement could be framed as a major victory.

“I think that is the most likely outcome – the usual drama, perhaps more yo-yoing, and then a minor deal, which will be overstated,” he said.

Dr Sun Chenghao, a fellow at Tsinghua University’s Centre for International Security and Strategy in Beijing, agreed that there is no clear path towards resolving the deeper issues between the two countries.

Among the more intransigent issues are America’s technology export controls, its objections to Chinese ownership of the wildly popular TikTok and its insistence that China must do more to curb trafficking of the deadly synthetic opioid fentanyl.

“The US strategy of bundling multiple issues together may improve Trump’s chances of declaring partial victories, but it also clearly adds to the overall complexity of the negotiations,” said Dr Sun.