US, China tariff truce holds for now but US says Trump has final say

Reuters

3 days ago

STOCKHOLM, July 29 (Reuters) - U.S. and Chinese officials agreed to seek an extension of their 90-day tariff truce on Tuesday, following two days of talks in Stockholm aimed at defusing an escalating trade war between the world's two biggest economies that threatens global growth.
No major breakthroughs were announced, and U.S. officials said it was up to President Donald Trump to decide whether to extend a trade truce that expires on August 12 or potentially let tariffs shoot back up to triple-digit figures.
After months of threatening high tariffs on trading partners, Trump has secured trade deals with the European Union, Japan, and others, but China's powerhouse economy and grip on global rare earth flows make these talks particularly complex.
Both sides in May walked back from imposing triple-digit tariffs on each other in what would have amounted to a bilateral trade embargo. But global supply chains and financial markets could face renewed turmoil without an agreement.
Trump will have the final say on whether to prolong a truce, U.S. Treasury Secretary Scott Bessent told reporters.
Another 90-day extension is one option, U.S. Trade Representative Jamieson Greer added.
"We'll report back to him the process we had here. We had constructive meetings for sure, to go back with the positive report. But the extension of the pause, he'll decide," Greer said after talks at Rosenbad, the Swedish prime minister's office in central Stockholm.
Bessent said there would likely be another meeting between U.S. and Chinese officials in about 90 days, and the agreements on the flow of Chinese rare earths were becoming more refined after previous talks in Geneva and London.
"There was good personal interaction being built up, good, mutual respect. I think we understand their agenda much better," he said.
Underlining the stakes, the International Monetary Fund on Tuesday raised its global growth forecast but flagged a potential rebound in tariff rates as a major risk.
China's top trade negotiator Li Chenggang said both sides fully recognized the importance of maintaining a stable and sound economic and trade relationship.
"The Chinese and U.S. economic and trade teams will maintain active communication, exchange views on economic and trade issues in a timely manner, and continue to promote the stable and healthy development of bilateral economic and trade relations," said Li.
The talks could pave the way for a meeting between Trump and Chinese President Xi Jinping later in the year, though Trump denied going out of his way to seek one and U.S. officials said the topic was not discussed.
The Stockholm meetings also included a lengthy discussion on the U.S. and Chinese economies, with Greer and Bessent emphasizing the need for China to shift away from a state-led, export-driven manufacturing economy to one powered by increased consumer demand, which would help U.S. exports.
The Stockholm talks follow Trump's biggest trade deal yet with the European Union on Sunday for a 15% tariff on most EU goods exports to the United States, and a deal with Japan.
That agreement has brought a measure of relief to the EU but also frustration and anger, with France denouncing the deal as a "submission" and Germany, Europe's largest economy, warning of "significant" damage.
China can exercise a degree of leverage with its grip on the global market for rare earths and magnets, used in everything from military hardware to car windshield wiper motors, analysts say.
Unlike the EU, it does not rely on the United States for security ties and can let trade talks play out for several more months, Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, told Reuters.
"China is well aware of its strong negotiating position, as could clearly be seen in the temporary escalation observed in April," he said.
"But over Europe always hangs the Damocles sword of the U.S. withdrawing its security guarantee, and that is why the EU did not escalate the situation like China did."
Previous U.S.-China trade talks in Geneva and London in May and June focused on bringing U.S. and Chinese retaliatory tariffs down from triple-digit levels and restoring the flow of rare earth minerals halted by China and Nvidia's (NVDA.O), opens new tab H20 AI chips, and other goods halted by the United States.
Among broader economic issues, Washington complains that China's state-led, export-driven model is flooding world markets with cheap goods, while Beijing says U.S. national security export controls on tech goods seek to stunt Chinese growth.
Separately, China's industry minister on Tuesday met with a delegation of U.S. businesses, including Apple (AAPL.O), opens new tab, in Beijing, and pledged to uphold fair and open market competition and provide support and services for foreign enterprises.