‘We really sort of made a deal…’: US close to trade agreement with China, says Trump

Donald Trump said the US is close to a trade deal with China. This comes after the US signed a trade deal with the EU. "We're very close to a deal with China. We really sort of made a deal with China, but we'll see how that goes," Trump told reporters before his meeting with von der Leyen, providing no further details.

Senior US and Chinese negotiators convened in Stockholm to address longstanding economic disputes between the two powers. Led by US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, the discussions aim to extend a truce on tariffs that have heightened tensions in the trade war.

The current talks come as China faces an August 12 deadline to finalise a durable tariff agreement with the Trump administration. Without a resolution, global supply chains risk chaos from potential tariffs exceeding 100 per cent. Analysts predict a likely 90-day extension of the current tariff truce, which could set the stage for a meeting between President Trump and President Xi Jinping later in the year.

The Stockholm discussions are significant as they represent "the first meaningful round of US-China trade talks," according to Bo Zhengyuan, a Shanghai-based partner at China consultancy firm Plenum. Previous meetings focused on reducing retaliatory tariffs and restoring the flow of goods like rare earth minerals but have not tackled broader economic concerns.

A recent agreement with the European Union set a precedent, with the EU accepting a 15 per cent tariff on exports to the US and committing to $600 billion in US investments. However, a similar breakthrough is not expected with China. The US administration is poised to impose new sectoral tariffs impacting semiconductors and pharmaceuticals among other products.

The potential extension of the tariff truce is seen as a strategic move to prevent escalation and possibly facilitate a Trump-Xi meeting in late October or early November. Wendy Cutler, vice president at the Asia Society Policy Institute, noted, "The Stockholm meeting is an opportunity to start laying the groundwork for a Trump visit to China."

In the background of these talks is the US's call for China to shift its economic model from exports to domestic consumer demand. This would require addressing a protracted property crisis and boosting social safety nets to encourage consumer spending, a move US policymakers have advocated for decades. Michael Froman, former US trade representative, questioned, "Can we effectively use tariffs to get China to fundamentally change their economic strategy? That remains to be seen."

China is likely to request a reduction of multi-layered US tariffs currently totaling 55% on most goods. The tariffs, alongside export controls, have been a point of contention, with China arguing that easing them would help reduce the US trade deficit.

As talks progress, the potential outcomes remain crucial not only for US-China relations but also for the stability of global markets. With ongoing speculation about a Trump-Xi meeting, the Stockholm discussions are critical in setting the tone for future negotiations.