U.S.-China tariff truce: These are the big sticking points in deal talks
The U.S. and China agreed to extend the tariff truce for another 90 days — major sticking points are holding up a deal, and both sides are planning a leaders’ summit later this year to break the impasse. Hours before the higher tariffs were set to kick in, the two countries on Monday announced the tariff truce will be extended to mid-November. The extension was widely expected after the latest round of bilateral talks in Stockholm in late July. Reaching a durable deal, however, will be a feat that requires prolonged and contested “bargaining-like negotiations,” said Xinbo Wu, director of the Centre for American Studies at Fudan University in Shanghai. Beijing will likely hold firm on its priorities, such as fully removing tariffs on its goods, easing technology curbs and lifting sanctions on Chinese entities, Wu said. For Trump, narrowing the trade deficit remains a top priority — a demand that could push China to boost purchase commitments and services imports, he added. U.S. and Chinese officials have also been working to arrange a summit between U.S. President Donald Trump and his counterpart Xi Jinping in the coming months, which will likely take place in Beijing, experts said. The Office of the United States Trade Representative and Ministry of Foreign Affairs of China did not respond to a request for comments on a timeline. “The tariff extension was necessary for trade negotiations to continue while [the] planning for a possible summit continues through diplomatic channels,” said Jeff Moon, president at consultancy China Moon Strategies and a former assistant U.S. trade representative for China. There will be “additional tariff extensions at least until the summit date,” he added. But although the U.S. and China may eventually sign a final trade deal, it may not address issues central to the trade war — namely, China’s industrial overcapacity, which is driven by heavy state subsidies, Moon said. “This unsatisfactory result ensures that the trade war will grind ahead into the indefinite future,” Moon added. The Chinese Ministry of Finance said in a notice that both countries will continue to pause 24% tariffs on each other’s goods for 90 days while retaining a 10% levy. In separate statements, the Chinese Ministry of Commerce said it would extend the suspension of restrictions on companies targeted in its unreliable entity list and export control list for another 90 days. In May, the two sides agreed to a 90-day tariff truce that rolled back the prohibitive 145% duties in April and paused other punitive measures, allowing negotiators more time to pursue a lasting deal. Chinese exports to the U.S. would continue to face an average 54.9% tariffs, according to the Peterson Institute for International Economics , while U.S. shipments to China face average levies of 32.6%. Trade deficits Trump’s stated goal has been to end the U.S. trade deficit and bring manufacturing onshore, a target that could lead to a huge boost in the Chinese buying of American goods and investments in America. In a post on Truth Social Sunday night , Trump said he hopes China will quadruple its soybean orders. “Trump is reminding China that agriculture is a top American priority and that he expects a trade deal to include Chinese purchases,” Moon said. As part of the phase one agreement signed in 2020 , China had agreed to a $200 billion increase in annual purchases of U.S. goods and services, up from 2017’s $186 billion, ending a nearly two-year tariff war. Beijing, however, didn’t follow through on that agreement as the Covid-19 pandemic hit. China has ramped up soybean purchases in recent months, with imports volumes growing 36.2%, 10.4% and 18.4% in May, June and July, respectively, according to Wind Information. Another point of contention is the U.S. targeting of Chinese transshipments, which could weigh on China’s export momentum in the coming months. Trump imposed a blanket 40% tariff on goods routed through third-party countries before reaching the United States, although it’s not clear how those shipments would be defined. Tech export controls Technology export controls have been top of the agenda in bilateral talks, as Trump struck a deal with Nvidia and AMD to share part of their revenue from sales to China in exchange for permissions to sell to the country. The Chinese government, however, has reportedly been urging local companies to avoid using Nvidia’s H20 chips. The report came as Beijing said Nvidia’s chips were not technologically advanced nor environmentally safe — an allegation that Nvidia has denied. Chinese officials have pushed the U.S. to ease export controls on chips critical for artificial intelligence as part of a trade deal, the Financial Times reported Sunday. National security hawks in the Trump administration have warned that U.S. chips and other technology could strengthen China’s AI sector and its military. Others have argued that more restrictions could backfire and prompt Beijing to step up efforts to develop domestic alternatives and reduce reliance on American suppliers. “By easing restrictions on sales of advanced computer chips to China, Mr. Trump has undercut a tool that limited China’s ability to compete with the United States in artificial intelligence and other new technologies,” Eswar Prasad, an economics professor at Cornell University and former head of IMF’s China division, said in a recent commentary for The New York Times. Critical minerals The leverage that Beijing wields through its dominance of rare earths could be another factor that pushes Trump to offer concessions, including those on export controls, according to experts. China dominates the mining and processing of rare earth minerals, which are crucial for U.S. high-tech industrial firms. China’s grip on rare earths is seen as a key reason behind the recent easing of restrictions on Nvidia’s H20 chip exports to the country, according to Paul Triolo, partner at DGA-Albright Stonebridge Group, who expects Beijing to press for broader tech relaxations in upcoming negotiations. Beijing agreed to relax its export ban on rare-earth metals and magnets to the U.S. in June and moved to expedite licensing process after a series of negotiations, although few details were made available about its commitment to speeding up shipments of the critical minerals. In June, the country’s rare-earth exports globally surged 60% to 7,742 metric tons, the highest since January 2012, according to data on Wind Information, before dropping to 5,994.3 metric tons in July. China’s exports of rare-earth magnets to the U.S. in June jumped more than seven times from the prior month, with American firms receiving about 353 metric tons of the permanent magnets in June, according to official customs data. A similar country-specific breakdown for July will be released on Aug. 20.
Source – Middle east monitor
