Stockholm, Jul 28 (AP) Top trade officials from China and the United States launched a new round of talks on Monday in a bid to ease tensions over tariffs between the world's two biggest national economies.

US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng were meeting at the offices of Sweden's prime minister for two days of talks that Bessent has said will likely lead to an extension of current tariff levels. But other possible outcomes will be scrutinised.

Analysts say the talks could set the stage for a possible meeting between US President Donald Trump and Chinese President Xi Jinping later this year.

The US-China trade talks are the third this year, nearly four months after Trump upended global trade with his sweeping tariff proposals, including an import tax that shot up to 145 per cent on Chinese goods. China retaliated with tariffs reaching 125 per cent against US goods, sending global financial markets into a temporary tailspin.

Extending a 90-day pause The Stockholm meeting, following similar talks in Geneva and London, is set to extend a 90-day pause on those tariffs. During the pause, US tariffs have been lowered to 30 per cent on Chinese goods, and China set a 10 per cent tariff on US products.

The Trump administration, fresh off a deal on tariffs with the European Union, wants to reduce a trade deficit of USD 904 billion overall last year, including a nearly USD 300 billion trade deficit with China.

China's Commerce Ministry said last week that the “consultations” would raise shared concerns through the principles of “mutual respect, peaceful coexistence and win-win cooperation.” The talks with the Chinese are part of a flurry of US trade negotiations set off by Trump's arm-twisting “Liberation Day” tariffs against dozens of countries. Since then, some talks have borne fruit in reaching deals. Others have not.

Without an extension by Aug 12, the tit-for-tat US-China tariffs could snap back to the triple-digit levels seen before the 90-day pause reached in Geneva. Many other countries — including some developing ones that depend on exports to the US — face a Friday deadline, as the Trump administration has said letters will go out beforehand with set rates.

Critics say Trump's tariffs penalise Americans by forcing US importers to shoulder the costs or pass them to consumers through higher prices.

A suggestion of stability On Friday, Trump told reporters “we have the confines of a deal with China” — just two days after Bessent told MSNBC that a “status quo” had been reached between the two sides.

While the Chinese side has offered little guidance about the specifics of its aims in Stockholm, Bessent has suggested that the situation has stabilized to the point that China and the US can start looking toward longer-term balance between their economies.

For years, since China vaulted into the global trading system about two decades ago, the United States has sought to press leaders in Beijing to encourage more consumption in China and wrest greater market access to foreign-made — including American — goods.

Other sticking points in the relationship include overcapacity in China — by far the world's largest manufacturer — and concerns about whether Beijing is doing enough to control chemicals used to make fentanyl, analysts say.

In Stockholm, the Chinese will likely demand the removal of a 20 per cent fentanyl-related tariff that Trump imposed earlier this year, said Sun Yun, director of the China program at the Washington-based Stimson Centre.

Looking long-term Experts say long-term progress in the US-China trade relationship will hinge on structural changes. Those include increased manufacturing in the United States, which is part of Trump's ambition. On the Chinese side, that could involve a reduction of excess Chinese production in many industries, including electric vehicles and steel, and increased Chinese consumer spending to ease imbalances in China's export-driven economy.

Sean Stein, president of the US-China Business Council, said Stockholm could be the first real opportunity for the two governments to address structural reform issues, including market access in China for US companies.

Businesses will read how the two sides characterize the outcome in Stockholm and look for clues about a possible Trump-Xi summit, because any real deal will depend on the two presidents meeting, Stein said.

Bessent has also said the Stockholm talks could address Chinese purchases of Russian and Iranian oil. (AP) RD RD

Tariff negotiations may extend a bilateral tariff pause and frame talks on market access and structural trade reforms. High-level trade negotiations in Stockholm focus on managing and potentially extending a bilateral tariff pause, maintaining lower applied tariff rates while considering formal extension to avoid reinstatement of higher tariffs. Talks address reciprocal limits on retaliation, procedures for notifying affected importers of rate changes, and structural issues such as market access, Chinese consumption rebalancing, US manufacturing incentives, and targeted tariff removals tied to specific policy concerns.