MNI: China Likely To Insist U.S. Tariffs Drop To 10%- Advisors

China will continue insisting that the U.S. drops tariffs to its baseline 10% in what are likely to be extended negotiations beyond the current Aug 12 deadline, policy advisors told MNI, adding that while this will be a tough sell a potential meeting between the two countries’ leaders later this year might set the scene for a deal including Chinese purchases of American goods.

Following the conclusion of the third round of trade talks in Stockholm this week, China and the U.S. agreed to continue working toward extending the 90-day truce on the 24% reciprocal tariff due to expire next month. China also continues to hope for further loosening of high-tech export restrictions and for the removal of a 20% levy linked to fentanyl. 

The Stockholm talks were marked by a pragmatic attitude from both sides, said Liu Ying, research fellow at the Chongyang Institute for Financial Studies, adding that an in-person meeting later in 2025 between China’s Xi Jinping and U.S. President Donald Trump might clinch a deal based on a lower tariff rate. However, she acknowledged that any comprehensive agreement in the short-term could be very challenging given the obvious differences over key issues, noting the U.S.’s renewed tariff threat against Russian oil purchases which comes on top of its long-standing criticism of Chinese overcapacity.

A former official asking for anonymity told MNI that China thinks Trump might agree to a 10% tariff combined with big purchases of American goods in a meeting with Xi , but he added that a more likely deal would be for a 34% tariff and the removal of the 20% fentanyl levy, an outcome which he said would still be “quite a success” for Beijing.

A meeting of the two leaders, probably on the sidelines of the 2025 APEC summit in South Korea from Oct 28, would be a likely precursor to a trade deal, he said. 

Should tariffs be cut to 10%, China could commit to increase imports of U.S goods by around USD800 billion, with USD500 billion of oil and about USD300 billion of agricultural products, he said. 

MARKET ACCESS

The Stockholm talks saw detailed exchanges on the two countries' macroeconomic policies, advisors said. (See MNI: China Advisors Positive Towards Stockholm Talks With U.S.)

China is likely to focus more on boosting consumption in its next Five-year Plan, especially in the service sector, which is also an inevitable requirement for China's economic transformation, said Liu, noting the acceleration in the opening up of the service industry, after restrictions on foreign investment in manufacturing were lifted.

“While China is shortening its negative list for foreign investment, the U.S. should reciprocally open its market for China’s high-tech and high-end manufacturing products,” said Liu.

Wang Dong, professor and executive director of the Institute for Global Cooperation and Understanding, said China is likely to make commitments in line with its own development strategy, which could include further relaxation of restrictions on foreign equity holdings in the service sector as well as emphasising fair treatment down to the local government level.

HIGH-TECH EASING

There is room for further negotiation over relaxing U.S. high-tech restrictions in exchange for Chinese moves to expedite rare earth exports, Wang said. China could expand the scope of civilian rare earth exports as well as extend the period of export licenses, though this would require reciprocal moves by the U.S., such as further lifting licensing restrictions on the export of some Electronic Design Automation software for producing chips, he added.

However, the former official said negotiating space in this area is limited, as the U.S. only intends to lift restrictions on specific items, instead of discussing the entire export control list. “The H20 chip can meet most of the needs of Chinese companies at present,” he added.