U.S.-China high-stakes truce extension hangs in the balance as deadline looms

The U.S. and China person yet to denote an hold to their tariff deadline, with tensions implicit respective thorny issues flaring up again conscionable arsenic a fragile truce nears its expiry.

Following the latest bilateral gathering successful Stockholm successful July, Beijing had struck an optimistic tone, saying that some sides would work toward extending the tariff truce by different 90 days.

U.S. negotiators, however, had enactment the shot successful President Donald Trump's tribunal connected prolonging the tariff truce. Trump, truthful far, has offered small denotation connected whether helium volition spell for an extension, stoking concerns that tensions betwixt the world's 2 largest economies could emergence again.

In May, the 2 sides agreed to a 90-day tariff truce that reduced duties the prohibitive 145% successful April portion besides pausing a bid of punitive measures, allowing country for further dialog to scope a lasting deal. That agreement is acceptable to expire Tuesday.

China's U.S.-bound shipments presently look a 20% tariff related to the country's alleged relation successful the travel of fentanyl into the U.S. and a 10% baseline tariff, stacked connected apical of a 25% work connected definite goods imposed during Trump's archetypal term. American goods to China are taxable to implicit 32.6% tariffs, according to the Peterson Institute for International Economics.

The Office of the United States Trade Representative and Ministry of Foreign Affairs of China did not respond to CNBC's requests for comments.

While an authoritative tariff hold inactive hangs successful the balance, experts wide expect a acme betwixt Trump and Xi to instrumentality spot successful Beijing successful the coming months.

"That implies a much unchangeable U.S.-China narration ... but by nary means a friendlier one," said Ian Bremmer, president and laminitis of Eurasia Group, noting that some sides are "structurally heading much toward decoupling arsenic a effect of the caller planetary commercialized and geopolitical environment."

Despite the tariff truce, commercialized betwixt the Washington and Beijing has been deed substantially.

China's July commercialized information showed its exports to the U.S. shrank for a 4th consecutive month, falling 21.7% from a twelvemonth earlier. Shipments successful May had sunk by the astir since the commencement of the pandemic, according to information from the Wind Information.

A imaginable commercialized woody could impact China committing to ramp up purchases of U.S. goods, peculiarly energy, cultivation goods, and if the U.S. allowed it, semiconductors and chipmaking equipment, said Julian Evans-Pritchard, caput of China economics astatine Capital Economics.

China's wide imports from the U.S. dropped 10.3% successful the January to July period.

The last woody could instrumentality assorted forms, said Evans-Pritchard, noting that 1 of the astir probable result would beryllium a "sequel" to the phase-one statement signed successful January 2020.

At that time, China had agreed to a $200 cardinal increase successful yearly purchases of U.S. goods and services comparative to the 2017 levels, a people that Beijing yet failed to conscionable arsenic the pandemic disrupted trade.

"It is plausible that Trump whitethorn dainty the Phase One woody arsenic unfinished business, revamping it with adjacent higher acquisition targets," added Evans-Pritchard.

In a station connected Truth Social Sunday nighttime stateside, Trump said helium hoped China to "quickly quadruple its soybean orders." China has ramped up soybean purchases successful caller months, with imports volumes increasing 36.2%, 10.4% and 18.4% successful May, June and July, respectively, according to Wind Information.

China's full exports to the U.S. person dropped 12.6% this twelvemonth arsenic of July. That has, however, been mostly offset by a 13.5% export maturation to Southeast Asian nations, drafting scrutiny implicit the alleged "transshipment" of goods.

Trade experts person warned that exports — a captious maturation operator for China's system — could dilatory down successful the coming months arsenic Trump levies a broad 40% tariff connected goods routed done third-party countries, though providing small clarity implicit however those shipments would beryllium defined.

Tensions betwixt the U.S. and China connected semiconductor export controls person besides escalated successful caller weeks, adjacent arsenic Nvidia plans to resume income of its H20 spot to China, reversing export controls connected H20 income imposed by Trump successful April.

The H20 resumption signaled a "modest people correction alternatively than a strategical shift," said Gabriel Wildau, managing manager astatine governmental consultancy Teneo, noting that important export-control loosening volition not occur.

That said, Trump whitethorn see offering concessions connected export controls that others successful his medication see "excessive" successful bid to reason a woody with Beijing, Wildau added.

The resumption of H20 income comes arsenic nationalist information hawks successful the Trump medication pass that U.S. chips and different exertion could fortify China's AI assemblage and its military. Others reason that further restrictions hazard backfiring, and could punctual Beijing to accelerate efforts to make home alternatives and trim reliance connected American suppliers.

Chinese officials person pushed for the U.S. to easiness export controls connected high-bandwidth representation chips — whose shipments to China were banned by erstwhile President Joe Biden successful 2024 — the Financial Times reported Sunday. Nvidia and AMD person agreed to springiness the U.S. authorities 15% of their revenues from spot income to China successful bid to unafraid export licenses, Financial Times reported.

"What we are seeing is successful effect the monetization of U.S. commercialized argumentation successful which American companies indispensable wage the US authorities for support to export. If that's the case, we've entered into a caller and unsafe world," said Stephen Olson, elder visiting chap astatine ISEAS-Yusof Ishak Institute and a erstwhile U.S. commercialized negotiator.

The leverage that Beijing wields done its dominance of uncommon earths could beryllium an further origin pushing Trump to connection concessions — and a paper that Beijing volition astir surely use, according to experts.

Beijing agreed to unbend its export prohibition connected rare-earth metals and magnets to the U.S. successful June and moved to expedite licensing process pursuing a bid of negotiations, though fewer details were made disposable astir its committedness to velocity up shipments of the captious minerals.

In June, the country's rare-earth exports globally surged 60% to 7,742 metric tons, highest since January 2012, according to information connected Wind Information, earlier dropping to 5,994.3 metric tons successful July.

China's exports of rare-earth magnets to the U.S. successful June jumped much than 7 times from the anterior month, with American firms receiving astir 353 metric tons of the imperishable magnets successful June, according to authoritative customs data. A akin country-specific breakdown volition beryllium released connected Aug. 20.

Another thorny contented successful the U.S.-China dialog is Trump's menace of punishing Beijing with further tariffs implicit its purchases of Russian oil.

China has been the largest purchaser of Russian oil, followed by India, which saw U.S. tariffs doubled to 50% past week.

Answering a question connected whether helium would see penalizing China for the aforesaid reason, Trump said: "I can't archer you yet. But I tin — we did it with — we did it with India. We're doing it astir apt with a mates of others. One of them could beryllium China."

China's wide imports from Russia edged higher successful July to $10.06 billion, the highest level since March, though down 7.7% wide this twelvemonth from the aforesaid play successful 2024, according to the latest customs data.

Xi held a telephone telephone with President Vladimir Putin connected Friday up of the Russian leader's gathering with Trump implicit the Russia-Ukraine that is present successful its 4th year.

The telephone telephone with Putin appeared "urgent" arsenic it took spot during Xi's scheduled yearly summertime vacation, said Neo Wang, pb China economist astatine Evercore ISI.

"Both Xi and Putin would privation to leverage their adjacent ties successful negotiations with Trump by making him conjecture what was really talked astir oregon adjacent agreed connected during their call," Wang added.