Top US and Chinese officials are meeting Monday in Stockholm to try to extend their fragile tariff detente beyond a mid-August deadline and explore broader steps to ease trade tensions.

The Stockholm negotiations come just days after Trump secured his largest trade deal to date with the European Union. Under that agreement, most EU goods exports to the U.S., including automobiles, will face a 15% tariff. In return, the EU has committed to purchasing $750 billion in American energy and making $600 billion in U.S. investments over the coming years.

Meanwhile, Washington and Beijing are expected to extend their current tariff truce by another three months, according to a report by the South China Morning Post, citing unnamed sources familiar with the talks.

One source told the newspaper that neither side will impose new tariffs during the extension period. The existing pause in tariff escalation, originally set to expire on August 12, has helped prevent further deterioration in trade relations as both sides continue negotiating over broader economic and geopolitical disputes.

What’s on the platter at Monday’s meet?

The talks, led by Chinese Vice Premier He Lifeng and US Treasury Secretary Scott Bessent, mark the third high-level meeting in less than three months. The agenda includes negotiating the duration of the current tariff freeze and addressing contentious issues such as US tariffs linked to fentanyl trafficking and China’s continued purchases of sanctioned Russian and Iranian Oil.

If no agreement is reached, global supply chains could once again be thrown into disarray, as U.S. tariffs are set to revert to punitive triple-digit levels, effectively amounting to a bilateral trade embargo.

Also Read: US and China to talk tariffs. Hopes are rising that truce lasts.

Still, Bessent said in recent days that the US would use this week’s huddle to work out what’s “likely an extension” to the current tariff pause, adding: “I think trade is in a very good place with China.”

Any progress in this week’s US-China negotiations could lay the groundwork for a potential meeting between Donald Trump and Chinese President Xi Jinping, possibly timed with a major summit in South Korea later this year. Xi extended an invitation for Trump and First Lady Melania Trump to visit China during a phone call last month, though no date has been confirmed.

Sweden’s role as host for the talks became clearer after Swedish Finance Minister Elisabeth Svantesson revealed that both U.S. and Chinese officials approached her during the recent G20 gathering in South Africa to propose Sweden as a neutral ground for the negotiations. The meetings in Stockholm mark a quiet but significant moment in the ongoing efforts to manage trade tensions and avoid a renewed tariff escalation.

US Ambassador David Perdue, who arrived in Beijing in May, presented his credentials to Xi on Friday, China’s envoy to the US posted on X.

At the core of the ongoing negotiations between the world’s two largest economies lies a high-stakes standoff over critical technologies. Beijing’s tight control over rare-earth magnets vital for electric vehicles, wind turbines, and advanced military systems clashes with Washington’s sweeping export restrictions on cutting-edge semiconductors crucial to artificial intelligence development.

Reducing the 20% fentanyl tariffs Trump imposed over US claims Chinese companies supply chemicals used to make the illegal drug is also a high priority for Beijing, Eurasia Group analysts wrote in a note last week, citing recent meetings with Ministry of Public Security officials. Ministry officials travelled to the Geneva talks in May and will likely go to Stockholm, the analysts wrote, as reported by Bloomberg.

Also Read: What is fentanyl crisis?

While China has denied it is responsible for the flow of the deadly drug, last month it tightened controls over two chemicals that can be used to make the opioid. Earlier this month, Trump praised those moves. “China has been helping out,” he told reporters. “We’re talking to them and they’re making big steps.”

For the US, the recent Chinese actions aren’t enough, as such moves were required to comply with United Nations measures, according to a person familiar with the trade talks. Chances of reducing the 20% tariff in this round of talks are very slim, added the person who asked not to be identified, discussing sensitive matters, while noting everything could change on Trump’s whim, Bloomberg reported.

China would be willing to cooperate more on fentanyl, said Sun Chenghao, a professor at Tsinghua University in Beijing, but the US would have to remove the related tariffs, stop blaming Beijing for what it sees as a US domestic problem and provide concrete evidence of crimes.

The US business community remains hopeful for progress, with Sean Stein, president of the US-China Business Council, telling Bloomberg TV that movement on fentanyl presents the “biggest opportunity” in talks.

“That then lowers tariffs on the US side, which then opens the door for China to lower tariffs that lets us sell agriculture, lets us sell airplanes, lets us sell automobiles, that let’s us sell energy,” he said.

Oil Purchases

As US Treasury Secretary Scott Bessent opened the latest round of trade talks, he signalled a broader negotiating agenda including Beijing’s ongoing purchases of sanctioned Russian and Iranian oil. But China has made clear it won’t entertain US pressure on that front.

“China won’t play along,” warned Lv Xiang, a US affairs expert at the Chinese Academy of Social Sciences, speaking to state-run Global Times, firmly rejecting any effort to use China as leverage against Russia’s economy.

At the same time, energy trade between the U.S. and China has sharply declined. In June, Chinese imports of American crude oil, LNG, and coal dropped to nearly zero, the first time in nearly three years, with tariffs of 10–15% imposed by Beijing in February dampening purchases. The energy gap highlights how geopolitical friction is deepening the divide, even as negotiators seek to keep broader trade tensions from reigniting.

Xi’s government has begun rolling back some of its other retaliatory measures since the two sides met last month in London. Crucially, Beijing has boosted shipments of rare earth magnets, while the US relaxed restrictions on sales of less-advanced semiconductors to China.

Also Read: Oil Rises on Strong Chinese Data, US Moves on War in Ukraine

In another potential goodwill gesture, as the Sweden talks were announced this month, China revealed it had suspended an antitrust investigation into the local unit of US chemical manufacturer DuPont de Nemours Inc.

China’s colossal manufacturing output will also be a talking point for Trump’s team.

I think trade is in a very good place with China.

Bessent said the US hopes to see China “pull back on some of this glut of manufacturing that they’re doing and concentrate on building a consumer economy.”

(With inputs from Bloomberg)