Now that trade deals have been clinched with the European Union and Japan, the U.S. looks to focus on China as the world’s two biggest economies prepare for high-stakes talks.

Negotiations between Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are scheduled to start on Monday in Stockholm.

That comes as a trade truce between the two sides is due to end Aug. 12, though they are reportedly going to extend the deadline by 90 days.

U.S. deals with Japan and the EU could offer a blueprint for China. The EU will invest $600 billion in the U.S., buy $750 billion of American energy products and purchase “vast amounts” of weapons, according to Trump.

It comes a week after a similar agreement with Japan, which vowed to invest $550 billion in key U.S. industrial sectors. Both the EU and Japan will face a 15% tariff on most of their exports to the U.S.

Bessent highlighted the $550 billion pledge as a key reason the U.S. and Japan were able to settle on a levy that was lower than the 25% rate Trump had threatened earlier.

“They got the 15% rate because they were willing to provide this innovative financing mechanism,” he told Bloomberg TV on Wednesday, when asked if other countries could get a similar rate.

Similarly, Trump had hinted that the EU would have to “buy down” the threatened tariff rate of 30% and pointed to the Japan deal.

But talks with Beijing may be tougher.

“When Japan broke down and made a deal the EU had little choice,” Jamie Cox, managing partner for Harris Financial Group, said in a note on Sunday. “The biggest piece in the trade deal puzzle still remains, and the Chinese are unlikely to be as willing to fold.”

Without a lasting agreement between the U.S. and China, tariffs could soar back to prohibitively high levels that would effectively cut off trade. In April, Trump had set tariffs on China at 145%, prompting Beijing to retaliate with its own levy of 125%.

Meanwhile, the U.S. has reached deals elsewhere in Asia, with the Philippines and Indonesia facing 19% tariffs while Vietnam has a 20% duty. That’s as Trump seeks to discourage the trans-shipment of Chinese goods via other countries in the region.

Any pledges of investment in the U.S. also come as Trump’s tariffs face legal challenges, with a court hearing scheduled Thursday on whether the president has authority under the International Emergency Economic Powers Act to impose wide-ranging duties.

On Sunday, European Commission President Ursula von der Leyen confirmed that the EU’s $750 billion in U.S. energy purchases would come over the next three years, meaning they will happen while Trump is in office.

But U.S. tariffs could be invalidated before any money is spent, and Wall Street is skeptical that Japan will fully deliver on a target that isn’t a binding commitment.

Analysts at Piper Sandler have concluded that Trump’s tariffs are illegal and noted that the $550 billion Japanese investment comes with few concrete details.

“Our trading partners and major multinationals know Trump’s tariffs are on shaky legal ground,” they wrote. “Therefore, we find it hard to believe many of them are going to make massive investments in the US they would not have otherwise made in response to tariffs that may not last.”

U.S. and Chinese flags and a “tariffs” label are seen in this illustration created on April 10, 2025. REUTERS/Dado Ruvic/Illustration/File Photo Purchase Licensing Rights , opens new tab

Item 1 of 2 U.S. and Chinese flags and a “tariffs” label are seen in this illustration created on April 10, 2025. REUTERS/Dado Ruvic/Illustration/File Photo

Summary

Companies Third round of US-China talks to be held in Stockholm on Monday

Aim is to extend August 12 deadline, avoiding sky-high tariffs

Latest talks to focus on longstanding economic disputes

STOCKHOLM, July 27 (Reuters) – Senior U.S. and Chinese negotiators meet in Stockholm on Monday to tackle longstanding economic disputes at the centre of a trade war between the world’s top two economies, aiming to extend a truce keeping sharply higher tariffs at bay.

China is facing an August 12 deadline to reach a durable tariff agreement with President Donald Trump ‘s administration, after Beijing and Washington reached a preliminary deal in June to end weeks of escalating tit-for-tat tariffs.

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Without an agreement, global supply chains could face renewed turmoil from duties exceeding 100%.

The Stockholm talks, led by U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, come right on the heels of Trump’s biggest trade deal yet , with the European Union accepting a 15% tariff on its goods exports to the U.S. and agreeing to make significant EU purchases of U.S. energy and military equipment.

That deal struck with European Commission President Ursula von der Leyen on Sunday in Scotland also calls for $600 billion in investments in the U.S. by the EU, Trump told reporters.

No similar breakthrough is expected in the U.S.-China talks, but trade analysts said that another 90-day extension of a tariff and export control truce struck in mid-May was likely.

An extension of that length would prevent further escalation and help create conditions for a potential meeting between Trump and Chinese President Xi Jinping in late October or early November.

Spokespersons for the White House and U.S. Trade Representative’s office did not immediately respond to requests for comment on a South China Morning Post report quoting unnamed sources as saying the two sides would refrain from introducing new tariffs or take other steps that could escalate the trade war for another 90 days.

Trump’s administration is poised to impose new sectoral tariffs that will impact China, including on semiconductors, pharmaceuticals, ship-to-shore cranes and other products.

“We’re very close to a deal with China. We really sort of made a deal with China, but we’ll see how that goes,” Trump told reporters before his meeting with von der Leyen, providing no further details.

DEEPER ISSUES

Previous U.S.-China trade talks in Geneva and London in May and June focused on bringing U.S. and Chinese retaliatory tariffs down from triple-digit levels and restoring the flow of rare earth minerals halted by China and Nvidia’s (NVDA.O) , opens new tab H20 AI chips and other goods halted by the United States.

So far, the talks have not delved into broader economic issues. They include U.S. complaints that China’s state-led, export-driven model is flooding world markets with cheap goods, and Beijing’s complaints that U.S. national security export controls on tech goods seek to stunt Chinese growth.

“Stockholm will be the first meaningful round of U.S.-China trade talks,” said Bo Zhengyuan, Shanghai-based partner at China consultancy firm Plenum.

Trump has been successful in pressuring some other trading partners, including Japan, Vietnam and the Philippines, into deals accepting higher U.S. tariffs of 15% to 20%.

Analysts say the U.S.-China negotiations are far more complex and will require more time. China’s grip on the global market for rare earth minerals and magnets, used in everything from military hardware to car windshield wiper motors, has proved to be an effective leverage point on U.S. industries.

TRUMP-XI MEETING?

In the background of the talks is speculation about a possible meeting between Trump and Xi in late October.

Trump has said he will decide soon whether to visit China in a landmark trip to address trade and security tensions. A new flare-up of tariffs and export controls would likely derail any plans for a meeting with Xi.

“The Stockholm meeting is an opportunity to start laying the groundwork for a Trump visit to China,” said Wendy Cutler, vice president at the Asia Society Policy Institute.

Bessent has already said he wants to work out an extension of the August 12 deadline to prevent tariffs snapping back to 145% on the U.S. side and 125% on the Chinese side.

Still, China will likely request a reduction of multi-layered U.S. tariffs totaling 55% on most goods and further easing of U.S. high-tech export controls, analysts said. Beijing has argued that such purchases would help reduce the U.S. trade deficit with China, which reached $295.5 billion in 2024.

China is currently facing a 20% tariff related to the U.S. fentanyl crisis, a 10% reciprocal tariff, and 25% duties on most industrial goods imposed during Trump’s first term.

Bessent has also said he would discuss with He the need for China to rebalance its economy away from exports toward domestic consumer demand. The shift would require China to put an end to a protracted property crisis and boost social safety nets to encourage household spending.

Michael Froman, a former U.S. trade representative during Barack Obama’s administration, said such a shift has been a goal of U.S. policymakers for two decades.

“Can we effectively use tariffs to get China to fundamentally change their economic strategy? That remains to be seen,” said Froman, now president of the Council on Foreign Relations think tank.

Reporting by David Lawder; Additional reporting by Laurie Chen in Beijing; Editing by Helen Popper and Marguerita Choy

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1.

Tariff handshake: The United States and European Union reached a trade agreement on Sunday (Monday AEST) setting a 15% tariff on most EU goods, including automobiles, staving off a trade war that could have sent shock waves through the global economy. US President Donald Trump and European Commission President Ursula von der Leyen announced the deal after meeting at Trump’s golf resort in Turnberry, Scotland. Trump said the EU would buy US$750 billion ($1.1 trillion) in US energy, invest an additional US$600 billion in America, and make major purchases of military equipment. Steel and aluminium tariffs remain at 50%. Von der Leyen said the deal “will bring stability” and “predictability.” Trump had threatened a 30% duty if no agreement was reached by 1 August, while the EU had prepared retaliatory tariffs on €93 billion worth of American goods if talks had failed. (WSJ)(Reuters)(Bloomberg)

2.

Tariff extension: Beijing and Washington are expected to extend their tariff truce by another 90 days at trade talks beginning Monday in Stockholm, the South China Morning Post reported, citing unnamed sources on both sides of the negotiations. The current suspension, agreed in May, is set to expire on 12 August. At the start of the meeting with European Commission President Ursula von der Leyen in Scotland, Trump said: “We’re very close to a deal with China. We really sort of made a deal with China, but we’ll see how that goes.” One source told SCMP the extension would include a commitment by both sides not to impose additional tariffs or escalate the trade war. The talks, led by US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, are addressing longstanding disputes, with China expected to raise US fentanyl-related tariffs and the US set to press Beijing on industrial overcapacity and tech restrictions. (Capital Brief)(SCMP)(Bloomberg)(Reuters)(CNN)

3.

YouTube threat: Google is threatening to sue the Australian government if YouTube is included in a social media ban for children under the age of 16, due to come into effect in December. In a letter to Communications Minister Anika Wells, the tech giant warned it was considering its legal position and flagged the ban could be challenged on the grounds it restricted the implied constitutional freedom of political communication. YouTube was initially exempt, but eSafety Commissioner Julie Inman Grant has argued the platform should be included, stating it was by far the most used by children and the most prevalent place where they experienced harm. On Sunday, Prime Minister Anthony Albanese told the ABC’s Insiders program that the minister would make the decision “independent of any of these threats that are made by the social media companies.” Meanwhile, the FT reported VPN use is surging in the UK following the rollout of new online safety rules in that country. (SMH)(SBS)(NewsWire)

4.

Harvey briefs: Gilbert + Tobin has rolled out Harvey, its preferred tool to assist with legal work, across its team of 650 lawyers, and CEO Sam Nickless told Capital Brief the firm is fast approaching a mindset of “Why not use AI?”, likening the shift to choosing Excel over manually sorting Word tables. The firm initially told staff to experiment with ChatGPT but not use confidential information. It now uses secure integrations, including Microsoft’s platform, ChatGPT Enterprise and its in-house chat tool, Gilbot. Harvey, which can process up to 10,000 documents at once, has proved useful in banking, company constitution reviews, law reform and negotiations. Harvey now includes a verification step for each extracted data cell, and lawyers are instructed to avoid using it for open-ended legal research to minimise hallucinations. While validating outputs still takes time, the firm says fewer hours are already being passed through to clients, and it is considering what the efficiencies mean for billing. (Capital Brief)

5.

The Signal: In the debut edition of The Signal, Capital Brief’s new weekly dispatch from media correspondent John Buckley, Nine’s looming $1.4 billion Domain exit sets the stage for deeper questions about what the company might do or sell next. Shareholders are due to vote on the transaction on 4 August. The sale has led many insiders to speculate on the future of Nine’s publishing assets. A growing number of senior staff have come to wonder whether the company might soon consider selling off its newspaper mastheads, including The Sydney Morning Herald, The Age and The Australian Financial Review. That view is not limited to staff. Some of Nine’s largest shareholders, including Pendal, have floated the possibility of Nine entertaining offers for the AFR. Some investors believe it alone could fetch up to $700 million. CEO Matt Stanton has told colleagues the newspapers remain critical. No sale process has been initiated, according to a person close to Stanton. (Capital Brief)

6.

AUKUS anchors: Australia and the UK on Saturday signed a 50-year treaty to bolster cooperation on the AUKUS nuclear submarine partnership, as the US reviews its role in the pact. Signed in Geelong by Defence Minister Richard Marles and UK Defence Secretary John Healey, the “Geelong Treaty” enables cooperation on the design, build, operation, sustainment and disposal of the SSN-AUKUS submarines, as well as workforce, infrastructure and regulatory systems. The submarines will be built in northern England and South Australia to be delivered to the Australian navy in the 2040s. The treaty is expected to be tabled in parliament this week. The UK Ministry of Defence said the treaty is expected to be worth up to £20 billion in exports over the next 25 years. (Joint statement)(Reuters)(The Guardian)

7.

Transnational repression: Hong Kong’s national security police issued arrest warrants for 19 activists based overseas, including two Australian residents. Australian citizen Chongyi Feng and resident Wong Sau-Wo are accused of launching a referendum or running as candidates in the unofficial “Hong Kong Parliament” group. Police allege the group seeks to subvert state power and overthrow the governments of China and Hong Kong by unlawful means. Bounties of HK$200,000 ($38,800) to HK$1 million have been offered for information leading to arrests. Australian Foreign Minister Penny Wong said the government “strongly objects” to the warrants and the broad, extraterritorial application of Hong Kong’s national security legislation. UK and US officials also condemned the move as “transnational repression.” HK officials said national security offences are serious crimes with extraterritorial reach and urged those named to surrender. (Penny Wong)(Marco Rubio)(UK joint statement)(ABC)(SMH)(The Guardian)

8.

Tactical pause: The Israeli military began 10-hour daily pauses in military activity in three populated areas of Gaza to facilitate the delivery of humanitarian aid, following growing international criticism over hunger in the enclave. Designated secure routes for aid convoys have also been established, and Israel, Jordan and the UAE have conducted airdrops. Gaza’s Health Ministry said six more Palestinians died from starvation in the last 24 hours, CNN reported Sunday, bringing the total to at least 133 since October 2023. The UN says less than 8% of World Food Programme trucks have reached their destination in the past 10 weeks, with most looted or delayed. Meanwhile, Prime Minister Anthony Albanese on Sunday said Israel’s March decision to block food into Gaza was a breach of international law and described the situation as a breach of decency, humanity and morality. (Reuters)(CNN)(AP)

The U.S. and European Union agreed on trade terms that include a 15% rate on most EU products as well as hundreds of billions of dollars of investments in American industry.

President Donald Trump and European Commission President Ursula von der Leyen met in Scotland on Sunday to iron out the agreement.

Trump said the EU will invest $600 billion in the U.S. and buy $750 billion of U.S. energy, with “vast amounts” of American weapons also in the mix. He also said the EU will be “opening up their countries at zero tariff.”

Von der Leyen said the 15% rate was “all inclusive,” but Trump said later that it didn’t apply to pharmaceuticals and metals though it does for autos.

“I think that basically concludes the deal,” he told reporters. “It’s the biggest of all the deals.”

Von der Leyen also said the agreement would “rebalance” trade between the two partners. The U.S. goods trade deficit with the 27-member EU was $235.6 billion in 2024, a 12.9% increase from 2023, according to the office of the U.S. Trade Representative.

She later confirmed that the $750 billion in U.S. energy purchases would come over the next three years, while adding that both sides will drop tariffs to zero on aircraft, plane parts, certain chemicals, and chip equipment as well as some farm products, generic drugs and raw materials. No decisions have been made on a rate for wine and spirits, she added.

The Distilled Spirits Council of the United States hailed the agreement though U.S. and EU tariffs on spirits still must be negotiated.

“We are optimistic that in the days ahead this positive meeting and agreement will lead to a return to zero-for-zero tariffs for U.S. and EU spirits products, which will benefit not only our nation’s distillers, but also the American workers and farmers who support them from grain to glass,” CEO Chris Swonger said in a statement.

But von der Leyen also introduced some uncertainty by saying the 15% rate does apply to pharmaceuticals while also suggesting more details will come from the U.S. and that pharma overall is “on a different sheet of paper.”

A deal with America’s biggest trading partner removes a key source of market uncertainty and the threat of a damaging trade war.

Michael Brown, senior research strategist at Pepperstone, said in a note that European carmakers are among the big winners from the deal as tariffs on autos will drop to 15% from the current 25%, securing a similar carveout that Japan obtained last week. U.S. defense and energy stocks also stand to gain.

“Stocks hardly need much of an excuse to rally right now, and agreement of the ‘biggest ever deal’ – Trump’s words, not mine – not only removes a key left tail risk that the market had been concerned about, but also yet again reiterates that the direction of travel remains away from punchy rhetoric, and towards trade deals done,” he wrote.

Heading into their meeting, Trump and von der Leyen said they saw a 50-50 chance of reaching a deal. Trump ruled out pharmaceuticals from any deal and said the tariff rate on the EU wouldn’t go below 15%.

The EU already faces a 50% U.S. tariff on steel and aluminum. Without a deal by Aug. 1, the EU was set to get hit with a 30% “reciprocal” tariff, up from 10%.

Last week, Trump reached a trade with Japan that set a 15% rate and included a pledge for Tokyo to invest $550 billion in key U.S. industrial sectors, with Trump able to direct the funds.

Treasury Secretary Scott Bessent said Japan’s investment offer was key to clinching a trade deal and suggested it could help other countries get a comparable rate, though Wall Street analysts have expressed skepticism that the money will fully materialize.

In fact, Trump has hinted that the EU would have to “buy down” the threatened tariff rate of 30% and pointed to the Japan deal.

In case no deal with the U.S. was made, the EU had already pre-planned retaliatory tariffs of up to 30% on more than $100 billion worth of goods American exports, such as aircraft, cars and bourbon whiskey.

Meanwhile, other U.S. trading partners are also staring down the Aug. 1 deadline, and Commerce Secretary Howard Lutnick said Sunday that no further extensions will be given.

But the U.S. and China are reportedly extending their trade truce by 90 days as talks between Bessent and Chinese Vice Premier He Lifeng scheduled to start on Monday in Stockholm. Without an extension, their tariff pause was scheduled to end on Aug. 12.

“When Japan broke down and made a deal the EU had little choice. The biggest piece in the trade deal puzzle still remains, and the Chinese are unlikely to be as willing to fold,” Jamie Cox, managing partner for Harris Financial Group, said in a note. “The next big durable theme in markets is security, and the EU deal only accelerates it.”

Wall Street looks to begin a jam-packed week on a high note as investors cheer the U.S.-EU trade deal that was announced on Sunday.

The agreement with America’s biggest trading partner removes a key source of market uncertainty and the threat of a damaging trade war. It also adds to an increasingly bullish narrative as the S&P 500 notched five record highs last week.

Futures tied to the Dow Jones Industrial Average climbed 161 points, or 0.36%. S&P 500 futures were up 0.34%, and Nasdaq futures rose 0.46%.

The yield on the 10-year Treasury was flat at 4.386%. The U.S. dollar dipped 0.12% against the euro but was steady against the yen.

Trump’s deals with the EU and Japan set 15% tariffs rates on both trade parters, who have also vowed to invest hundreds of billions of dollars in the U.S.

Gold edged down 0.15% to $3,330.50 per ounce. U.S. oil prices rose 0.1% to $65.22 per barrel, and Brent crude climbed 0.1% to $68.51.

Investors will not be able to look away over the coming week as every single day could produce significant market-moving news.

High-stakes trade negotiations between Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are scheduled to start on Monday in Stockholm. That comes as a tariff truce between the two sides is due to end Aug. 12, though they are reportedly going to extend the deadline by 90 days.

Tariff drama will continue throughout the week as other countries try to reach deals with the U.S. before Friday’s deadline, when a pause on aggressive “reciprocal” rates will expire.

Meanwhile, Trump’s tariffs face legal challenges, with a court hearing scheduled Thursday on whether the president has authority under the International Emergency Economic Powers Act to impose wide-ranging duties.

On Tuesday, the Federal Reserve will begin its two-day policy meeting. Analysts don’t expect the central bank to adjust rates, but Governor Christopher Waller has indicated he will dissent and call for a cut.

Chairman Jerome Powell’s press briefing on Wednesday afternoon will likely be dominated by questions related to the White House’s attacks about renovations at the Fed’s headquarters and calls from Trump allies for Powell to be ousted due to the project’s cost overruns.

Meanwhile, several closely watched datasets are due that will offer more clues on how tariffs may—or may not—be impacting the economy. On Tuesday, reports on consumer confidence, home prices, and job openings will come out.

On Wednesday, ADP’s private-sector payroll survey, second-quarter GDP data, and pending home sales are scheduled.

On Thursday, weekly jobless claims and the personal consumption expenditures report, which includes the Fed’s preferred inflation gauge, are due.

And on Friday, the Labor Department’s monthly jobs report, the Institute for Supply Management’s manufacturing activity index, and construction spending round out the week in data.

Don’t forget earnings. Boeing announces quarterly results on Tuesday, Microsoft follows on Wednesday, while Apple and Amazon report Thursday. Oil giants Exxon Mobil and Chevron put out their numbers on Friday.