The US-China trade talks changed little. For Beijing, that counts as a win

The US appears poised to keep its China tariffs at 30 per cent while raising duties on a slew of other countries, helping Chinese exporters

Trade relations between China and the United States remain mired in uncertainty after two days of tense negotiations in Sweden earlier this week. But Beijing may actually have emerged in a stronger position as Washington continues to raise tariffs on other global economies, analysts said.

A third round of US-China trade talks in Stockholm ended on Tuesday with China announcing that both sides had agreed to extend their “tariff truce” by another 90 days, while the US side insisted the deal was still pending US President Donald Trump’s final approval.

That means, if nothing unexpected happens, the US will continue to impose 30 per cent additional tariffs on China after August 12, when the original truce is due to expire. The rate includes 20 per cent of duties Trump announced in the first quarter of the year, which were related to China’s role in the fentanyl trade, and another 10 per cent levy imposed in April.

But in relative terms, China’s tariff rate is starting to look less damaging, as the US moves to impose higher rates on a slew of major trading partners before an August 1 deadline set by Trump.

The gap between tariffs on China and various Southeast Asian nations is reducing fastAmitendu Palit, researcher

“It is interesting that the gap between tariffs on China and various Southeast Asian nations is reducing fast,” said Amitendu Palit, senior research fellow at the Institute of South Asian Studies at the National University of Singapore.

“Once all deals are frozen, China might not be at a significant comparative disadvantage vis-à-vis other countries.”

The US has already announced deals that set a 20 per cent tariff on imports from Vietnam, as well as 19 per cent duties on goods from Indonesia and the Philippines.

Unless further agreements are brokered by Friday, Washington is also due to impose 25 per cent tariffs on countries including South Korea and Malaysia, and 36 per cent duties targeting Thailand.

The narrowing gap in tariff rates means that direct US-China trade flows may begin to recover, after years of goods being diverted via “connector” economies like Vietnam and Indonesia, Palit said.

Dan Wang, China director at Eurasia Group, said the current US tariff levels would have a minimal impact on China, primarily due to the country’s economic scale.

“Other countries may see some marginal substitution, but the scale is too small and the variety of affected products is limited,” she said.

“Moreover, prices are dynamic. China’s comprehensive industrial supply chain allows it to negotiate with suppliers to switch materials or adjust designs, effectively offsetting the increased costs.”

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However, it will still be possible for the US to raise tariffs on specific products even during the extended US-China tariff truce – for example, through the means of a Section 301 investigation, said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.

At a press conference in Stockholm on Tuesday following the trade talks, US Trade Representative Jamieson Greer said that higher tariffs on Chinese goods were possible “depending on the product”.

Maria Monica Wihardja, a visiting fellow at Singapore’s ISEAS-Yusof Ishak Institute, said that while the US tariff rate on China was likely to remain at 30 per cent for now, it was hard to say whether China was maintaining or losing its export competitiveness relative to other countries, as so many details in the trade deals remained shrouded in uncertainty.

“None of the deals with Trump are a done deal,” she said. “In many cases, it is not clear what other tariffs are applied or could be applied in the future, on top of the base tariffs as announced in the headlines.”

The deals the other economies struck with the US were meant to minimise losses rather than to maximise gains, according to Wihardja. They reflected a defensive reaction to unilateral tariffs imposed by the US and a lopsided negotiation process, with countries forced to offer concessions in return for a lower tariff rate.

“This is in contrast with the US-China negotiation in which China has a powerful bargaining power, such as its rare earth exports to the US,” she said.

China “is probably the only country that is in the position to retaliate credibly”, she added. “It has many cards to play to secure a deal that works for them while other countries don’t.”

Under the current tariff truce, Chinese duties on overall US imports will be maintained at 10 per cent, on top of an extra 10 to 15 per cent on selected American goods – including energy and agricultural products – imposed in retaliation for the fentanyl tariffs.

China retains critical structural advantages that continue to set it apart – its manufacturing ecosystem is far more sophisticatedMatteo Giovannini, finance manager

In recent years, countries like Vietnam, Thailand and Indonesia have steadily gained ground as alternative manufacturing hubs for the US market, particularly in sectors such as textiles, basic electronics and assembly-based manufacturing, said Matteo Giovannini, senior finance manager at the Industrial and Commercial Bank of China.

“That said, China retains critical structural advantages that continue to set it apart. Its manufacturing ecosystem is far more sophisticated, with deeply integrated supply chains, world-class infrastructure, and unmatched production capacity,” said Giovannini, who is also a non-resident associate fellow at the Center for China and Globalization think tank.

In particular, US fashion companies remain deeply concerned about the future of US-China trade under Trump and intend to further “reduce their China exposure” to mitigate sourcing risks, according to Sheng Lu, a professor at the University of Delaware’s Department of Fashion and Apparel Studies.

In a survey of 25 leading US apparel brands and retailers, Lu found that more than 80 per cent planned to further reduce their apparel sourcing from China over the next two years, despite the tariff truce reached in May.

Many large-scale US fashion companies are already limiting or plan to limit their apparel sourcing from China to a “low single-digit” percentage by 2026 or earlier, Lu said.

While US fashion companies still rated China as highly economically competitive as an apparel sourcing base compared to many of its Asian competitors regarding costs and efficiency, non-economic factors – particularly the perceived extremely high risks of facing US import restrictions – are driving their de-risking efforts, Lu said.