US, China Return To Negotiating Table In Stockholm As Tensions Rise Over Drugs, Oil, Chips

U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are meeting in Stockholm on Monday and Tuesday to extend the current tariff pause and tackle key trade disputes. 

This is their third round of talks in less than three months, Bloomberg reported.

Discussions include how long the tariff truce will last, U.S. levies linked to fentanyl trafficking, and China’s imports of sanctioned oil from Russia and Iran. 

The meeting comes ahead of an Aug. 1 deadline for the U.S. to finalize trade deals with multiple countries, though talks with China are on a separate track. Tariffs on Chinese goods remain significantly higher than those on other U.S. partners.

Bessent said last week that an extension of the tariff pause is likely, adding that “trade is in a very good place with China.” 

At the center of the talks are issues related to critical technologies. The U.S. is focused on China’s control of rare-earth magnets used in EVs and weapons, and Beijing’s access to advanced semiconductors. 

China, meanwhile, is pushing for the removal of a 20% U.S. tariff on fentanyl-related chemicals.

While Beijing denies responsibility for fentanyl exports, it recently tightened control of two precursor chemicals. Trump welcomed the move, saying China is “making big steps,” but U.S. officials argue the actions fall short of expectations. 

One person familiar with the talks reportedly said the chances of lifting the fentanyl tariff in this round are slim.

Tsinghua University professor Sun Chenghao said China is open to more cooperation but expects the U.S. to remove related tariffs and provide evidence. U.S.-China Business Council President Sean Stein said progress on fentanyl could unlock broader trade gains, including lower tariffs on agriculture, energy, and industrial goods.

China’s oil trade is another source of friction. The U.S. plans to raise Beijing’s ongoing imports from Iran and Russia, though Chinese state media has rejected that approach. In contrast, China’s imports of American energy products, including crude oil, LNG, and coal, fell to zero in June for the first time in nearly three years.

Despite tensions, both sides have made modest gestures. China has ramped up rare-earth magnet exports and suspended an antitrust probe into DuPont’s China unit. The U.S. eased restrictions on the sale of less-advanced semiconductors.

Bessent also said the U.S. wants China to address overcapacity in manufacturing and shift toward domestic consumption, which is another point expected to surface during the Stockholm meetings.

On Stocktwits, retail sentiment was ‘bullish’ for the SPDR S&P 500 ETF Trust (SPY), the Invesco QQQ Trust (QQQ), and the iShares MSCI China ETF (MCHI). 

Message volume was ‘normal’ for SPY and QQQ, and ‘low’ for MCHI. So far this year, MCHI has gained 28.1%, outperforming both the SPY, which is up 9%, and the QQQ, which is up 11%.

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