US and China Approach Trade Truce

The United States and China are likely to extend their current tariff truce, which is set to expire this week. The move could pave the way for a more comprehensive trade deal to be finalized at the Asia-Pacific Economic Cooperation (APEC) summit in South Korea at the end of October. This potential extension comes after a period of intense trade friction between the world’s two largest economies.

Analysts and former trade officials believe that President Donald Trump will extend the truce, which temporarily lowered tariffs on Chinese and American goods. This decision is seen as a necessary step to prevent an effective trade blockade. However, there are differing opinions on the likelihood and scope of a future deal. Some experts suggest that China now holds more leverage, citing its control over critical rare earth exports. Others believe the U.S. negotiating position remains strong and that any deal would likely be a broad framework, similar to agreements with other trading partners. The proposed agreement is expected to resemble the 2020 “Phase 1” deal, which included commitments from China to purchase additional U.S. goods.

Additional Trade Tensions

The potential U.S.-China deal is happening amidst other global trade developments. The White House has clarified that a new 15% tariff on Japanese imports will replace existing duties, not be added on top of them. This clarification addresses confusion over the terms of a recent trade agreement and highlights the challenges of negotiating without a formal, written deal. Meanwhile, tensions with Canada are escalating after the U.S. Commerce Department announced higher countervailing duties on Canadian softwood lumber, raising the total duty rate to over 35%. This decision, combined with other recent tariffs, is straining relations and drawing criticism from Canadian lumber trade groups who argue it will harm businesses on both sides of the border.