U.S.-China high-stakes tariff truce extension hangs in the balance as deadline looms

The U.S. and China have yet to announce an extension to their tariff deadline, with tensions over several thorny issues flaring up again just as a fragile truce nears its expiry.

Following the latest bilateral meeting in Stockholm in July, Beijing had struck an optimistic tone, saying that both sides would work toward extending the tariff truce by another 90 days.

U.S. negotiators, however, had put the ball in President Donald Trump’s court on prolonging the tariff truce. Trump, so far, has offered little indication on whether he will go for an extension, stoking concerns that tensions between the world’s two largest economies could rise again.

In May, the two sides agreed to a 90-day tariff truce that reduced duties the prohibitive 145% in April while also pausing a series of punitive measures, allowing room for further negotiation to reach a lasting deal. That agreement is set to expire Tuesday.

China’s U.S.-bound shipments currently face a 20% tariff related to the country’s alleged role in the flow of fentanyl into the U.S. and a 10% baseline tariff, stacked on top of a 25% duty on certain goods imposed during Trump’s first term. American goods to China are subject to over 32.6% tariffs, according to the Peterson Institute for International Economics.

The Office of the United States Trade Representative and Ministry of Foreign Affairs of China did not respond to CNBC’s requests for comments.

While an official tariff extension still hangs in the balance, experts widely expect a summit between Trump and Xi to take place in Beijing in the coming months.

“That implies a more stable U.S.-China relationship … but by no means a friendlier one,” said Ian Bremmer, president and founder of Eurasia Group, noting that both sides are “structurally heading more toward decoupling as a consequence of the new global trade and geopolitical environment.”