What to Expect from U.S.-China Talks in Sweden: 90-day Extension, No Japanese-Style Breakthrough

TradingKey - Trade delegations from China and the United States are currently holding talks in Stockholm, Sweden, in a bid to de-escalate their ongoing tariff dispute. 

After the first day of discussions, little information has been released — but markets are betting the most likely outcome is a three-month extension of the current tariff truce, while the “investment-for-tariffs” model used with Japan and the EU is unlikely to apply.

On Monday, July 28, a U.S. Treasury spokesperson confirmed that the first round of negotiations had concluded and that talks would continue on Tuesday. This marks the third round of high-level trade discussions between the two nations in the past three months, aimed at resolving long-standing trade tensions.

A Short-Term Extension Likely

Reports suggest the most probable outcome is a three-month extension of the current tariff suspension period, which is set to expire on August 12.

U.S. Commerce Secretary Howard Lutnick acknowledged this possibility in an interview on Monday, “Is that a likely outcome? Sure, it seems that way, but let’s leave it to President Trump to decide.”

President Donald Trump, speaking on Monday, struck a conciliatory tone, "We have a good relationship with China. I'd love to see China open up their country."

The “Japan Model” Won’t Apply to China

In the lead-up to the talks, attention focused on the so-called “Japan model” — under which Japan and the EU secured lower 15% tariffs in exchange for massive investments in the U.S. (Japan: $550 billion; EU: $600 billion).

However, analysts now believe this investment-for-tariff framework will not work with China.

The Council on Foreign Relations noted that China is not Japan — it is a strategic competitor with its own leverage, and has already demonstrated a strong willingness to retaliate. China knows exactly where to hit back.

Pangaea Policy pointed out that while foreign investment has been central to Trump’s recent tariff negotiations, the U.S. is unlikely to welcome large-scale Chinese investment in sensitive sectors.

The U.S. has already taken steps to restrict Chinese capital, including:

• Forcing the divestment of TikTok unless sold to a U.S. buyer
• Limiting Chinese ownership of agricultural land and critical infrastructure
• Blocking Chinese tech investments over national security concerns

Unlike Japan and the EU, where investment pledges were seen as economic cooperation, Chinese investment is viewed through a national security lens — making any “investment-for-tariff” deal politically unfeasible.