Top economic officials from the United States and China are set to resume trade talks in Stockholm on Monday, aiming to resolve persistent economic tensions and extend a fragile truce that has kept escalating tariffs at bay.

With a looming August 12 deadline, China is under pressure to finalize a durable tariff agreement with President Donald Trump’s administration. This follows earlier preliminary deals in May and June that temporarily paused a cycle of retaliatory tariffs and supply chain disruptions, including Beijing’s restriction on rare earth exports and U.S. controls on advanced chips like Nvidia’s H20 AI processors.

If no deal is reached, global supply chains could be thrown back into chaos as U.S. tariffs on Chinese goods are set to snap back to triple-digit levels—effectively amounting to a bilateral trade embargo.

The Stockholm meeting comes just a day after Trump signed his biggest trade agreement yet with the European Union, which includes a 15% tariff on most EU exports to the U.S., notably autos. The EU also committed to $750 billion in American energy purchases and $600 billion in future U.S. investments. While no major breakthrough is expected in the U.S.-China talks, analysts anticipate a likely 90-day extension of the current truce to maintain momentum and prevent further escalation.

Such an extension would also help lay the groundwork for a potential summit between Trump and Chinese President Xi Jinping, tentatively eyed for late October or early November.

Meanwhile, the U.S. is reportedly preparing new sector-specific tariffs targeting Chinese semiconductors, pharmaceuticals, and ship-to-shore cranes, which could be implemented in the coming weeks. Despite this, President Trump struck a cautiously optimistic tone over the weekend:

“We’re very close to a deal with China. We really sort of made a deal with China, but we’ll see how that goes,” he told reporters on Sunday before finalizing the EU agreement with European Commission President Ursula von der Leyen.

To avoid derailing negotiations, the U.S. has paused some tech export restrictions to China, according to the Financial Times, which cited sources saying the Commerce Department was instructed to hold off on aggressive enforcement in recent months.

Previous rounds of talks held in Geneva and London focused on scaling back retaliatory tariffs and restoring trade in sensitive goods. However, they have not yet addressed deeper structural issues, such as U.S. claims that China’s state-driven industrial policy floods global markets with cheap goods, or Beijing’s frustration with American national security restrictions designed to curb China’s tech ambitions.

Treasury Secretary Scott Bessent confirmed last Tuesday that an extension of the trade truce is on the table. Speaking to Fox Business, “We’ll be working out what is likely an extension” during the Stockholm talks.

“I think trade is in a very good place with China,” Bessent added.