Talks resumed in Madrid on Monday, being the fourth round of discussions in as many months between delegations led by U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng. 

The discussions cover far more than TikTok, as tariffs, rare earth exports, and economic ties are all on the table.

Bessent, speaking alongside U.S. Trade Representative Jamieson Greer, stressed that Washington would not compromise on security. “We are not willing to sacrifice national security for a social media app,” he said, adding that Beijing had come forward with “a very aggressive ask.”

While both sides say technical progress has been made, the sticking points go deeper. For Washington, the divestment of TikTok’s U.S. arm remains a red line. For Beijing, TikTok is part of a negotiation package that includes tariffs and long-standing export restrictions. 

Greer stated that, “From the Chinese perspective, they view as part and parcel of the potential TikTok deal a variety of matters, whether it’s tariffs or other measures that have been taken over years.”

The September 17 deadline for ByteDance to sell TikTok’s U.S. operations is fast approaching. It is already the fourth extension granted by President Donald Trump this year. 

Trump himself has spoken about flexibility, saying: “We may let it die, or we may… I don’t know. It depends on China.” Analysts note the political undertone: TikTok’s popularity with younger voters has given the White House leverage that goes beyond trade.

But the divestment itself is not straightforward. China classifies TikTok’s algorithm as a sensitive export, complicating any potential sale to U.S. buyers. Earlier this year, Beijing blocked a proposed restructuring of TikTok’s U.S. operations after Trump imposed steep tariffs.

The negotiations are also taking place against the backdrop of a fragile truce in the wider trade war. In July, China agreed to resume rare earth exports to the United States, crucial for defence and technology sectors. Yet Beijing has withheld its quota data for 2025, pointing to rare earths that may once again be used as a bargaining chip.

For now, tariffs remain partially reduced, U.S. duties stand at 30% on Chinese goods and China has imposed 10% on American exports. These reductions expire in November, after which Washington plans to maintain tariffs of up to 55% on Chinese imports unless a new deal is reached.

Despite the high stakes, expectations for a breakthrough in Madrid are low. William Reinsch, senior trade adviser at the Center for Strategic and International Studies, told reporters: “I’m not expecting anything substantive between the United States and China unless and until there is a one-on-one meeting between Trump and Xi. Setting that up is really what these talks are all about.”

Such a meeting may take place in October during the APEC summit in South Korea, but Beijing is unlikely to agree without significant concessions, particularly on export controls and tariff rollbacks.

For now, both sides appear willing to extend deadlines rather than risk collapse. A concluding press briefing in Madrid was tentatively scheduled, but whether it will announce progress or simply another pause in a long-running case is still unknown.

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Starting Wednesday, the United States will lower its punitive tariffs on Chinese goods from 145% to 30%. China will respond in kind, dropping its retaliatory duties from 125% to 10%. 

This is a big change from the near-embargo levels both sides had maintained, freezing nearly $600 billion in two-way trade and straining global supply chains.

For months, there have been high tariffs, factory slowdowns, and markets on edge. Now, with this deal, the two countries are finally showing willingness to talk, not threaten.

Speaking from Geneva after two days of negotiations, U.S. Treasury Secretary Scott Bessent said plainly, “Both countries represented their national interest very well.” He added, “We both have an interest in balanced trade, the U.S. will continue moving towards that.”

The deal, reached during face-to-face meetings at the U.N. ambassador’s villa overlooking Lake Geneva, also includes a commitment to ongoing discussions, alternating between the U.S. and China. Both governments published a joint statement outlining the framework for continued talks.

“The consensus from both delegations this weekend is neither side wants a decoupling,” Bessent said. “And what had occurred with these very high tariffs … was the equivalent of an embargo, and neither side wants that. We do want trade.”

This unexpected softening comes just months after President Trump, having returned to office in January, escalated the trade war to new heights by raising tariffs to 145%. 

China retaliated with equally aggressive tariffs and export restrictions on rare earth materials, key inputs for U.S. industries ranging from defence to consumer electronics.

Markets reacted instantly. Wall Street futures jumped. The Hang Seng in Hong Kong surged by 3.4%. In Europe, container shipping giant Maersk rose more than 12%, and luxury brands like LVMH and Kering recorded gains of 7.4% and 6.7% respectively. Oil prices also rose, with Brent Crude climbing 2.8%.

Economists had expected a more modest rollback, if any. Zhiwei Zhang of Pinpoint Asset Management said, “This is better than I expected. I thought tariffs would be cut to somewhere around 50%.” He added, “Obviously, this is very positive news for economies in both countries and for the global economy.”

But don’t mistake this deal for a full reconciliation. The U.S. tariffs targeting critical sectors such as electric vehicles, semiconductors, steel, and pharmaceuticals will remain in place. According to Bessent, these areas are still considered strategic and vulnerable.

“We have identified 5 or 6 strategic industries and supply chain vulnerabilities and we will continue moving towards US independence or reliable supplies of allies on those,” he said.

While much of the attention was on tariffs, the discussions unexpectedly touched on the U.S. fentanyl issue, a national security issue that Trump cited when imposing some of the original tariffs. 

Chinese negotiators reportedly showed unusual openness to cooperation. A Chinese deputy minister was specifically sent to address the opioid issue, which Bessent later described as “the upside surprise for me from this weekend.”

It’s too early to say whether this 90-day truce will lead to a lasting agreement. But it has halted, at least temporarily, a damaging escalation.

This weekend’s meetings may just be the start of a longer, complicated road toward resolving issues over intellectual property, forced technology transfers, and unfair subsidies.

President Trump, speaking before the deal was formally announced, described the talks as “a total reset… in a friendly, but constructive, manner.”

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