US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are leading delegations in the second day of talks in Madrid, focusing on the potential divestment of TikTok by its Chinese owner ByteDance.
The discussions at the Palacio de Santa Cruz address broader economic policies, including tariffs and national security concerns related to the popular social media app.
Bessent emphasized that while progress has been made on technical aspects, a comprehensive agreement remains challenging due to Chinese demands for trade concessions.
The talks represent the fourth round in four months, following a 90-day extension of a trade truce agreed upon in July in Stockholm, which reduced high retaliatory tariffs and resumed rare earth exports from China to the United States.
TikTok faces a potential US ban unless ByteDance divests its US operations by the September 17 deadline, with expectations leaning toward another extension.
US Trade Representative Jamieson Greer noted that the Chinese side views the TikTok issue as interconnected with longstanding measures like tariffs.
The negotiations also occur against the backdrop of US demands for allies to impose tariffs on Chinese imports linked to Beijing's purchases of Russian oil, which China has criticized as economic coercion.
A Chinese Commerce Ministry spokesperson described these demands as a violation of prior consensus between US and Chinese leaders.
Adding to the strain, China's market regulator announced a preliminary investigation into Nvidia for alleged anti-monopoly violations, seen as retaliation against US restrictions on Chinese chip technology.
Delegations have met in various European cities since May to resolve differences stemming from US President Trump's tariff hikes on Chinese imports and subsequent countermeasures by Beijing.
A US Supreme Court ruling expected by early 2026 could potentially invalidate recent tariffs, impacting Washington's negotiating position.
Experts anticipate limited breakthroughs without a direct meeting between Trump and Chinese President Xi Jinping, possibly as early as October at a South Korea summit.
Bessent stated that even without a TikTok deal, high-level relations remain strong.
William Reinsch, a senior trade adviser at the Center for Strategic and International Studies, indicated that these talks primarily aim to facilitate such a leader-level engagement.
Trump has expressed interest in meeting Xi, though China may seek further easing of US export controls on high-tech goods beforehand.
The app, boasting around 170 million US users, has seen a shift in Trump's stance, with the White House launching an official account in August.
Despite initial calls for a ban during his first term, Trump has delayed enforcement multiple times and downplayed related national security concerns.