Trump, Xi Extend Trade Truce, Cut Tariffs; Shutdown Risks Mount
President Trump and Chinese President Xi Jinping have agreed to extend their trade truce for another year, with both sides making modest tariff cuts and targeted concessions. The deal, reached on the sidelines of the APEC summit in Busan, South Korea, could be signed as early as next week, according to US Treasury signals.
The agreement includes several key points. The US will reduce the average tariff on Chinese goods to 47% from 57% by halving the fentanyl tariff. In response, China will resume large purchases of US soybeans and pause its new rare earth export controls for one year. Both nations will also pause tit-for-tat port fees as part of the trade truce.
Meanwhile, the US government shutdown continues, now in its 30th day. If it persists past November 5, it will surpass the longest shutdown in history. Federal Reserve Chair Jerome Powell, speaking after this week's FOMC meeting, acknowledged the uncertainty caused by the shutdown, stating that the Fed is 'driving in the fog' and should not pre-commit to another rate move without clearer readings on jobs and inflation.
The trade truce extension provides some relief, but the ongoing government shutdown poses significant economic risks. The CBO estimates that the shutdown could cost the US economy between $7 and $14 billion and shave up to 2% from Q4 GDP. With the shutdown entering its 30th day, both sides are under pressure to reach a resolution.
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