Update 906 — Chinese Trade Detente,
Shutdown Rolling to Record Lead Week
President Trump returned from Asia touting major success when, in fact, details of finalized plans are few and far between. With China, we are nearly back where we were before, after months of pain for American businesses and farmers who are paying the price for tariffs and China’s lack of agricultural purchases. The Senate this week held largely symbolic votes disapproving of the President’s use of emergency powers to impose tariffs — revealing a widening fracture within his party.
Meanwhile, the government shutdown continued through another week, on track to break the record for the longest shutdown in history next Wednesday. Pressure on both parties will only intensify tomorrow, as more than 42 million Americans miss out on their November SNAP benefits and 24 million Americans face sky-high health insurance premiums due to Republicans’ failure to extend enhanced ACA premium tax credits. Tuesday’s elections may provide direct feedback on each party’s shutdown strategy, possibly paving the way for a resolution as soon as next week.
Good weekends all…
Best,
Dana
Headline
Trump’s Trip to Asia; Senate Votes Down Tariffs
President Trump’s five-day trip to Asia wrapped up this week with a series of trade announcements. Lavish gifts and flattery welcomed the President as he traveled through Malaysia, Japan, and finally South Korea. In the end, the President did not sign any comprehensive trade deals; however, he did secure progress toward important commitments for agricultural purchases and rare earths.
China
The most anticipated event this week was President Trump’s meeting with President Xi Jinping. Last week, Treasury Secretary Scott Bessent, along with high-level American negotiators, laid out a framework for a deal with Chinese counterparts for the leaders to agree upon in person.
- Agricultural Purchases – China agreed to resume soybean purchases in a “tremendous amount,” per President Trump’s Truth Social post. Bessent later elaborated to specify that China agreed to buy 12 million metric tons of soybeans this year and 25 million metric tons through 2028. Tensions had been on the rise in recent weeks as American farmers pressured the Trump administration to strike a deal with China to resume purchases or finance a bailout for farmers. The administration has readied $12 billion in aid for farmers to be rolled out once the shutdown ends. The graph below shows that the announced purchases will not make up for the lost sales this year, seeing a 32 percent decline since 2024.
Source: CSIS
- Rare Earths – China deferred its new rare earth export controls for one year. Earlier this month, China previewed a plan to tighten restrictions on rare earths that originate in China, which has a near monopoly on the sector.
- Tariff Rate – The President threatened triple digit tariff rates as a result of China’s rare earth restrictions. Once China announced the delay and committed to continue cracking down on fentanyl trafficking, the United States cut tariff rates by 10 percent. Goods from China will now face a 47 percent tariff rate, with some sectors subject to higher duties.
The outcome of Trump’s meeting with Xi can be seen as a temporary truce, although the message out of the White House is one of a huge win. The United States and China are largely where they were before Trump waged economic war. The two leaders left without a pen-to-paper trade deal, but perhaps Xi knew all Trump needed was a perceived success to tout back in the US. A formalized deal may be signed on state visits next year. But with relations on such thin ice, this is surely not the end of back-and-forth trade tensions, especially as China is flexing its own leverage over rare earths and American agricultural purchases.
Japan, South Korea
Although rapport was high with newly elected conservative Japanese Prime Minister Sanae Takaichi, the two leaders only vaguely addressed the real trade tensions between their two countries. President Trump met with South Korean President Lee Jae Myung, where they clarified details on previously agreed-upon strategic investments and agreed to drop tariffs from 25 to 10 percent.
- Strategic Investments – The large-scale investment frameworks announced by Japan and South Korea have been heavily criticized for lacking an enforcement structure or any further detail.
- Japan: In September, Japan agreed to invest $550 billion in exchange for lower tariffs. According to a White House fact sheet, the investments will be used for critical energy and AI infrastructure, along with manufacturing and shipbuilding commitments. The President walked away claiming he secured signed and sealed investments, but rather, a number of Japanese companies have simply expressed interest in investing.
- South Korea: Similar to the deal struck with Japan, the leaders returned to expand on previous commitments. Of the $350 billion promised in investments, $200 billion will be in cash installments, $150 billion in cooperative shipbuilding with a $20 billion annual cap.
- Rare Earths – Amid tensions with China on rare earths, Japan and the US signed a framework to secure rare earth minerals and to accelerate processing capabilities – the system of extracting rare earths to usable forms. This agreement comes alongside similar announcements with Australia, Malaysia, Thailand, and Cambodia as the world tries to manage China’s almost absolute grip on rare earth elements and processing.
The President would describe his trip to Asia as a resounding success, boasting of trade deals and hundreds of billions of dollars in investments. But this week, Trump largely tamped down fires he started with the implementation of his sweeping tariff regime. While the pomp put on by world leaders spoke to the President’s ego, there remains no paper-to-pen deals with the necessary enforcement mechanisms to solve the underlying trade imbalances.
Republicans Fracture
Also this week, the Senate held three votes on legislation to terminate Trump’s declared national emergencies that were used to impose sweeping tariffs. All three votes passed with some Republican defections against the President’s policies. Republican defectors included Susan Collins (ME), Lisa Murkowski (AK), Mitch McConnell (KY), and a co-sponsor of the bills, Rand Paul (KY).
- Brazil – On Tuesday, the Senate voted down, 52-48, tariffs on Brazil. President Trump imposed 50 percent tariffs on Brazil in July, citing the prosecution of close ally former President Jair Bolsonaro and pointing to an alleged “unlawful” crackdown on American tech firms in Brazil. Republican Senator from North Carolina, Thom Tillis, joined those voting down the tariffs.
- Canada – A similar vote, 50-46, to end tariffs on Canada occurred Wednesday evening. Four Republicans again joined Democrats. Trade relations with Canada have been on ice this week after an ad attacking Trump’s tariffs angered the President, and he halted all negotiations and raised tariffs by 10 percent.
- Global – Thursday’s final vote, passed 51-47, with the group of Republicans voting with Democrats to end global tariffs announced on “Liberation Day” in April.
On the Senate floor, Tim Kaine (D-VA) claimed, “President Trump has stretched this notion of emergency far beyond the language of the statute.” Although Congress holds the power to terminate the declared emergencies at the foundation of Trump’s tariffs, earlier this year, the House voted to block any such legislation until March 2026. The Senate trio of votes this week are largely symbolic but reveal the growing pushback from the right on Trump’s trade agenda.
These votes come ahead of a big week for Trump’s trade agenda. Next week, the Supreme Court is scheduled to hear oral arguments on a case that will determine the fate of Trump’s use of the International Emergency Economic Powers Act (IEEAPA) to impose the very tariffs the Senate voted down this week.
Other Developments
Shutdown Persists as Nov. 1 Pressure Points Loom
The government shutdown continued this week, hitting its 31st day today and on track to tie the 35-day record for the longest funding lapse next Tuesday. The Senate only held one vote on the House-passed continuing resolution (CR), and it failed for the 13th time without a change in support.
Trump, who has had limited involvement in the shutdown to this point, threw a grenade at the Senate last night, demanding that Republican Senators “go for what is called the Nuclear Option — Get rid of the Filibuster, and get rid of it, NOW!” Senate Majority Leader John Thune (R-SD), along with several senior Republican colleagues, is not in agreement with the President’s stance, further complicating the situation for the GOP and the path toward a resolution.
Union Boosts Clean CR, ACA Rates Skyrocket
The shutdown stalemate persisted this week despite heavy pressure on both parties. On Monday, the American Federation of Government Employees (AFGE) – the largest union of civilian federal workers – issued a statement calling on Congress to “reopen the government immediately under a clean continuing resolution that allows continued debate on larger issues.” While this marked a departure from Democrats’ push for tangible healthcare concessions in exchange for their votes to reopen the government, it ultimately did not influence Tuesday’s CR vote.
Republicans felt their own share of pressure this week, as premium increases for Affordable Care Act (ACA) health insurance plans were announced on Wednesday ahead of marketplace enrollment beginning tomorrow. An extension of enhancements to premium tax credits (PTCs) that expire at the end of this year, which 22 million of the 24 million ACA marketplace enrollees rely on to secure more affordable premiums, has been one of the Democrats’ main demands in the shutdown fight. Without an extension, premiums could rise an average of 114 percent for marketplace enrollees, causing 5 million or more Americans to lose their health insurance. Republicans, who are getting hit by constituents over their decision not to extend the enhanced credits, have yet to come to the table for tangible negotiations to prevent premium price hikes.
Nov. SNAP Benefits on Hold Amid Shutdown
Pressure mounting on both parties will only continue to amplify into next week. Also tomorrow, the more than 42 million Americans who rely on the Supplemental Nutrition Assistance Program (SNAP) for valuable nutrition assistance will go without benefits for the first time in the program’s 60-year history.
Democrats have argued that the USDA is legally obligated to draw from a nearly $6 billion SNAP emergency/contingency fund, but the administration is arguing that it does not have the authority to do so. The administration has also not made an effort to use the USDA’s transfer authority to shift funding to the program, and Senate Majority Leader John Thune has denounced the use of targeted bills to address specific aspects of the funding lapse, meaning a shutdown-ending resolution may be the only way to restore benefits for SNAP recipients ahead of the holiday season.
This pressure surely has the potential to bring both parties to the negotiation table next week, but whether this gets them closer to a bipartisan resolution remains to be seen.
What Could Drive a Shutdown-Ending Deal?
After a month of very little progress towards ending the government shutdown, tides could be shifting as the consequences of the funding lapse continue to amplify. Tomorrow, more than 42 million Americans will go without their monthly food assistance ahead of the holiday season. Also tomorrow, open enrollment will begin for the 24 million Americans who rely on the ACA marketplace for health insurance, and people will begin to have to choose between paying premiums that they can’t afford, opting for more affordable, lower quality coverage, or going without health insurance altogether. All the while, federal employees continue to go without paychecks, having to turn to second jobs and/or food banks to feed their families and pay their bills.
State and local level elections on Tuesday may give the most solid evidence to date of who the American people are blaming for these harmful consequences, motivating one side to cave or offering enough cover for a bipartisan resolution. In any case, the shutdown will continue into next week, likely becoming the longest government shutdown in the current budget era.
Trump Nominations
Senate Banking Considers Travis Hill to Chair FDIC
The Senate Committee on Banking, Housing, and Urban Affairs convened for a hearing Thursday morning in which senators considered the nomination of Travis Hill to serve as Chair of the Federal Deposit Insurance Corporation (FDIC). Hill served as Vice Chair of the FDIC from January 2023 to January of this year, when President Trump appointed him Acting Chair of the federal banking regulator.
Committee Democrats and Senator John Kennedy (R-LA) were notably critical of Hill’s efforts to address the toxic workplace culture at the FDIC detailed in the independent review conducted by the law firm of Cleary Gottlieb Steen & Hamilton. Kennedy suggested that he may not vote to confirm Hill unless he delivers a report detailing what has happened to FDIC staff members who were found to have committed harassment and discrimination.
Ranking Member Elizabeth Warren (D-MA) was critical of Hill’s approach to banking supervision, with Hill admitting to decreasing the number of examiners focused on safety and soundness. Warren also noted that in January, Hill rescinded at least two hundred job offers to bank examiners, then reportedly cut the FDIC workforce by 20 percent, roughly 1,250 positions, in response to DOGE.
Warren also noted Hill’s record of weakening banking regulation during his tenure as the FDIC’s policy director from 2019 to 2020, during which the FDIC weakened key big bank safeguards, which led to the second, third, and fourth largest bank failures in American history.
Hill’s confirmation, which requires a simple majority vote, could be held up if every Democrat and Senator Kennedy votes against his confirmation.
Ex-Im First VP and Vice Chair Nominee Withdraws
Bryce McFerran, Trump’s pick for vice president and vice chair of the US Export-Import Bank, withdrew his nomination on Wednesday. McFerran was previously scheduled to appear before the Senate Committee on Banking, Housing, and Urban Affairs for his confirmation hearing on Thursday morning.
McFerran, a career banker, is also a major GOP donor who gave nearly $1 million to support Trump’s 2024 presidential campaign. The withdrawal follows a report from the Washington Post that McFerran worked for years at a Russian-owned steel company, Evraz PLC, and has ties through his wife’s relatives to the Kremlin. The British government imposed sanctions on Evraz back in 2022 for allegedly producing goods to help Russia’s war effort against Ukraine, while McFerran’s father-in-law and brother-in-law both served in senior positions at a Kremlin-backed investment fund.
Ranking Member of the Senate Banking Committee Elizabeth Warren (D-MA) questioned McFerran about these ties in a letter sent to him on Wednesday, stating that these revelations raised “significant questions regarding [McFerran’s] judgment and [his] commitment to U.S. national security interests.” The White House called the Washington Post report “fake news,” but also acknowledged that McFerran had withdrawn his nomination and that he would remain in his current acting role as EXIM’s chief banking officer “until a permanent replacement is named in the coming weeks.”