Breakthrough in Sight: US May Drop 100% Tariffs as New Trade Framework Takes Shape

According to an October 28 report by The Wall Street Journal, the United States and China are set to negotiate a trade framework aimed at reducing US tariffs on Chinese goods.

Citing informed sources, a subsequent Reuters report stated that the specifics of the agreement would be finalised in further talks, with anticipated terms subject to adjustment based on the outcome of a forthcoming leaders' meeting. The Journal indicated that the US may halve the current 20% tariff on certain Chinese goods to 10%. This levy was originally imposed as the so-called 'fentanyl tariff' targeting China.

Breakthrough in Talks Averts Escalation

This development follows the fifth round of Sino-US economic and trade negotiations held in Malaysia from October 24 to October 27. On October 26, Li Chenggang, China's Vice Minister of Commerce and Chief International Trade Negotiator, stated that the two sides had engaged in in-depth and candid discussions on issues of mutual concern.

The discussions covered a range of topics, including export controls, extending the suspension period for reciprocal tariffs, fentanyl tariffs and anti-drug cooperation, further trade expansion, and measures related to US Section 301 vessel fees. Following over a day of intensive talks, the sides constructively explored viable solutions and reached preliminary consensus, with each party now proceeding with internal approval procedures.

In a significant de-escalation, US Treasury Secretary Scott Bessent explicitly stated that a highly successful framework had been established and that the US was no longer considering imposing 100% tariffs on Chinese imports.

US Trade Representative Jamieson Greer confirmed at a press conference that the negotiations had been productive, covering issues such as extending the tariff suspension and rare earths. Both sides are finalising the details of a trade agreement proposal for their respective leaders' consideration.

The South China Morning Post observed that the outcome signals a de-escalation between the world's two largest economies. The current suspension period for reciprocal tariffs is set to expire on November 10.

US Government Shutdown Set to Continue

Separately, the US federal government shutdown is expected to extend into November. On October 28, US Senate Minority Leader Chuck Schumer indicated the shutdown could persist, exacerbating a situation where millions face steep healthcare costs as tax credits under the Affordable Care Act expire.

Hundreds of thousands of federal employees remain on unpaid leave or are working without pay, while federal food assistance programmes are nearing termination.

On the same day, the US Senate failed for the 13th time to advance the Fiscal Year 2025 Continuing Resolution and Extended Term Bill, with a procedural vote of 54 to 45 falling short of the required 60 votes. The bill, previously passed by the House of Representatives, sought to temporarily restore government operations at current funding levels. Its failure ensures the government shutdown will continue.