Weekly Buzz: The US and China hit pause on their trade war (again)

US and Chinese negotiators reached a deal on the sidelines of the ASEAN summit in Malaysia this week. Both sides will extend an existing tariff truce that was set to expire on November 1, and the framework agreement removes the threat of 100% tariffs on Chinese imports.

What’s the deal?

As part of negotiations, China agreed to delay its rare earth export restrictions for a year and resume buying US soybeans after cutting off purchases in September. The agreement sets up a trade framework ahead of the Trump-Xi meeting in South Korea.

The olive branch came after weeks of escalating tensions. President Trump warned of a 100% tariff rate in response to Beijing's tighter customs checks on Nvidia chips, higher port fees for American ships, and rare earth controls. That rare earth concession matters: China controls nearly 70% of global rare earth mining and over 90% of processing capacity. These minerals are essential for everything from smartphones to wind turbines. 

Meanwhile, during the summit, China signed an upgraded free trade agreement with ASEAN countries, deepening economic ties with a bloc that represents US$771 billion in annual trade. It's Beijing's modus operandi: build alternative trade avenues while navigating friction with the US.

What this means for you as an investor

While tensions between the two largest economies have cooled, bigger issues remain. The US wants China to scale back industrial subsidies, while China wants access to the US’s chipmaking tech. Neither side has budged on these issues just yet.

While you can’t predict when the US-China dynamic will shift again, you can prepare for it. For investors focused on the long term, an investment portfolio that’s spread across regions will be able to absorb shocks better than those concentrated in any single market.

(For a portfolio that’s designed with global diversification in mind, check out General Investing.)

In Other News: US inflation ticks up, but rate cuts stay on track

US inflation rose to 3% in September, up from 2.9% in August. While that's a tick higher, it came in below the 3.1% analysts expected. Markets took this as good news, and it gave the US Federal Reserve room to cut interest rates by a quarter of a point at this week's meeting.

The monthly increase in the headline inflation number was driven mostly by a 4.1% spike in gas prices. Core inflation, which strips out volatile food and energy prices, rose just 0.2% for the month.

There is still the tariff wildcard to consider for upcoming inflation reports. While American companies have been able to absorb costs rather than passing them to consumers, these import taxes may not have fully worked through the US economy just yet.

The Fed is threading the needle between cooling inflation and supporting employment. While inflation still sits above the Fed's 2% target, the central bank is betting that a weakening labour market poses a bigger threat than stubborn price pressures. Markets are pricing in one more rate cut in December.

Simply Finance: Core vs headline inflation

Headline inflation measures prices across everything you buy. Core inflation strips out food and energy costs because gas and grocery prices swing more sharply month to month. Central banks watch core inflation closely because it better reflects whether prices are rising steadily across the economy.