Trump's China trip could bring good news for markets - but also prolong the government shutdown into November

By Victor Reklaitis

There's a view that the president needs to be at the center of talks in Washington for the shutdown to end

When could the government shutdown end? This photo shows a sign indicating that the U.S. Capitol Visitor Center in Washington is closed during the shutdown.

Investors are bracing for President Donald Trump's upcoming Asia trip, which could lead to another extension of his administration's trade truce with China.

Trump has been threatening since Oct. 10 to raise U.S. tariffs on China by 100 percentage points, saying he's responding to Beijing's moves that could limit American access to rare-earth minerals that are crucial for electronics.

But analysts are expecting that the world's two biggest economies will have some successful negotiations this month and largely will be able to avoid escalating their trade fight.

The 100% stacking tariff is unlikely to become reality, said Chris Krueger, an analyst at TD Cowen's Washington Research Group, in a note on Wednesday. Krueger noted that Trump is due to meet Chinese President Xi Jinping in South Korea at the Asia-Pacific Economic Cooperation summit that starts Oct. 31. Before that, he's expected to make a three-day visit to Japan and take part in the Association of Southeast Asian Nations summit in Malaysia, which starts this weekend.

The Asia trip is coming as the ongoing U.S. government shutdown has turned into the second-longest closure ever. The shutdown could run into November if it's not settled before Trump departs for Asia at the end of this week, Krueger noted - saying it's hard to see a break in the impasse without having the Republican president at the center of talks between his party and Democratic lawmakers.

The current shutdown has happened largely because Democrats and Republicans are locked in a standoff over including an extension for Obamacare subsidies in stopgap funding legislation. As the closure of federal agencies persists, economists are growing increasingly worried that its consequences could become more severe. While Trump has found ways to keep paying the military and law enforcement during the shutdown, federal employees are due to miss their first full paychecks on Friday.

Short-term deal with China looks likely

Derek Scissors, a senior fellow at the American Enterprise Institute who focuses on Asian economies, is among the analysts expecting another U.S.-China deal in the near term.

"In the short term, I think you can make a deal. In the long term, the U.S. has a really serious challenge across a broad range of supply chains," Scissors said in a CNBC interview. He added he doesn't think Beijing is ready to impose controls related to rare earths, so there could be a deal that involves a rare-earths delay and a resumption of Chinese buying of American soybeans.

The meeting between Trump and Xi is approaching as a 90-day trade truce between the U.S. and China that was announced in August is due to expire on Nov. 10. It was the second such truce, following one announced in May.

With the Asia trip nearing, another part of Trump's Oct. 10 threat - hitting China with export controls for critical U.S. software - was back in the spotlight on Wednesday, after a Reuters report said the White House was considering making good on that threat. Analysts pinned the S&P 500 stock index's SPX drop on Wednesday partially on that news.

-Victor Reklaitis

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10-22-25 1625ET