The week kicks off with the UK’s Chancellor Rachel Reeves en route to a trade and investment forum in Saudi Arabia, as she pushes for good news on growth ahead of next month’s Budget.
There’s also heightened anticipation of a positive outcome to this week’s US-China trade talks in South Korea, as senior officials produced a framework deal on the sidelines of a South-East Asian summit this weekend.
There are also key interest rates decisions from major economies, including the US and EU.
Tariff truce
US and Chinese leaders Donald Trump and Xi Jinping are set to meet in South Korea for long-awaited trade talks that could see a more permanent resolution to trade tensions between their countries.
A rapprochement appears more likely after events this weekend, with meetings of senior trade officials from both countries at a summit of the Association of Southeast Asian Nations (ASEAN) yielding a framework deal.
The Guardian reports that the deal will take Trump’s recent threat of 100% tariffs on Chinese imports “off the table”, according to US treasury secretary Scott Bessent, as well as paving the way for the sale of TikTok in the US.
The deal is also rumoured to extend their rolling tariff truce for longer than 90 days. Since April, when Trump hit China with 145% rates and XI retaliated with a 125% levy, both sides have paused the reimposition of tariffs periodically.
US officials are also confident that the deal will delay new Chinese export controls on rare earths essential to the production of key defence, tech and commercial goods worldwide, the FT reports.
Trade tensions initially escalated earlier this month when China introduced stringent new licencing requirements on any goods containing the critical minerals.
China’s top trade negotiator Li Chenggang said that the “US position has been tough” but that both parties had reached a “preliminary consensus” on a deal. He did not specify whether China would delay its new export controls.
Bessent was positive about negotiations, telling reporters “we had a very good two days”.
“I think we have a very successful framework for the leaders to discuss on Thursday.”
Trump was also optimistic, saying: “I think we’re going to have a deal with China”.
Politico reported the US president took a more conciliatory stance towards negotiations over the weekend, telling reporters that both sides would likely need to make concessions to get a deal across the line.
“Sure they’ll have to make concessions[…] I guess we will, too.
“We’re at 157% tariff for them. I don’t think that’s sustainable for them[…] They want to get that down, and we want certain things from them.”
GCC negotiations
Chancellor Rachel Reeves will be heading to Riyadh, Saudi Arabia, today (27 October) in the hopes of confirming a trade deal between the UK and the Gulf Cooperation Council (GCC).
She’ll be leading a UK trade delegation to the Future Investment Initiative (FII), a meeting of senior politicians and business leaders being dubbed the “Davos in the Desert”.
Ahead of the visit Reeves said:
“Our number one priority is growth, so I am taking Britain’s offer – of stability, regulatory agility and world-class expertise – directly to one of the world’s most important trade and investment hubs, making that case in our national interest.”
The BBC reports that several two-way trade and investments deals between the GCC and UK are anticipated over the next few days.
Reeves is eager for positive headlines on growth ahead of next month’s Budget, which is widely expected to include tax increases on workers in a bid to plug a growing fiscal hole of up to £30bn.
She’s also advocating for agreements such as the prospective GCC deal, and other trade accords struck this year, to be factored into Office for Budget Responsibility forecasts.
However, the value of the GCC deal is only estimated to add an extra £1.6bn to UK coffers according to the government’s own forecasts – less than 0.1% of GDP.
The GCC is comprised of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Human rights groups have repeatedly raised concerns about human and workers’ rights violations across the Gulf, with the Trade Unions Congress urging the government not to make agreements with countries which violate international law.
Interest rate decisions
Across a number of large economies, central banks will be making interest rate decision this week.
Although US consumers are beginning to feel the pinch when shopping for regular household items, the overall impact of tariffs has only seen inflation rates rise slightly.
Despite hitting 3% for the first time since January, experts told the BBC that the US Federal Reserve is likely to be “breathing a sigh of relief” over the stats, which are lower than many anticipated following the implementation of Trump’s trade policy this year.
However, the Fed is still expected to cut interest rates by 0.25% this week as the US labour market continues to soften. This would bring the rate down to between 3.75% and 4%.
Euractiv reports that the European Central Bank (ECB) is likely to hold rates at 2% for a third consecutive meeting, with ECB President Christine Lagarde describing the bank as “in a good place”, with inflation across the bloc also under control.
“With policy rates now at 2%, we are well-placed to respond if the risks to inflation shift, or if new shocks emerge that threaten our target.”
Threats still remain as France’s borrowing costs increase amid the country’s ongoing political quagmire, while trade tensions with US haven’t fully abated.
Other dates in the diary
Monday: Trump in Japan ahead of South Korea summit
Tuesday: WTO begins first review of UK trade policies and practices
Wednesday: Government delivery plan for Sixth Carbon Budget due
Thursday: Japan interest rate decision
Friday: China manufacturing PMI
Saturday: ASEAN Defence Ministers’ Meeting Plus in Malaysia
Sunday: Deadline to file judicial review into Gatwick expansion
