US Floats China Trade Truce; Judge Pauses Shutdown Layoffs

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1:09Bloomberg Audio Studios. Podcasts. Radio. News. Good morning. I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. Karen, we begin with the latest developments on the trade front between the U.S. and China. Treasury Secretary Scott Besant is proposing a longer pause on high tariffs on Chinese goods. That would be in return for Beijing putting off its recently announced plan to tighten limits on critical rare earths. As heard live here on Bloomberg Radio, Besant spoke at a Washington news conference. Right now, we are currently in a 90-day roll on the tariffs. So is it possible that we could go to a longer role in return for a delay?

1:58Perhaps. But all that's going to be negotiated in the coming weeks. And Treasury Secretary Scott Besson says there's a very good chance he travels to Asia to meet with his Chinese counterpart, Vice Premier Ha Li Feng. And let's turn to a Bloomberg exclusive now, Nathan. and sources say Chinese hackers accessed classified UK computer systems for more than a decade. We go to London and get the details with Bloomberg's James Wilcock. Good morning, James. Good morning, Karen and Nathan. Politicians in Westminster are locked in a very public row about if China should be designated a threat to national security.

2:35Now, former British security officials tell Bloomberg exclusively that hackers from China have been successfully accessing in classified UK data for a decade. It includes private communications, diplomatic communiques and policy documents. Chinese officials have not responded to Bloomberg's request for comment, but the story is part of a broader debate about cybersecurity global risks, with US IT firm F5 blaming Chinese hackers for a recent hack that compromises many Fortune 500 companies. In London, James Woolcock, Bloomberg Radio. All right, James, thank you. And CEOs around the world, including Apple's Tim Cook, are expected to meet with top trade Chinese negotiator Hali Feng in Beijing this week.

3:15Sources say the executives are part of an advisory board for Tsinghua University's School of Economics and Management that typically gathers every year. The sit-down comes at a critical time in bilateral ties with the U.S. calling for a response from other nations to China's curbs on rare earths that were announced last week. Let's get the latest now, Nathan, on the government shutdown. The White House has promised to use the spending fight on Capitol Hill to lay off thousands of federal workers. But a federal judge in San Francisco has put those plans on hold. Judge Susan Ilston's decision means more than 30 federal agencies cannot send new layoff notices if they involve programs that affect unionized workers.

3:55About 4 ,100 employees have received pink slips so far. The ruling came hours after White House Budget Director Russell Vogt said the layoffs could reach 10 ,000. Think of Green New Deal programs at the Department of Energy. Think the Minority Business Development Agency at Commerce that divvies up business grants on the basis of race. Think environmental justice at EPA. And White House Budget Director Russ Vogt spoke on the Charlie Kirk show. Judge Ilson says it appears the Trump administration is taking advantage of the shutdown to assume all bets are off and the laws don't apply to them. She set a hearing for October 28th.

4:32Meanwhile, Karen, President Trump has confirmed a report in The New York Times that he's authorized covert CIA action in Venezuela to ramp up pressure on President Nicolas Maduro. They authorized for two reasons, really. Number one, they have emptied their prisons into the United States of America. They came in through the, well, they came in through the border. They came in because we had an open border policy. And speaking in the Oval Office, the president said he also authorized the operation because a lot of drugs are coming in from Venezuela. The U.S. has already hit a half dozen boats in the Southern Caribbean that the administration says were carrying drugs.

5:07The Times report says the CIA is now authorized to carry out lethal operations in Venezuela. Asked if agents have the authority to take out Maduro, President Trump said that would be a ridiculous question to answer. Well, Nathan, President Trump says he might go to the Supreme Court to personally watch oral arguments on whether the bulk of his tariffs pass legal muster. The high court will hear arguments next month over whether import taxes imposed by Trump are legal, with Trump saying the tariffs are authorized under the 1977 International Emergency Economic Powers Act. The U.S. Court of Appeals for the Federal Circuit ruled that the law does not authorize such a sweeping array of tariffs.

5:46Well, those arguments aren't expected until next month, Karen, but we are less than two weeks away from the next Fed rate decision, and traders are ramping up their bets on more cuts. Bloomberg's John Tucker is here with more. Good morning, John. Good morning, Nathan. This is the activity in the options markets. It shows a buildup in positioning for a supersized half-point rate reduction, either when the Fed meets later this month or in December. And that's more than two quarter-point cuts now priced into interest rate swaps. The weeks-long government shutdown, that's delayed the release of key data on employment and inflation, obviously.

6:22But when we do finally get it, the traders expect a deluge of weakness. And those renewed trade tensions between the U.S. and China appear to have provided further incentive for traders to hedge for the possibility of half-point moves. In New York, I'm John Tucker, Bloomberg Radio. Well, Karen, let's turn to markets now. Global stocks are on the rise. As strong tech earnings are shifting the focus from the lingering U.S.-China trade threat, Keith Lerner, chief investment officer at Truist, is still bullish on tech. You know, this is not a bubble in our view. We're up about 25 percent in the technology sector over the last year.

6:56During the bubble period, we were up more than 100 percent. And the earnings power today is a lot different than them. But there's a lot of actually still a lot of concern as opposed to just raw optimism, which if you look at the market making new highs, you would expect a bit more optimism. That's true. As Chief Investment Officer Keith Lerner, the Nasdaq is up more than 17 % this year. Another day, Nathan, and another record for gold. Right now, Comex Gold is at$4 ,248 an ounce. Earlier this week, JPMorgan Chase's Jamie Dimon said gold could easily go to$5 ,000 in environments like this. And another company is benefiting from the AI boom, Karen.

7:35and Taiwan's semiconductor manufacturing is hiking its projection for 2025 revenue growth to the mid 30 % range. We get more from Bloomberg's Tom McKenzie. I think it's worth emphasizing at a time when people are questioning whether or not we are in the middle of an AI bubble, the fact that TSMC has come through with a record set of profits and not for the first time. But this is a new record, almost 40 % jump in quarterly profits for the company that is the biggest foundry, so the maker that actually produces the chips that are designed by the likes of NVIDIA and Apple. Bloomberg's Tom McKenzie says the results underscore how TSMC remains one of the bigger beneficiaries of a spending spree on AI infrastructure that's expected to cross the trillion-dollar mark in coming years.

8:22And shares of Nestle, they're surging this morning, Nathan, up more than 8%. The food maker posted a stronger-than-expected increase and quarterly sales. It also announced plans to slash 16 ,000 jobs just weeks after replacing its chief executive officer.

8:40Time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Michael Barr. Michael, good morning. Good morning, Karen. President Donald Trump said he terminated the$16 billion gateway rail tunnel under the Hudson River, linking New York City and New Jersey. The president spoke during a press conference Wednesday as tense negotiations over the federal government shutdown drag on. Not only jobs, I mean, the project in Manhattan, the project in New York, it's billions and billions of dollars that Schumer has worked 20 years to get.

9:14It's terminated. Senator Schumer says the Gateway Project is one of the most important infrastructure projects in America and called President Trump's move vindictive and reckless. New Jersey Senator Andy Kim agrees. I hope the American people see this. We have a president that is unhinged, somebody that is so clearly not thinking about what's best for this country. And this is a perfect example of his willingness to hurt American families for his own political benefit. Senator Kim made his comments in an online media post. President Trump said his administration would look to San Francisco as the next target of his federal crime crackdown.

9:54President Trump's Comments come as San Francisco's crime rates have fallen in recent months, with the city on track to see the fewest homicides since the 1950s. Israel threatened to resume attacks on Gaza if Hamas does not go through with all the steps outlined in President Trump's peace plan. Hamas returned all 20 live hostages to Israel on Monday and has sent the remains of seven deceased hostages so far, leaving 21 unaccounted for. Tonight, the top three candidates in New York City's mayoral race will take to the debate stage. Queens Assemblyman Zoran Mamdani running as a Democrat, former New York Governor Andrew Cuomo running as an Independent, and Curtis Sliwa running as a Republican.

10:40Sliwa said that he's trying to distinguish himself from his opponents, saying that Mamdani is a Democratic Socialist and that if he wins, we'll see a rise of more Democratic Socialist candidates running for elected office around the country. Global News 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg. Karen. Thanks, Michael. Time now for our Bloomberg Sports Update. And for that, we bring in John Stashauer. Thanks, Karen. The American League Championship Series began in Toronto with two wins by Seattle. The Mariners back home took an early lead in Game 3, but the Blue Jays scored the next 12 runs and they won going away 13-4.

11:18Toronto had 18 hits, hit four home runs. They'll play game four tonight ahead of game three in the NLCS. In L.A., the Dodgers lead the Brewers two games to none. The NBA season begins next week, and Russell Westbrook just got a job. His 18th season will be with Sacramento. That's your Bloomberg Sports Update. Stay with us. More from Bloomberg Daybreak coming up after this. I'm Carol Masser. And I'm Tim Stenevek, inviting you to join us for the Bloomberg Businessweek Daily Podcast. Now, every day we are bringing you reporting from the magazine that helps global leaders stay ahead. We've got insight on the people, the companies and trends that are shaping today's complex economy.

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13:11on 100 % tariffs if China puts its plans for rare earth export controls on hold. Besant says those restrictions go too far. If China wants to be an unreliable partner to the world, then the world will have to decouple. The world does not want to decouple. We want to de-risk. That was Treasury Secretary Scott Besant at a Washington news conference heard live on Bloomberg Radio. This morning, we're joined by Bloomberg News Chief Asia Correspondent Rosalind Matheson. And, Roz, you've been talking for days about the positioning ahead of possible talks at the end of the month between Presidents Trump and Xi.

13:46Could this offer from Secretary Besant be that off-ramp from these tensions? Good morning. Good morning. Yeah, it will be interesting to see how this is responded to because there's been a rolling series of truces of 90 days. And Scott Besant, as you were saying, is floating the idea of a longer extension if China backs down on some of its rare earth restrictions. but rare earths are really the key point of leverage that China has in this you know obviously because of the scarcity issue and the U.S. desire to have them and so do you use all your leverage just to get an extension of a trade truce or do you use it for something more fundamental which is a proper U.S.-China trade deal you know are you willing to to pull back on some of it but not all of it to get an extension but you if you're China you probably don't want to give it all away just for an extension.

14:38You know, China has promised previously also to be more fulsome with its rare earths and to open the spigot and hasn't necessarily done so in practice. And so for the US also, you need to ask, are they going to get something fundamental out of it? So maybe there is a bit of a window here to at least get an extension of the trade truce. But more broadly, you know, China will want to use its rare earths to negotiate a proper trade deal. Now, to your point, we have seen extension after extension of the tariff pause, this planned meeting between Presidents Trump and Xi. Is there a possibility that that could lead to that broader trade deal that seems to have been so elusive for the last several years?

15:21We have seen that being the breakthrough previously. We've seen it take Xi Jinping and Donald Trump to sit down, and they have done that in different parts of the world and emerge with the trade deal. Those trade deals have lasted for a while, but have descended generally back, you know, after months or years. So there's no guarantee even then. But you do have, you know, a strong personal rapport between Xi Jinping and Donald Trump. They're both negotiators. They're both very transactional. And in the minute, it might take them meeting to produce something. And obviously, if you are going into a meeting that's so high stakes as US president or the president of China, you do kind of want to come out of it with something and you want to be sure that you're going to be able to do so.

16:03So it does seem as at this point they're all leaning on the idea that Xi and Trump need to get in a room and that's where the magic's going to happen. Just 30 seconds left, Roz. We're expecting global CEOs to meet with the top trade negotiator from China this week. Could that have any impact? Well, that will be interesting to see the messaging that comes from that. I mean, Scott Besson has also said that he intends to meet with Hele Feng, who's the Chinese vice Premier before any meeting between Xi Jinping and Donald Trump. And it does show at least that there are various avenues of communication to get messaging between China and the US.

16:39And these executives obviously have skin in the game with either side an incentive to have these trade tensions ease. And so the messaging from that will be very interesting to watch. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify, or anywhere else you listen. You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM Channel 121.

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