(UBS)
China Visit
The visit quickly yielded an extension of last year’s trade truce to January 10 (it was set to expire on October 10). Particularly with China’s demonstrated ability to use its dominance in the mining and processing of critical rare earth metals as leverage, it was in the interest of both sides to maintain the détente on trade. Another key issue in US-China relations is artificial intelligence (AI). President Trump has been dismissive of public concerns about safety and other risks of AI. With each leader seeing AI development as essential in its competition with the other, it’s not surprising that the discussions did not yield much tangible progress in addressing AI risks (beyond a notification system around security incidents and further dialogue).
Iran
With ongoing concerns about the economic impact and costs of the war in Iran likely to be an important issue in the November elections, the Senate this week held yet another vote on war authorization. While Republicans mostly continue to support publicly the administration’s war effort and mostly supported the authorization, four Republican Senators joined all but one Democrat in voting to oppose the war. With no end to the war in sight, a key question will be how Congress will pay for the rising fiscal cost of the war. The Pentagon’s official estimate is $44 billion, but outside analysts have had significantly higher estimates. Republicans may try to take a shot at trying to pass a reconciliation bill with Iran war funding after the election. However, there are major hurdles to getting this done during the lame duck period. Otherwise, there will need to be an effort to build bipartisan support for a supplemental bill for war funding. However, given Democrats’ opposition to the war, there are even bigger obstacles with that approach. There’s an imperative to pass this spending (in particular, to rebuild the military’s depleted munitions supply), but there is no clear path forward.
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