U.S. Shutdown 2025: Treasury Scrambles as Economic Fallout Spreads – Scott Bessent Warns of Real Impact

• How Is the Shutdown Hitting the U.S. Economy?
• Trump-Xi Meeting Still On Despite Rare Earths Clash
• U.S. Pushes Back Hard Against China’s "Provocative" Move
• Market Rollercoaster: From Panic to Cautious Relief
• What’s Next for the Shutdown and Trade Wars?
• FAQs: Your Shutdown and Trade War Questions Answered

The U.S. government shutdown, now in its 13th day, is biting into the real economy, warns finance expert Scott Bessent. Treasury officials are juggling payments—prioritizing military paychecks while furloughing federal workers and delaying aid to farmers. Meanwhile, tensions with China over rare earths escalate, though Bessent confirms the Trump-Xi meeting at APEC remains on track. Markets wobble, but Treasury’s calming statements offer temporary relief. Here’s the full breakdown.

How Is the Shutdown Hitting the U.S. Economy?

The Treasury Department is now playing financial triage, ensuring military personnel get paid while Smithsonian staff, National Zoo employees, and other federal workers face furloughs. "This isn’t just political theater—it’s hitting paychecks and GDP," Bessent noted on air. Museums are dark, economic data releases are frozen, and farmers are left twisting in the wind without aid. The Ripple effect is spreading to tourism and agriculture, sectors already bruised by earlier trade wars. In my view, this shutdown’s economic damage could linger longer than the 2018-2019 episode.

Trump-Xi Meeting Still On Despite Rare Earths Clash

Even as China flexes its rare earths muscle—announcing stricter export controls—Bessent insists the planned Trump-Xi meeting at November’s APEC summit in Korea isn’t derailed. "Lines of communication reopened fast after last week’s tariff threats," he said. Markets reacted wildly: the S&P 500 plunged 2% Friday (its worst day since April) before rebounding Monday on softer Treasury rhetoric. The 100% tariff threat? "Avoidable if talks go well," Bessent hinted. Smart money’s betting on a face-saving compromise—maybe a token rare earths quota to cool tensions.

U.S. Pushes Back Hard Against China’s "Provocative" Move

China’s new rule—forcing foreign firms using Chinese rare earth materials to obtain export licenses—got a blunt response from Treasury: "We won’t comply." Bessent called it a "command economy overreach" and rallied allies in Europe and Asia to counter Beijing. The irony? China accused the U.S. of hypocrisy over its own tariff threats. Meanwhile, tech manufacturers are sweating—rare earths are vital for everything from iPhones to EV batteries. If this escalates, expect more supply chain chaos like 2023’s chip shortage mess.

Market Rollercoaster: From Panic to Cautious Relief

Last week’s China-U.S. fireworks sent crypto and stocks on a wild ride. The Nasdaq clawed back 2% by Monday as Treasury dialed down the heat. "Markets hate uncertainty more than bad news," quipped a BTCC analyst. True to form, bitcoin briefly spiked as a "chaos hedge" before settling. TradingView charts show the VIX volatility index still elevated—proof traders aren’t relaxing yet. Pro tip: Watch bond yields this week; if they dip further, it signals Wall Street’s bracing for prolonged pain.

What’s Next for the Shutdown and Trade Wars?

With no budget deal in sight, the shutdown could drag into November—coinciding with the APEC summit. Bessent predicts a "ugly patchwork" of stopgap measures. As for China, behind-the-scenes talks at this week’s IMF/World Bank meetings may set the tone. One wildcard: whether Europe backs the U.S. rare earths push or cuts its own deal with Beijing. Either way, grab popcorn—this geopolitical-economic drama has more acts coming.

FAQs: Your Shutdown and Trade War Questions Answered

How long could the U.S. shutdown last?

Historically, shutdowns average 2-3 weeks, but the 2018-2019 one lasted 35 days. With election-year politics in play, this could stretch.

Why are rare earths so important?

They’re essential for tech/military hardware. China controls 80% of global supply—giving it massive leverage.

Will the 100% tariffs happen?

Unlikely if APEC talks go smoothly. Both sides lose in a full trade war—hence the recent de-escalation.