Sorry, no search results could be found.
21 Oct 2025 | 3 minutes to read
China’s exports surged in September suggesting President Xi may have a stronger hand in trade negotiations with the US. Global exports rose +8.3% compared to September last year, reaching a total of $328.5bn. However, US-bound cargo continued to fall. The data marked a significant jump from August and provides further evidence that China may be successfully re-directing some shipments previously destined for the US, for example to the EU. China also reported continued deflation last week, with the September Consumer Prices Index declining -0.3%, indicating that domestic demand remains weak.
Sino-US trade tensions continue to simmer. On 14 October, the US introduced a new levy on any Chinese vessel entering US ports after its Section 301 trade investigation – initiated in 2024 – found that Chinese shipbuilding practices “burdened US commerce”. On the same day, China placed curbs on South Korean shipbuilder, Hanwha Ocean, preventing any Chinese individual or entity from doing business with it. China’s move, perhaps in retaliation to South Korea’s alleged cooperation with the US’s investigation, underscores its willingness to constrain countries it perceives may not be aligned with its strategic vision.
The latest escalation of trade tensions relates to so-called “rare earth elements” critical to many technologies, including defence and aerospace. China recently announced the introduction of special export licenses. In retaliation, President Trump threatened 100% tariffs on all imports from China. Separately last week, the US federal government announced a strategic investment in Trilogy Metals, an exploration and mineral development company in North-West Alaska. The 10% ($36.5m) stake will support Trilogy’s copper and critical minerals exploration and is the fifth sovereign wealth investment the US has made since June.
Xi and Trump are expected to meet in South Korea at the end of the month. Investors will hope that they find strategic common ground.
The UK is set to be the second fastest growing economy in the G7 in 2025 according to the latest biannual forecast from the International Monetary Fund (IMF), second only to the US. The projections, which were published last week, show the UK economy growing by 1.3% in both 2025 and 2026. However, that still represents relatively modest growth by historical standards. And importantly, on a per capita basis, economic output is only forecast to grow by 0.4% and 0.5% in 2025 and 2026 respectively – which would be the slowest expansion in the G7. The latest official UK GDP figures – also released last week – showed that the economy grew slightly in August, with the Office for National Statistics (ONS) reporting a 0.1% expansion. This was in line with expectations, but monthly GDP prints are often subject to revision. Indeed, the July figure was revised down from zero to a contraction of -0.1%. The government has consistently said that boosting growth is a priority, and Chancellor Rachel Reeves sought to use the IMF gathering in Washington last week to promote the UK’s financial stability and its viability as a place to invest. Nevertheless, the long run up to her Autumn Budget may ultimately prove a drag on current economic activity, as investors and businesses await confirmation of the future path for fiscal policy. Think tank, the Institute for Fiscal Studies (IFS), last week projected that Reeves would need to find £22bn to meet the current shortfall, while also suggesting there was a “strong case” for going further still to create a buffer sufficient to avoid “limping” from one fiscal event to another.
The IMF forecast also warned that the UK will experience the highest inflation rate amongst the G7 group of advanced economies, citing higher energy bills as a key contributory factor. Consumer price inflation is forecast to average 3.4% this year and 2.5% in 2026. While wage growth has also contributed to inflationary pressures, recent data showed signs of a cooling labour market, with the unemployment rate also ticking up marginally from 4.7% to 4.8%. Nevertheless, the IMF urged the Bank of England (BoE) to be “very cautious” with regards to future interest rate cuts while inflationary pressure persisted. BoE governor, Andrew Bailey, noted that labour market data supported the view of inflation easing, and that he expects rates to be cut again. But when, and to what extent, is highly data dependant. Last week, financial markets were not fully pricing in another cut until March 2026. Bailey noted that US trade tariffs had created uncertainty amongst businesses domestically, but that the BoE had not yet detected a clear impact on inflation, while the IMF’s wider global growth forecast suggested US tariffs had thus far had a more limited impact on advanced economies than had been anticipated. However, navigating the path for monetary policy clearly remains challenging for central banks. How the UK government seeks to get to grips with its noted fiscal challenges next month will have a key bearing on BoE thinking.
Disclaimer
Past performance is not a reliable indicator of future returns. Nothing herein should be construed as a recommendation to hold, buy or sell any security or encourage any investment decision. The mention of any particular asset class, sub-asset class or company does not imply that it is held, or may ever be held, in any product or service.
Before you invest, make sure you feel comfortable with the level of risk you take. Investments aim to grow your money, but they might lose it too.