China Moves to Mend Ties With India as US Tariffs Push New Strategic Alignments

Economic

Summary:

China is sending Foreign Minister Wang Yi to New Delhi in a bid to ease years of tension with India, just as US-India relations sour under Trump’s aggressive tariff regime...

A Diplomatic Reset Amid Geopolitical Realignment

In a significant diplomatic overture, China will send Foreign Minister Wang Yi to New Delhi on August 18, marking his first visit in over three years. The trip signals a potential inflection point in Sino-Indian relations, which have been strained since the deadly 2020 Himalayan border clash. Sources familiar with the matter indicate that a key focus of Wang’s meetings with India’s National Security Adviser Ajit Doval and Foreign Minister Subrahmanyam Jaishankar will be on reducing military presence along their disputed border, a move aimed at de-escalating tensions and rebuilding trust.

This visit is emblematic of a broader thaw that began quietly in late 2024. It comes as India reassesses its geopolitical posture in response to deteriorating trade ties with the United States. President Donald Trump’s recent 50% tariff hike on Indian exports significantly higher than on many of India’s regional peers has added new urgency to New Delhi’s search for alternative economic alignments.

Bilateral Trade and Border Confidence-Building in Focus

China and India are now considering the revival of border trade routes that were shuttered during the Covid-19 pandemic and have remained closed since the 2020 clashes. The proposed reactivation of three designated trading points along their 3,488-kilometer Himalayan border could restore long-standing local trade in goods such as spices, wool, carpets, and herbal products. While the absolute value of this trade was relatively minor estimated at $3.16 million in FY2017–18 it served as a confidence-building mechanism in border communities and contributed to grassroots economic cooperation.

Reopening these channels would have symbolic and practical significance, particularly if paired with broader coordination on direct flights and visa liberalization. China has already signaled its willingness to coordinate closely with India on these measures, describing the need for “properly handling differences” in light of their shared identity as key developing economies and members of the Global South.

Strategic Timing: Modi’s Visit to China and Trump’s Tariff Pressure

The timing of Wang Yi’s visit is notable. Indian Prime Minister Narendra Modi is expected to travel to China later this month to attend the Shanghai Cooperation Organisation (SCO) summit in Tianjin. There, he may hold a bilateral meeting with Chinese President Xi Jinping his first since 2018. This potential face-to-face engagement could signal a dramatic shift in diplomatic tone following years of border tension and military buildup.

Concurrently, Trump’s administration has increased pressure on India for its continued import of discounted Russian oil. The U.S. claims these purchases fund the Kremlin’s war effort in Ukraine, but India has defended its stance by arguing that such imports help stabilize global energy markets. Moreover, India’s deepening trade ties with Russia cemented by new bilateral agreements in July highlight New Delhi’s growing resistance to Washington’s foreign policy demands.

Thus, China’s engagement with India comes at a time when New Delhi appears more willing to diversify its alliances and reduce its dependence on Western partners, especially the United States. There is a correlative relationship here: the more Trump’s tariffs alienate traditional partners, the more space opens for China to reassert influence regionally.

Economic Concessions as Tools of Diplomacy

China has also made tactical economic moves to support the diplomatic reset. It has recently relaxed restrictions on fertilizer shipments to India, providing short-term relief in a sector that affects both food security and inflation management. These incremental gestures align with China’s broader effort to rebuild bilateral goodwill through low-risk, high-visibility economic concessions.

If both sides continue to prioritize cooperation over confrontation, it could mark a turning point in regional power dynamics. India and China remain the world’s most populous nations and fastest-growing major economies. Strengthened ties could reshape the trajectory of the Global South, not just in terms of trade but also in regional security frameworks and global governance.

A Pragmatic Shift in a Fragmenting World Order

As global alliances realign under the weight of U.S. protectionism and geopolitical competition, the warming relationship between India and China reflects a pragmatic recalibration of national interests. While tensions still linger particularly along the border the willingness of both governments to re-engage on multiple fronts suggests a growing understanding that strategic cooperation may serve their long-term goals more effectively than rivalry.

China’s diplomatic outreach, paired with India’s growing disillusionment with Trump-era tariffs, introduces a new chapter in Asian diplomacy one that could gradually reshape the economic and political geometry of the region, especially as the multipolar world order becomes more defined.

Source: Bloomberg

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Winkelmann

Forex

Economic

Euro zone industrial output dipped more than expected in June even as overall economic growth held up in the second quarter, challenging views that the 20 nation currency union remains resilient to the fallout from a global trade war.Industrial output fell 1.3% on the month in June, driven by a big dip in Germany and weak consumer goods production, underperforming expectations for a 1.0% fall, data from Eurostat showed on Thursday.

Adding to the negative surprise, Eurostat also revised its output growth estimate for May to 1.1% from 1.7%, suggesting that the underlying trend is weaker than thought.Meanwhile GDP grew by 0.1% on the quarter, in line with a preliminary estimate, and employment rose just 0.1% on the quarter, in line with expectations in a Reuters poll, but below the 0.2% in the previous three months.A recent string of relatively upbeat indicators from purchasing managers (PMI) data to the European Commission's sentiment reading have fuelled a narrative that consumption is keeping the bloc resilient to trade tensions, but more recent numbers, like industrial orders and a key sentiment reading from Germany, have challenged this view.

Still, investors continue to bet on a modest upturn on the premise that a recent EU trade deal with the U.S. provides much needed certainty and Germany's plans to sharply boost budget spending will support growth.This is why financial investors think the ECB may be done cutting interest rates and policymakers will sit out a temporary dip in inflation below the 2% target, as price pressures over the medium term are already building up.Growth is unlikely to take off, however, and the euro zone is facing modest expansion of only around 1% a year in the coming years, trailing other major economies, given structural inefficiencies.

Compared to a year earlier, second quarter economic growth was 1.4%, a figure that is boosted by a one-off demand surge before U.S. tariffs took effect. This figure is now seen slowing steadily before picking up in 2026.The monthly industrial fall was driven by a 2.3% drop in Germany and an 11.3% fall in Ireland, a figure that is unlikely to concern many, since Irish data is exceptionally volatile due to activity among big multinational companies, mostly in pharmaceuticals, based there for tax purposes.Industry figures showed that besides energy production, every sector took a dip last month, led by a 4.7% fall in non-durable consumer goods and a 2.2% fall in capital goods production.

Source: Reuters

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Gerik

Economic

Commodity

Gold Retains Strength Amid Shifting Rate Expectations

Gold prices maintained recent gains on Thursday after US Treasury Secretary Scott Bessent publicly called on the Federal Reserve to cut its benchmark interest rate by at least 1.5 percentage points. This rare political intervention signaled intensifying pressure on the central bank and triggered a notable market response, increasing the probability of a September rate cut.

Bullion rose as much as 0.6% before easing to trade around $3,365 per ounce. This price movement reflects a direct causal relationship: lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, making the metal more attractive to investors. The drop in Treasury yields following Bessent’s comments added further support, as real returns on safe-haven bonds diminish when rate expectations fall.

Market Sentiment Shifts Toward Monetary Easing

In contrast to last month’s cautious outlook, when traders assigned less than a 50% chance of a rate cut in September, sentiment has now shifted decisively. The market consensus is building around a 25-basis-point cut next month, with a growing faction pricing in a larger adjustment. This pivot reflects how policymaker commentary, even when unofficial, can materially influence monetary expectations and asset pricing.

Gold’s steady performance in this context illustrates the correlation between easing cycles and rising demand for safe-haven assets. The market’s reaction also suggests that investors are front-running a potential policy shift, reinforcing bullish momentum for precious metals.

Geopolitical Tensions and Central Bank Buying Support Broader Rally

Beyond interest rates, gold’s 28% year-to-date gain is also supported by sustained geopolitical and trade-related uncertainty, which continues to drive haven demand. Central bank gold purchases particularly from emerging markets seeking diversification from US dollar reserves have further underpinned the price rally. The majority of this surge occurred in the year’s first four months, but recent developments show that macroeconomic catalysts remain potent.

Spot gold edged up 0.2% to $3,363.35 per ounce in early London trading, building on a similar gain in the prior session. Meanwhile, silver and platinum were largely unchanged, and palladium posted a minor increase, suggesting investor interest remains concentrated in gold due to its more direct sensitivity to interest rate trends and macro hedging functions.

Tariff Uncertainty on Gold Imports Briefly Distorts Futures Market

An additional factor influencing gold pricing is regulatory ambiguity. Confusion over whether US imports of gold bars would face new tariffs sparked temporary dislocations in the futures market earlier this week. The resulting premium for New York-traded gold futures over London spot prices was eventually narrowed after President Donald Trump stated there would be no levy. However, his lack of elaboration left some residual uncertainty in the market, revealing how regulatory clarity or lack thereof can introduce short-term price distortions even in highly liquid markets.

This episode highlights the correlation between policy announcements and market efficiency: when clarity is absent, arbitrage mechanisms between spot and futures markets weaken, leading to pricing anomalies that may persist until official confirmation is delivered.

Gold Outlook Anchored in Rate Speculation and Policy Ambiguity

Gold’s current price trajectory remains closely tied to investor expectations surrounding US monetary policy. Bessent’s call for aggressive rate cuts amplified speculation of a shift in Fed policy, reinforcing gold’s appeal as both a hedge against declining real yields and a store of value in uncertain times.

With additional support from central bank demand and lingering trade policy ambiguities, gold appears well-positioned to maintain its elevated levels in the near term. However, much will depend on how the Fed responds to both political pressure and incoming economic data ahead of its next meeting, with the metal’s future likely to be determined by a complex interplay between rates, risk sentiment, and global capital flows.

Source: Bloomberg

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Gerik

Economic

Trade Standoff and Policy Escalation

The current impasse stems from a rapid escalation in a year-long trade dispute. Beijing’s decision to impose a 100% duty on Canadian canola meal came without warning, catching both importers and feed producers off guard. This measure followed a preliminary anti-dumping levy of 75.8% on Canadian canola oilseed announced just two days earlier, itself a retaliatory move in response to Ottawa’s tariffs on Chinese electric vehicles imposed last August. The tariff expansion fits into a broader Chinese strategy of applying targeted pressure across multiple agricultural and industrial sectors, a pattern also seen in its March decision to impose identical 100% tariffs on Canadian rapeseed oil, oil cakes, and pea imports.

Trade sources estimate that between 200,000 and 400,000 metric tons of canola meal are now sitting idle in secure warehouses near major Chinese ports, awaiting resolution. At the higher estimate, the cargo’s market value reaches roughly $120 million. Importers face an unpalatable choice: either absorb the full tariff hit, doubling the landed cost and making domestic resale unviable, or reroute the product to alternative markets willing to take the feed ingredient at a 30% discount.

Market Ripple Effects

The search for alternative buyers is focusing on Southeast Asia and South Korea, where demand for protein-rich feed ingredients remains robust. However, selling into these markets at discounted rates could depress regional feed prices and disrupt existing supply relationships. The heavy discounting also highlights a deeper structural problem for Canadian exporters: the sudden closure of China, historically a major buyer, compresses margins and forces them into more competitive, lower-value sales channels.

From a geopolitical perspective, the canola meal impasse serves as a visible example of how agricultural commodities are weaponized in trade conflicts. For China, targeting canola a key Canadian export not only hits Canadian farm incomes but also signals to Ottawa that tariff retaliation will be felt across politically sensitive rural constituencies. For Canada, the challenge is compounded by the difficulty of quickly re-diverting such large volumes to markets with comparable absorption capacity.

If the trade standoff persists, long-term supply chain adjustments may be necessary, including diversifying Canadian export destinations and negotiating alternative logistics routes. In the near term, the clearing of stranded stocks will likely depend on importers’ ability to negotiate sales into secondary markets, potentially at sustained discounts that could ripple back to farm-gate prices. The episode also raises a broader caution for agribusiness: in the current geopolitical climate, reliance on a single dominant buyer carries elevated risk, and market access can vanish overnight under the weight of political disputes.

Source: Reuters

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Winkelmann

Economic

Commodity

Forex

Gold (XAUUSD) prices have been rising for the third consecutive day, hovering near 3,359 USD. Investors are betting on Federal Reserve policy easing and awaiting Friday’s news.

XAUUSD forecast: key trading points

● Gold (XAUUSD) climbs higher for the third day in a row

● The market expects the Fed to ease monetary policy in September

● XAUUSD forecast for 14 August 2025: 3,380

Fundamental analysis

Gold (XAUUSD) quotes rose to 3,359 USD per ounce on Thursday, marking the third consecutive day of gains amid mounting expectations of renewed Fed rate cuts.

The latest US inflation report eased fears of acceleration due to tariffs, while signs of a cooling labour market broadened the scope for further policy easing. The market has almost fully priced in a 25-basis-point cut in September, with some participants expecting a larger 50-basis-point reduction.

Treasury Secretary Scott Bessent also called for multiple rate cuts, suggesting starting with a half-percentage move.

Additional support for gold came from heightened geopolitical risks ahead of Friday’s meeting between the US and Russian presidents. On Wednesday evening, Trump warned that Russia would face serious consequences if it refused to compromise and show readiness for dialogue. He did not provide specifics but had earlier threatened to impose economic sanctions if the Alaska talks failed.

The Gold (XAUUSD) forecast is positive.

XAUUSD technical analysis

On the H4 chart, XAUUSD quotes remain within the 3,330-3,380 range. After falling from the July peak of 3,439, prices hit a low of 3,267 at the end of the month, from which recovery began. In early August, gold broke above 3,330 and tested 3,408 but failed to consolidate higher.From 7 to 12 August, a gradual decline towards the 3,330 support level was observed, followed by a rebound, with prices now holding around 3,360 near the middle Bollinger Band. Resistance levels lie at 3,380, 3,408, and 3,439, with support levels at 3,330, 3,281, and 3,267.

Consolidation above 3,380 would open the way to 3,408, while a breakout below 3,330 could trigger a decline towards 3,280 and 3,267.

Summary

Gold (XAUUSD) has shown solid growth and retains the potential to climb higher. The Gold (XAUUSD) forecast for today, 14 August 2025, suggests a possible rise to 3,380.

Source: RoboForex

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Samantha Luan

Stocks

Political

Economic

China is preparing to mobilize companies owned by the central government in Beijing to purchase unsold homes from distressed property developers, following the limited success of a previous initiative that relied on local governments, according to people familiar with the matter.Regulators are planning to ask some of the biggest state-owned enterprises and bad debt managers including China Cinda Asset Management Co. to help clear the housing glut, said the people, asking not to be identified discussing a private matter. The firms will be allowed to tap 300 billion yuan ($41.8 billion) of funding that the central bank earmarked for the program last year, one of the people said.

The renewed effort, which is still under discussion, could help speed up the clearance of China’s 408 million square meters of excess inventory - larger than the size of Detroit - and ease the financial burden of the troubled developers. Officials are also considering scrapping a price cap for the program, in a bid to accelerate the process and improve the economics of the plan for both developers and state buyers, people familiar said in March.

The housing ministry and Cinda didn’t immediately respond to requests for comment.

While the move to enlist bad-debt managers might help improve sentiment, the impact may be limited by the firms’ own stretched finances. The plan comes as China’s property sector hits a new low with the delisting of China Evergrande Group and new-home sales by the 100 largest developers falling more than 20% for two consecutive months.The People’s Bank of China launched a nationwide relending program in May 2024 to help local state-owned companies buy unsold homes, and said a few months later it will ramp up the initiative. There are about 60 million unsold apartments in the country, which will take more than four years to sell without government aid, Bloomberg Economics estimated in May last year.

However, progress has been slow with less than 6% of the announced loans approved so far, according to a Bloomberg Intelligence report early this month. Acceleration of the program might be unlikely given a mismatch in the locations of unsold homes and demand for affordable housing, the report said.When China’s property sector started falling into distress more than four years ago, Beijing sought help from bad-debt managers. Regulators told firms including Huarong Asset Management Co. and Cinda to participate in the restructuring of weak developers, acquire stalled property projects and buy soured loans.

Then, in early 2023, the PBOC channeled 80 billion yuan of loans through these bad banks to selected developers at an annual interest rate of 1.75%, while encouraging the bad banks to match that amount with funds from their own reserves, people said at the time.However, few projects have actually been implemented under the policy, and its effect has been lackluster. The four largest bad-debt managers themselves were grappling with souring loans after over-extending during China’s real estate boom.

China’s efforts to put a floor under the years-long real estate slump have underwhelmed as domestic demand and the job market remain weak.

Regulators have also yet to offer more drastic stimulus. Chinese President Xi Jinping called for the acceleration of a “new model” for property development at the Central Urban Work Conference last month, promoting a more balanced approach to urban planning and renovation — while falling short of some investors’ expectations for more aggressive measures.The country’s home sales extended their slump in July as declining prices failed to attract buyers. Analysts including those from UBS Group AG have delayed expectations of China’s property recovery to mid-to-late 2026.

Source: Bloomberg Europe

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Economic

Exports and Consumption Rebound Amid Positive Growth Signals

Vietnam’s July economic performance reflects a complex but generally encouraging picture. Export growth surged by 16% year-on-year, supporting a continued trade surplus of over $2 billion for the second consecutive month. This surplus is substantially higher than the average of less than $900 million per month recorded in the first five months of 2025. This trade performance has helped stabilize foreign exchange supply, contributing positively to exchange rate management and offering room for future monetary easing.

Retail sales also recovered, rising 9.2% year-on-year after three consecutive months of decline, marking an improvement from June’s 8.3% growth, though still below the annual target of 11-12%. This rebound signals stronger domestic demand, supported partly by robust tourism activity during the summer months. International arrivals rose by 35.7%, primarily from China and South Korea, reflecting a partial base effect but also a sustained recovery in the services sector.

Investment Flows Remain Solid Despite External Risks

Foreign direct investment (FDI) maintained positive momentum, with a 10.3% increase in disbursed capital in July and an accumulated 8% rise over the first seven months. The processing and manufacturing sector alone attracted nearly $1.6 billion. Although newly registered capital declined slightly, the trend indicates continued investor confidence in Vietnam’s industrial capacity and strategic position in global supply chains.

Public investment also played a critical role in sustaining economic momentum. Disbursements reached approximately 885 trillion VND, nearly 30% higher than the previous year’s pace. This injection has provided crucial fiscal support amid global volatility and further expanded growth potential.

Structural Weaknesses Persist in Domestic Export Segments

Despite overall export growth, domestic sector exports have declined for three consecutive months, with electronics and steel products particularly affected. This reflects both a structural reliance on external demand and the vulnerability of value-added manufacturing to global cyclical slowdowns.

The July Manufacturing Purchasing Managers’ Index (PMI) rose to 52.4, the highest since August 2024, driven by domestic orders. However, export orders continued to contract, illustrating a divergent trend where internal demand compensates for external softness, highlighting a correlation rather than a causal turnaround in global trade flows.

Inflation Stable but Facing Future Supply-Side Pressures

Consumer price index (CPI) inflation remained under the government’s 4–4.5% target. However, underlying risks persist. One key concern is the possible resurgence of African swine fever. Although pork prices are temporarily subdued due to early slaughtering, slow restocking may lead to shortages by year-end. Pork, which has significant weight in Vietnam’s CPI basket, could thus trigger renewed inflationary pressure during the high-consumption period at the end of the year.

This scenario demonstrates a cause-effect risk chain: a disrupted supply of pork leads to price spikes, which then elevate headline inflation and reduce policy flexibility. Policymakers are advised to closely monitor livestock conditions and intervene if needed.

Global Volatility Complicates Domestic Policy Maneuvers

Global factors remain central to Vietnam’s policy outlook. According to Trần Ngọc Báu from WiGroup, recent signs of a slowdown in the U.S. economy such as declines in manufacturing and services PMI, as well as a deceleration in job creation have led to increased expectations of Federal Reserve rate cuts.

However, this is not perceived as a signal of outright weakness but rather a regulatory adjustment to stabilize inflation and ensure balanced GDP growth. A Fed rate cut, if confirmed, would ease global monetary conditions and relieve pressure on emerging market currencies, including the Vietnamese đồng.

Nonetheless, risks are compounded by U.S. trade policy adjustments. Planned tariff changes especially those targeting transshipped goods could disproportionately affect Vietnamese exports in sectors like textiles and electronics. These sectors are particularly exposed due to their reliance on imported components, and thus would need to comply more strictly with rules of origin to retain preferential access. This represents a direct cause-effect linkage between trade policy changes and Vietnamese exporters’ supply chain strategies.

Exchange Rate Management Faces a Narrowing Buffer

On the domestic front, policy direction remains growth-supportive. There is speculation about removing the credit growth ceiling to support GDP expansion toward the 8.3–8.5% target. However, both Nguyễn Hoàng Linh and Trần Ngọc Báu warn that excessive credit expansion, if unmatched by real economic absorption capacity, could trigger inflation and asset bubbles. Thus, any easing must be tempered with prudence.

Moreover, exchange rate management is becoming increasingly constrained. With an operational buffer estimated at just 1.5–2%, the State Bank of Vietnam must balance three simultaneous objectives: exchange rate stability, inflation control, and growth support. This tri-objective approach is complicated by seasonal pressures toward the end of the year and by narrowing policy space due to global uncertainty.

Navigating Recovery Amid External Shocks

Vietnam’s economic trajectory in July points to a firm recovery foundation, bolstered by trade surpluses, investment inflows, and retail momentum. Yet, the road ahead is complex. Global volatility, evolving trade dynamics, and potential supply shocks particularly in food are likely to test the adaptability of Vietnam’s macroeconomic policies.

For now, authorities must navigate this recovery phase with a balanced approach, ensuring that the gains from internal demand and public investment are not undermined by inflation, external shocks, or premature policy shifts. The emphasis going forward will be on fine-tuning rather than stimulus, with risk management at the center of Vietnam’s economic strategy.

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