Global Trade Remains Strong Despite Policy Changes, Uncertainty: UNCTAD

Economic

Summary:

Global trade expanded by about $500 billion in the first half of 2025, despite volatility, policy shifts and persistent geopolitical tensions.

Global trade expanded by about $500 billion in the first half of 2025, despite volatility, policy shifts and persistent geopolitical tensions. Momentum remained strong into the third quarter, even as growth patterns varied across regions and sectors, according to UNCTAD Global Trade Update (October 2025).

Trade in both goods and services recorded solid gains compared with the first quarter. Goods trade growth edged up from about 2% to 2.5% quarter over quarter, while services trade rebounded after contracting in the first quarter.

Manufacturing remained the main driver of global trade growth in the second quarter, led by the electronics sector. Strong demand for hybrid and electric vehicles continued to boost the automotive industry, reinforcing manufacturing’s central role in the current phase of trade expansion.

UN Trade and Development’s nowcast shows continued growth in the third quarter, with goods expected to expand by about 2.5% quarter over quarter and services accelerating sharply to around 4%. On a rolling annual basis, growth remains robust – about 5% for goods and 6% for services.

Prices for traded goods rose slightly in the second quarter, with preliminary estimates pointing to a marked increase in the third.

This suggests that while the rise in global trade value during the first half of the year was driven mainly by higher volumes, growth in the third quarter will be partly fuelled by rising prices.

Growth in the second quarter was driven primarily by developing economies, supported by rising South–South trade. Weak United States trade performance weighed on the global average.

Global imbalances in goods trade, which had widened in recent quarters, narrowed in the second quarter of 2025, largely reflecting shifts in United States trade policy.

Barring major shocks in the final months of the year, global trade is on track to surpass its 2024 record.

Despite turbulence from shifting US trade policy, global trade dynamics have so far shown limited disruption, though uncertainty over future policy remains a key risk. Geopolitical instability also continues to weigh on trade, with persistent conflicts that could further disrupt regional dynamics and heighten concerns over energy and food security.

Source: TradingView

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Michelle

Economic

Forex

The Australian and New Zealand dollars regained some ground on Monday as investors speculated the latest salvoes in the U.S.-China trade war were more show than substance, though increased volatility looked set to be a feature near-term.

Both currencies had crumbled on Friday when U.S. President Donald Trump threatened to slap 100% tariffs on China by November 1, sparking a rush to safe havens.

The Antipodean currencies, with open economies highly leveraged to commodities, tend to be used as hedges against risk at times of global stress.

Yet Trump had sounded more conciliatory on China over the weekend and analysts hoped the tariff threat was a negotiation tactic and some compromise would be found.

"The market reaction to the tariff warning last Friday seems excessive," said Raymond Yeung, chief economist for Greater China for ANZ.

"However, this tit-for-tat is likely to continue for some time, with periodic negotiations, as a new normal in the ongoing trend of China-US economic decoupling."

For now, the hope was enough to lift the Aussie 0.9% to $0.6529, recovering a chunk of Friday's 1.3% fall. Support lies at $0.6469, with the next rally target at $0.6573.

The risk of greater market volatility supported bonds, with 10-year yieldsdown 6 basis points at 4.308%.

The kiwi dollar added 0.4% to $0.5740, after falling 0.9% on Friday to test support around $0.5710. It now faces resistance at $0.5752 and $0.5844.

The currency was hampered by expectations of further rate cuts at home, with key two-year swap rates falling to their lowest since early 2022 at 2.5226% (NZDSM3NB2Y=).

Markets imply an 85% chance the Reserve Bank of New Zealand will ease again in November, having slashed the cash rate (OCR) by half a point to 2.5% last week. (0#NZDIRPR)

In contrast, the Reserve Bank of Australia kept rates at 3.60% this month and sounded cautious about easing again, leaving the kiwi down near three-year lows on the Aussie at A$0.8793 (NZDAUD=R).

"For now we seen a bottom of A$0.8750 that appears to be holding, even as traders increase their expectation that the OCR ends up closer to a terminal rate of 2.00%," said Mieneke Perniskie, a senior dealer at Kiwibank.

"The RBA appear to be at the end of their cutting cycle, with just 25bp of further easing expected, the timing of which is uncertain."

Source: TradingView

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Gerik

Economic

Guidance Withdrawal Reflects Growing Global Headwinds

Australia’s leading winemaker, Treasury Wine Estates Ltd. best known for its Penfolds label has abandoned its earnings guidance for the 2026 financial year and paused a planned A$200 million share buy-back due to mounting uncertainty in two key international markets: China and the United States. The announcement on Monday sent the company’s shares plunging by up to 14%, marking the steepest single-day decline since the onset of the Covid-19 pandemic and dragging Treasury’s valuation to its lowest point since September 2015.

This abrupt reversal is not merely a company-specific move but reflects broader structural pressures confronting the global wine industry. Shifts in consumer behavior particularly among younger demographics combined with softening macroeconomic conditions, have fundamentally altered demand dynamics in premium wine categories.

China’s Consumption Trends Undermine Market Recovery Hopes

The sharp drop in Treasury’s stock was largely driven by weaker-than-expected stock depletions in China during September. This underperformance stands in stark contrast to investor expectations earlier this year, when the removal of punitive tariffs in 2024 was anticipated to rejuvenate the company’s Chinese growth trajectory. Those tariffs had been imposed in retaliation to political tensions in 2020, when Australia called for an inquiry into the origins of Covid-19.

Although the trade barriers were lifted, Treasury now warns that its financial targets in China for FY2026 are unlikely to be met if current consumption trends persist. A significant causal factor is the Chinese government's policy discouraging alcohol consumption at official state functions. This policy shift has curtailed institutional demand, an important sales channel for premium wines like Penfolds.

RBC Capital Markets analyst Michael Toner interpreted Treasury’s retreat from guidance as a predictable response to "evolving consumption dynamics" in China. However, the complete withdrawal of performance forecasts for the Penfolds brand underscores the heightened uncertainty surrounding the Chinese market’s short-term potential.

U.S. Distribution Restructuring Adds to Uncertainty

Simultaneously, Treasury faces operational headwinds in the U.S. due to ongoing distributor transitions in California, one of its core markets. The company noted that these disruptions were significant enough to invalidate prior projections of modest growth for its Treasury Americas division for FY2026.

This issue illustrates a correlative relationship between internal logistical shifts and short-term revenue performance. The operational changes, while potentially beneficial in the long term, have undermined near-term visibility, forcing management to prioritize flexibility over guidance.

Strategic Pause in Share Buy-Back Reflects Caution Under New Leadership

Treasury’s decision to halt its A$200 million share buy-back program of which only 15% has been completed further reflects a cautious stance. The company explicitly stated that the program would remain on hold “until there is greater clarity around trading conditions and expectations.” This language signals both a reactive posture to external volatility and a broader recalibration of capital allocation strategy.

The uncertainty coincides with a critical leadership transition. Sam Fischer is set to take over as CEO from Tim Ford later this month. Ford had steered the company through pandemic-era disruptions and China’s trade sanctions, and Fischer now inherits a far more complex strategic landscape. His early tenure will be tested by the need to stabilize operations, re-engage with the Chinese market, and rebuild investor confidence.

Treasury Faces a Fragile Crossroads Amid Shifting Global Demand

The withdrawal of FY2026 earnings guidance by Treasury Wine Estates and the suspension of its share buy-back highlight the severity of challenges facing global premium wine brands. China’s evolving regulatory stance, combined with changing consumer preferences and transitional disruptions in the U.S., has created a highly volatile operating environment.

Although the company remains fundamentally strong, near-term prospects are clouded by external factors largely beyond its control. With new leadership stepping in, Treasury’s focus will likely shift to defending core markets, recalibrating growth strategies, and navigating a more fragmented global trade landscape. Investors and analysts alike will be watching closely for signs of stabilization in demand and clearer strategic direction in the months ahead.

Source: Reuters

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Gerik

Economic

Political

Xi’s Strategic Counter: Rare Earth Controls as Economic Leverage

President Xi Jinping has reasserted China’s position in the escalating U.S.–China trade conflict by imposing sweeping export controls on goods containing even trace amounts of rare earths. The move, framed by Beijing as defensive, was a direct response to the United States’ tightening of export restrictions on advanced semiconductor and software technologies. These rare earth materials are essential for the production of both civilian and military technologies, including artificial intelligence systems and advanced weaponry.

Beijing’s message was unequivocal: China will not tolerate unilateral economic coercion. The timing of this policy, coming just weeks ahead of a proposed summit between Xi and Trump, underscores its strategic intent to draw a red line that the U.S. must not cross without consequences.

Washington’s Tariff Threats Rekindle Decoupling Fears

Trump's response was immediate and forceful. He threatened to cancel the anticipated meeting with Xi and proposed doubling tariffs on Chinese goods to 100%, accompanied by expansive export controls on all critical software. This potential escalation would push U.S. tariff rates on Chinese goods close to 140%, levels that economists say would effectively shut down trade rather than simply increasing costs.

The Trump administration’s messaging has been contradictory open to negotiation on one hand, while pressing forward with protectionist threats on the other. On Truth Social, Trump struck a softer tone, stating, “The U.S.A. wants to help China, not hurt it!” However, he also reiterated that the tariff hike scheduled for November 1 remains in place.

This dual messaging reflects a strategic balancing act: keep pressure high while leaving diplomatic channels open. Nonetheless, the threat of renewed tariff hikes reintroduces significant volatility into global markets.

Interpretation of the May Truce Diverges Sharply

A critical source of the current breakdown is the divergent interpretation of the May tariff truce. While Xi understood it as a comprehensive freeze on new trade barriers including export controls and restrictions on strategic firms Washington interpreted it more narrowly, focusing only on tariff reductions tied to unimpeded access to rare earth materials.

This disagreement has reopened wounds in the relationship, bringing back fears of deeper decoupling. Markets reacted sharply on Friday, with U.S. stocks suffering their worst sell-off in six months. Commodities such as soybeans, wheat, copper, and cotton also dropped, illustrating the spillover risks of renewed trade hostility.

Strategic Stakes: Rare Earths, National Security, and Global Supply Chains

Beijing’s decision to limit access to rare earths is not merely economic. These minerals underpin key defense technologies in the U.S., from missile guidance systems to fighter jets. Analysts at Hutong Research noted that any disruption to rare earth flows threatens U.S. defense manufacturing and, by extension, the global projection of American power and the stability of the U.S. dollar. The current standoff thus has a strong causal relationship with national security policy, not just trade balances.

Trump’s previous imposition of 145% tariffs in April prompted Beijing to block U.S. purchases of Chinese rare earth magnets resulting in widespread factory shutdowns and highlighting the fragility of America’s supply chains. A repeat of that blockade is now back on the table if U.S. tariffs rise again.

Investment Deals, TikTok, and Limited Room for Compromise

China has reportedly offered a substantial investment package to the Trump administration, but such a gesture is likely to be blocked under U.S. national security rules. This friction is compounded by ongoing uncertainty surrounding TikTok’s U.S. operations, which remain politically sensitive. Any collapse of that deal would further entrench mistrust.

Analysts at CF40, a Beijing-based think tank, argue that Washington may face greater political constraints due to inflationary pressures and the 2026 midterm elections. The administration, they suggest, uses TikTok as a tool to attract younger voters, limiting its appetite for extreme trade measures.

Despite surging exports and resilient manufacturing activity, China still faces domestic deflationary pressures and weak consumption. A sudden tariff shock could destabilize that fragile recovery. However, Xi may find cover in the fact that Chinese exports have performed strongly this year, providing leverage to push back.

Next Moves and Fragile Diplomatic Windows

Another round of talks is expected in Frankfurt before the November 10 truce expiration. The scheduled Xi–Trump summit in South Korea, days before tariffs take effect, remains a potential turning point. If diplomacy fails, China’s export controls could expand further and the U.S. may enact broader restrictions on technology access.

Negotiations could resume sooner as Chinese officials head to Washington this week for meetings with international finance chiefs. Yet Beijing may face pushback from global partners, as the rare earths curbs impact not only the U.S. but also European and Asian firms, disrupting broader supply chains.

High-Stakes Brinkmanship with Global Consequences

The current standoff marks a critical juncture in U.S.–China relations. Xi’s red line represents a firm assertion of China’s economic sovereignty, while Trump’s tariff threats reinforce a transactional view of diplomacy. Both sides are testing the limits of pain tolerance economically and politically.

While markets initially recoiled, some signals of openness to compromise remain. Negotiations may still yield a resolution, but as the truce deadline approaches, the risk of escalation looms large. With rare earths, semiconductors, and national security on the table, the consequences of a misstep extend far beyond tariffs into the heart of global economic and geopolitical stability.

Source: Bloomberg

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Glendon

Economic

Commodity

Oil prices climbed nearly 2% in Asian trade on Monday after steep declines in the previous trading session, as U.S. President Donald Trump sought to ease investor concerns over escalating trade tensions with China.

As of 21:58 ET (01:58 GMT), Brent Oil Futures expiring in December jumped 1.7% to $63.78 per barrel, while West Texas Intermediate (WTI) crude futures climbed 1.8% to $59.95 per barrel.

Both benchmarks had fallen nearly 4% to five-month lows on Friday after Trump said he would impose an additional 100% tariff on imports from China, raising fears of weaker global oil demand.

Trump tempers China tariff stance

Over the weekend, Trump appeared to soften his tone, posting on Truth Social that “Don’t worry about China, it will all be fine,” which helped calm markets and lift risk appetite.

He added that "the U.S.A. wants to help China, not hurt it", hinting negotiations could continue.

The remarks spurred a modest rebound across commodities after last week’s selloff.

Oversupply worries remain in focus

Meanwhile, a ceasefire agreement between Israel and Hamas -- brokered by President Trump -- has reduced geopolitical tensions in the Middle East, weighing on oil prices.

The broader sentiment remained fragile as concerns about oversupply persisted. The U.S. Energy Information Administration (EIA) last week raised its 2025 crude output forecast to a record 13.53 million barrels per day, pointing to stronger U.S. supply growth.

At the same time, OPEC+ is pressing ahead with a gradual increase in production. The producer group agreed earlier this month to raise output by about 137,000 barrels per day in November, the smallest of the options discussed, in a bid to balance market stability with the risk of a growing glut.

Source: Investing

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Gerik

Commodity

Economic

Temporary Recovery in Oil Markets as Trade Anxiety Cools

Global oil prices regained ground on Monday following a sharp decline last week, as President Donald Trump’s administration indicated a willingness to de-escalate recent trade hostilities with China. Brent crude surpassed the $63 per barrel mark after tumbling 3.8% on Friday the largest single-day drop since August while West Texas Intermediate (WTI) hovered near $60.

The rebound was largely driven by sentiment, as markets responded positively to Trump’s softened rhetoric over the weekend. Speaking aboard Air Force One, Trump suggested the U.S. “will be fine with China,” offering a conciliatory tone even though the 100% tariff on Chinese goods and critical software exports, slated for November 1, remains officially in place.

Market Psychology: A Sentiment-Driven Rebound

This bounce in prices appears more reactive than strategic. Haris Khurshid, CIO of Karobaar Capital, described it as a "positioning rebound," noting that traders had priced in a worst-case scenario last week. The partial reversal in tone provided an opportunity for profit-taking rather than a signal of long-term bullishness. The current price recovery is causally tied to softer messaging, but not necessarily to changes in structural fundamentals or policy certainty.

Without tangible progress on trade negotiations, analysts warn that the rally could prove short-lived. This suggests a fragile correlation between political sentiment and oil pricing, wherein verbal diplomacy temporarily soothes volatility without changing the underlying risk landscape.

China’s Countermeasures and Logistics Ripple Effects

Meanwhile, China’s latest retaliatory move in the form of port fees on U.S.-owned vessels added operational disruptions to the geopolitical tensions. Set to take effect on October 14, the new fees prompted sudden cancellations across vessel categories, including oil tankers. This logistical bottleneck pushed up shipping rates, creating additional cost pressures in the oil supply chain.

These port fees mirror similar levies implemented by the U.S. on Chinese ships, escalating the tit-for-tat strategy not only in goods but in maritime logistics a domain where China maintains significant global influence. This escalation underscores the deeper strategic nature of the standoff, with consequences reaching beyond trade balances into global supply chain friction.

Oil Market Caught Between OPEC Supply and Geopolitical Volatility

Even as tensions around U.S.–China trade take center stage, broader forces continue to shape oil’s trajectory. The Organization of the Petroleum Exporting Countries (OPEC) and allied producers have recently increased output, a move that threatens to deepen an already looming supply surplus. This production uptick, when combined with fragile demand due to economic uncertainty, adds downward pressure on prices.

Moreover, geopolitical risks tied to energy flows remain in flux. Although a ceasefire between Israel and Hamas has temporarily reduced Middle East war risk, Trump’s statement about potentially supplying Ukraine with Tomahawk missiles that could reach deeper into Russian territory introduces a new layer of geopolitical instability. This comment ties the energy narrative to military risk, particularly with Russia being a critical OPEC+ member and a key player in European energy supply.

The latest oil price rebound reflects market relief in response to toned-down rhetoric from Washington, but the recovery lacks fundamental support. Unless trade negotiations yield clear de-escalation and logistical frictions ease, the upside for crude oil prices remains limited. Structural oversupply from OPEC+ and evolving geopolitical risks including in Eastern Europe and the Middle East suggest that volatility will continue to define the energy market outlook in the near term. While the market temporarily breathes easier, the underlying drivers point toward persistent fragility.

Source: Bloomberg

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Gerik

Economic

Political

Shifting Dynamics: A Dual Approach to U.S.–China Trade Tensions

President Donald Trump and Vice President JD Vance presented a carefully choreographed message on Sunday, simultaneously applying pressure on China while leaving open the possibility of negotiations. This dual-track strategy aimed to reassure financial markets, preserve American leverage, and pressure Beijing to reconsider its restrictive export controls. Trump’s statement that “it will all be fine” and that he “wants to help China” suggests a tactical softening of tone without retreating from the threat of a trade escalation.

Last week’s announcement of a 100% tariff on Chinese goods, coupled with a threat to restrict U.S. software and aircraft part exports, roiled markets. Stock indices, oil, and crypto assets fell sharply in response. These tensions were ignited by Beijing’s new export controls on rare earth elements critical to U.S. tech and defense industries. Although some measures will not be enforced until November, their symbolic value amplified investor anxiety.

Vice President Vance characterized the turbulence as part of a “delicate dance,” asserting that the United States holds more strategic leverage and is willing to use it if China responds with aggression. This rhetoric supports a causative narrative: Beijing’s moves are seen as provocations, and Washington’s economic response is framed as both justified and preventative.

Strategic Deadline: November 1 as a Pressure Valve

Trump’s selection of November 1 as the implementation date for tariffs appears to be both a warning and an invitation. By setting a future date, Trump retains flexibility while buying time for potential de-escalation. His remark that “November 1 is an eternity” implies that the deadline is negotiable depending on how China responds. U.S. Trade Representative Jamieson Greer echoed this sentiment, hinting at market stabilization if negotiations proceed.

The temporal buffer allows room for diplomacy while sustaining maximum pressure. Goldman Sachs economists noted this creates a spectrum of possible outcomes, from continued tariff pauses to renewed escalations. Their analysis suggests that China’s assertiveness may be a tactical effort to gain concessions, rather than a definitive break from negotiations.

China’s Cautious but Firm Response

China’s Ministry of Commerce responded with calibrated firmness, asserting its right to defend economic interests while encouraging dialogue. The ministry criticized the U.S.’s reliance on tariff threats and warned that China would “resolutely take corresponding measures” if provoked further. However, it also emphasized that export controls differ from outright bans a clarification likely intended to signal that Beijing remains open to negotiation.

This suggests a correlational relationship rather than direct causation: China's rhetoric does not yet indicate an irreversible escalation, but rather reflects a reactionary stance shaped by Washington’s provocations.

Mutual Interests, Strategic Distrust

While Trump emphasized his “friendship” with President Xi Jinping and expressed hope for China’s economic well-being, Vice President Vance reinforced that this relationship hinges on Beijing’s behavior. He warned that China risks global isolation if it continues curbing access to critical materials. These mixed signals praise paired with threats are indicative of a broader strategy to pressure China into softening its stance without closing diplomatic channels.

Greer added that Beijing’s overreach on export controls may backfire, as it undercuts its reputation as a stable trading partner. The Chinese government's reassurances that the controls are not outright bans may reflect a recalibration of messaging to avoid triggering harsher U.S. retaliation.

Broader Implications and the Return of Strategic Tariffs

The current tensions are an extension of the spring’s tariff conflict, which saw both countries raise tariffs to above 125% before stepping back. Presently, China maintains a 10% tariff on U.S. goods, while U.S. tariffs on Chinese imports stand at a combined 30%, atop existing duties.

If diplomacy fails, a return to triple-digit tariffs is plausible. However, both sides have vested interests in avoiding full-scale economic disruption. Trump’s comments and the administration’s rhetoric suggest that the U.S. is testing the waters for a resolution without appearing weak.

The trade dispute between the U.S. and China remains fluid, shaped by strategic ambiguity and shifting public messages. Trump and Vance’s statements over the weekend were designed to reassure markets, pressure China, and maintain negotiating power without closing the door to de-escalation. The interplay between imposed threats and rhetorical flexibility reflects a calculated effort to dominate the diplomatic terrain without undermining global investor confidence. Whether this results in a constructive outcome or renewed economic confrontation will depend on how both powers navigate the coming weeks particularly as the November 1 deadline draws closer.