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Canadian Prime Minister Mark Carney is meeting with China's top leadership, including President Xi Jinping, in a significant move to reshape global partnerships. The visit comes as Canada navigates strained relations with the United States following disruptive trade policies implemented by Donald Trump.

A Strategic Pivot to Beijing

Marking the first visit to China by a Canadian leader in eight years, Carney is signaling a clear strategic shift. During a meeting on Thursday, he told Chinese Premier Li Qiang, "I believe the progress we have made in this partnership sets up well for the new world order."

Carney's scheduled talks with President Xi on Friday follow a pattern of Western leaders, including the UK's Keir Starmer and Germany's Friedrich Merz, seeking to rebuild ties with Beijing after a trade truce between the U.S. and China stabilized relations.

Expanding Bilateral Trade and Investment

Since taking office last year, Carney has focused on resetting relations and deepening trade with the Asian economic superpower. The high-level meetings build on a recently unveiled agreement designed to expand bilateral commerce in several key areas:

• Energy

• Lumber

• Cultural exchanges

• Pet food exports

On Thursday, Carney also met with executives from major Chinese corporations, including China National Petroleum Corp. and the electric vehicle battery manufacturer Contemporary Amperex Technology Co. Ltd. (CATL).

Navigating the US-China Balancing Act

The diplomatic outreach to China occurs against a complex geopolitical backdrop. Carney has frequently described the Canada-US relationship as having suffered a historic "rupture" due to an array of tariffs imposed by Trump.

This creates a delicate situation for Canada, which faces difficult negotiations with the Trump administration over the North American free trade pact. Complicating matters, U.S. officials have been pressuring both Canada and Mexico to erect barriers against Chinese products as a precondition for those talks.

Lingering Trade Hurdles to Overcome

Despite the positive momentum, two major trade irritants remain unresolved between Canada and China. Ottawa hopes to convince Beijing to ease tariffs on its agricultural products. Meanwhile, Xi's government is pushing for Canada to roll back its own levies on Chinese-made electric vehicles.

A Shift from "Disruptive" to "Stable"

The change in Canada's official tone is stark. Canadian Industry Minister Melanie Joly told reporters on Thursday that the current objective is to bring "stability" to the relationship. This contrasts sharply with her assessment in 2022, when, as foreign minister, she called China an "increasingly disruptive global power."

In a pointed comparison, Joly added that the recent discussions in China have been more predictable than talks with other nations. "You know what? The conversations here have been more predictable and stable than sometimes with other countries, including our neighbor," she said.

Carney is expected to speak with reporters in Beijing later on Friday.

The United States has announced the second phase of a fragile ceasefire in Gaza, throwing its weight behind a new "Palestinian Technocratic Government" designed to manage the territory's transition after the conflict. Former President Donald Trump confirmed his support for the plan on Thursday, which aims to establish stability even as the truce that began in October continues to be violated.

The humanitarian crisis in Gaza provides a stark backdrop for international efforts to establish a stable post-war government.

A New Governance Model for Post-War Gaza

The U.S.-backed initiative centers on the creation of the "National Committee for the Administration of Gaza," a body of technocrats intended to govern the region. According to the plan agreed to by Israel and Hamas in October, this committee will be supervised by an international "Board of Peace."

In a social media post, Trump stated, "I am backing a newly appointed Palestinian Technocratic Government... to govern Gaza during its transition." He also revealed that he will personally chair the Board of Peace and that its members would be announced shortly.

Former U.S. President Donald Trump is personally chairing the 'Board of Peace' intended to oversee Gaza's transitional government.

The proposed structure has drawn criticism from some experts, who argue that having Trump chair a body supervising Gaza's governance resembles a colonial framework.

The 15-member technocratic committee will be led by Ali Shaath, a former deputy minister in the Palestinian Authority who previously managed the development of industrial zones. Mediators Egypt, Qatar, and Turkey confirmed his leadership, and Trump described the committee members as "unwaveringly committed to a PEACEFUL future."

Ceasefire Under Constant Strain

Despite the diplomatic push, the ceasefire on the ground remains extremely fragile. Since the truce began in October, both Israel and Hamas have accused each other of violations. The violence has continued, with reports indicating that over 440 Palestinians, including more than 100 children, and three Israeli soldiers have been killed.

Several key issues continue to test the agreement's viability:

• The failure to retrieve the remains of the last Israeli hostage.

• Israeli delays in reopening Gaza's border crossing with Egypt.

• Hamas's refusal to disarm its military wing.

The Difficult Path to Lasting Peace

As Washington and its partners move into the second phase of the plan, they face the significant challenges of implementing a "comprehensive demilitarization agreement" with Hamas. This phase is also tied to further Israeli withdrawal from Gaza and the deployment of an international peacekeeping force.

The regional mediators—Egypt, Qatar, and Turkey—are tasked with helping to secure the disarmament agreement with Hamas, a cornerstone of the plan's long-term success.

This initiative unfolds against the backdrop of a devastating conflict that began in late 2023. Israel's assault on Gaza has resulted in tens of thousands of deaths, triggered a severe hunger crisis, and displaced the entire population. Numerous rights experts and a U.N. inquiry have labeled the actions as genocide. Israel maintains it acted in self-defense following the 2023 Hamas-led attack, which killed 1,200 people and resulted in over 250 hostages being taken.

The United States and Taiwan have finalized a trade agreement designed to shift a significant portion of the global semiconductor supply chain onto American soil. The deal, announced late Thursday, lowers tariffs on Taiwanese exports in exchange for massive direct investments in the US tech sector.

According to US Commerce Secretary Howard Lutnick, the objective is to bring 40% of Taiwan's entire chip production and supply chain to the United States. In an interview with CNBC, Lutnick stated that tariffs on Taiwan could have been as high as 100% if Taipei had not agreed to manufacture in the US.

The US Commerce Department said the agreement will "drive a massive reshoring of America's semiconductor sector."

This move is expected to provoke a reaction from China, which considers Taiwan part of its territory and frequently criticizes Washington's influence over the island. For its part, Taiwan relies on the US as a critical ally to counter pressure from Beijing.

What the US-Taiwan Deal Includes

The long-negotiated agreement outlines major financial and industrial commitments from both sides.

• Tariff Reductions: The US will lower tariffs on Taiwanese goods from 20% to 15%. This rate will be capped for sectors like auto parts, timber, and lumber. Tariffs on generic pharmaceuticals and certain natural resources will be eliminated entirely.

• Direct Investment: Taiwanese technology companies will make new, direct investments in the US totaling at least $250 billion. This capital is aimed at expanding American capacity in advanced semiconductors and artificial intelligence.

• TSMC's Contribution: The investment figure includes the $100 billion that Taiwanese chipmaker TSMC committed in 2025.

• Additional Credit: The Trump administration added that Taiwan will also guarantee an extra $250 billion in credit to encourage further investment in the US.

The core US strategy is to regain self-sufficiency in an industry it invented. While semiconductors remain a key American export, the most cutting-edge chips—essential for the defense, automotive, and AI industries—are now manufactured in Taiwan.

"We're going to bring it all over so we become self-sufficient in the capacity of building semiconductors," Lutnick said.

Geopolitical Leverage and Taiwan's Response

The deal underscores the strategic leverage Washington holds. Speaking about Taiwan, Lutnick bluntly told CNBC, "Look, they need to keep our president ​happy, right, because our president is the key to protecting their country."

Taiwanese officials framed the agreement as a strategic partnership. Vice Premier Cheng Li-chun described the tariff deal as "unique" and confirmed it will be sent to Taiwan's parliament for approval. She emphasized Taipei's hope to become a close strategic partner with the US.

Addressing concerns about offshoring its core industry, Cheng clarified the government's position. "This is not about moving industry out of Taiwan," she told reporters. "Our tech industry is already an international one."

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Some Bank of Japan policymakers are considering an interest rate hike sooner than markets anticipate, with April emerging as a distinct possibility, according to sources familiar with the central bank's thinking. The primary driver for this accelerated timeline is a weakening yen, which threatens to amplify already persistent inflationary pressures.

While the BOJ is expected to hold rates steady at its upcoming January 23 meeting, internal discussions suggest a growing case for further monetary tightening. This comes just after the central bank raised borrowing costs to a 30-year high of 0.75% in December.

Market Expectations vs. Internal Debate

Current market consensus, reflected in a Reuters poll, points to the next rate hike occurring in July, with rates potentially reaching 1% or higher by September. However, some BOJ officials believe that if there is sufficient evidence of Japan sustainably hitting its 2% inflation target, action could be warranted earlier.

The debate highlights the challenge facing the central bank: normalizing its ultra-low interest rate policy amid rising global economic headwinds and an economy still recovering from deflation.

Governor Kazuo Ueda has advocated for a cautious approach, emphasizing the need to monitor the impact of past rate hikes on Japan’s fragile economy. However, a more hawkish sentiment is gaining ground among other board members.

At the December meeting, opinions included calls for:

• Steady rate hikes to avoid falling behind the inflation curve.

• A rate increase once every few months.

• Timely hikes to prevent excessive yen depreciation.

Hawkish members Naoki Tamura and Hajime Takata have already voiced dissent against the bank's view that inflation will not durably hit 2% until October or later.

Why a Weak Yen Changes the Game

The BOJ’s baseline projection assumes that food-driven inflation will cool, allowing for more sustainable wage-driven price growth. However, the yen's sharp decline since October complicates this outlook.

A weaker currency directly increases the cost of importing fuel, food, and raw materials. With Japanese companies already showing a willingness to pass on higher costs to consumers, a persistently weak yen provides another reason for price increases, a risk drawing significant attention within the BOJ.

Since Sanae Takaichi became prime minister in October, the yen has fallen approximately 8% against the dollar, briefly touching an 18-month low of 159.45. This has kept Japan’s real interest rates deeply negative and drawn criticism for fueling the currency’s slide.

All Eyes on the April Meeting

The BOJ's policy meeting on April 27-28 is shaping up to be a critical event. Several key data points and reports will be available by then, providing a clearer picture of the economic landscape.

Key factors that make the April meeting pivotal include:

• Annual Wage Negotiations: The results of major firms' wage talks with unions will be clear, offering insight into future wage growth.

• Quarterly Business Survey: The BOJ's "Tankan" survey, due April 1, will reveal how previous rate hikes have influenced business spending plans.

• Long-Term Forecasts: The board will release its first-ever growth and inflation projections extending through fiscal 2028, requiring a deeper analysis of its long-term policy path.

In its upcoming meeting, the BOJ is also expected to revise its economic growth and inflation forecasts for fiscal 2026 upwards from the current projections of 0.7% growth and 1.8% core inflation. For months, Japan's core consumer inflation has remained above the BOJ's 2% target, hitting 3.0% in November, driven largely by high food prices.

Singapore's non-oil domestic exports rose by 6.1% in December from a year earlier, government data showed on Friday, led primarily by non-monetary gold and supported by electronic products such as integrated circuits and disk media products.

The export growth compared with a Reuters poll forecast of a 10% increase and followed a revised rise of 11.5% in November.

Among key markets, exports to China and Taiwan rose, while shipments to Japan and United States were lower than a year earlier, Enterprise Singapore said.

For the full-year 2025, non-oil domestic exports grew 4.8%, beating Enterprise Singapore's November forecast of around 2.5%, as it expected robust AI-related demand and high gold prices to provide some support to shipments in the fourth quarter.

In December, the Trade Ministry said annual economic growth for 2025 came in at 4.8%, well ahead of its November forecast of around 4.0% and a previous range of 1.5% to 2.5%.

Source: Theedgemarkets