India's Trade Deficit Widens as US Tariffs Bite

Canadian Prime Minister Mark Carney has signaled a new era of cooperation with China, declaring the groundwork is laid for a strategic partnership between the two nations across multiple sectors. His comments came during a meeting with China's top legislator, Zhao Leji, in Beijing on Thursday.

Figure 1: Canadian and Chinese delegations meet in Beijing, a pivotal moment in the effort to rebuild diplomatic and economic relations between the two countries.

The four-day trip is the first official visit to China by a Canadian prime minister since 2017 and is seen as a crucial step in recalibrating a relationship that had cooled under the previous administration of Justin Trudeau. The visit builds on a positive meeting Carney had with Chinese leader Xi Jinping in South Korea last October, with another meeting scheduled for Friday.

A spokesperson for the Prime Minister's Office noted that Carney was "heartened by the leadership of President Xi Jinping," adding that warming relations could lead to strategic partnerships in energy, security, and people-to-people ties.

A Diplomatic Thaw After Years of Strain

Both nations have engaged in months of intense diplomatic efforts to repair their relationship. China's top diplomat, Wang Yi, described Carney's visit as a "pivotal" and "landmark moment" during a meeting with his Canadian counterpart, Anita Anand.

Anand acknowledged the significant behind-the-scenes work done to ensure the success of the high-level meetings.

Canada's renewed engagement with China is also driven by a strategic need to diversify its export markets. This push follows the imposition of tariffs on Canada by U.S. President Donald Trump last year, who also suggested the ally could become America's 51st state.

Economic Tensions and Trade at the Forefront

Trade and tariffs are expected to dominate the official talks. Bilateral ties have been tested by several periods of tension, most recently in 2024 when the Trudeau government imposed tariffs on Chinese electric vehicles, mirroring actions taken by the United States.

China responded in March of last year with tariffs on over $2.6 billion worth of Canadian farm and food products, including canola oil and meal. The dispute contributed to a 10.4% decline in Chinese imports of Canadian goods in 2025, according to customs data released Wednesday.

Dialogue between the two countries began to accelerate after Carney took office last year, leading to a series of meetings and calls between top officials that culminated in the leaders' meeting in South Korea.

Business Community Hopeful as High-Level Meetings Proceed

Chinese state media has previously pointed to the Trudeau government's policies, which aligned with U.S. efforts to contain China, as the primary source of friction.

The Canadian business community in China is expressing optimism about the change in leadership. "It was pretty tough watching that previous administration," said Jacob Cooke, CEO of Beijing-based WPIC Marketing + Technologies, a Canadian firm that has worked with brands like Arcteryx and Lululemon. "We know Carney has got a lot of business experience, and he's been to China many times... we're very optimistic, we're confident."

Since his arrival in Beijing on Wednesday, Prime Minister Carney has met with senior executives from several major Chinese corporations, including:

• EV battery manufacturer Contemporary Amperex Technology (CATL)

• China National Petroleum Corp (CNPC)

• Smart wind turbine maker Envision Energy

• Industrial and Commercial Bank of China

• Investment firm Primavera Capital Group

• E-commerce giant Alibaba

A Rapid Military Response After Diplomatic Deadlock

Greenland’s Strategic Role Reenters The Spotlight

NATO Allies Signal Collective Deterrence

Diplomatic Channels Remain Open But Strained

Greenlandic And Danish Opposition Hardens

A Broader Shift In Arctic Power Dynamics

Source: Reuters

A coalition of NATO countries is deploying military personnel to Greenland in a direct response to renewed American pressure to annex the strategically vital Arctic island. The move highlights a significant diplomatic rift between the United States and its European allies.

Denmark, which manages Greenland's defense, along with Germany, France, Sweden, and Norway, have all confirmed plans to send troops this week. This coordinated action follows President Donald Trump's public statements expressing a desire to take control of the island, which he has framed as a matter of national security.

The U.S. president's focus on Greenland has intensified following a military intervention in Venezuela on January 3 aimed at deposing President Nicolás Maduro.

Diplomatic Talks Stall in Washington

The military deployments were announced shortly after tense discussions at the White House between U.S. officials and representatives from Denmark and Greenland. Danish Foreign Minister Lars Løkke Rasmussen and Greenland's Vivian Motzfeldt met with U.S. Vice President JD Vance and Secretary of State Marco Rubio.

Following the hour-long meeting, Rasmussen described the conversation as "frank but constructive" but admitted to a "fundamental disagreement" with the American position. While U.S. officials did not offer immediate comments, President Trump later told reporters, "We need Greenland for national security."

Danish Foreign Minister Lars Løkke Rasmussen and Greenland's Foreign Minister Vivian Motzfeldt address reporters in Washington after tense discussions with U.S. officials.

Although the parties agreed to form a high-level working group to discuss the island's future, no diplomatic resolution was reached to de-escalate the situation.

European Allies Launch 'Operation Arctic Endurance'

In response to the diplomatic impasse, several European nations have committed military support under the banner of a Danish-led exercise named "Operation Arctic Endurance."

Denmark had already announced plans to increase its military activities in and around Greenland, including guarding national infrastructure, conducting naval operations, and deploying fighter aircraft.

Coordinated European Support

• Germany: The German Defense Ministry will send a 13-person "reconnaissance team" to Nuuk. Their mission is to evaluate potential military contributions to regional security, focusing on capabilities like maritime surveillance.

• France: President Emmanuel Macron confirmed French participation via social media, stating, "The first French military elements are already on their way. Others will follow."

• Sweden: Prime Minister Ulf Kristersson announced that several officers from Sweden's armed forces were scheduled to arrive in Greenland to help prepare for the joint exercise.

Denmark Rejects US Position, Ramps Up Arctic Investment

The coordinated military exercise underscores a firm rejection of the U.S. stance, a position that is also strongly held by Greenland's own population. Opinion polls show that Greenlanders overwhelmingly oppose coming under U.S. control, with a majority favoring eventual independence from Denmark.

Denmark has been actively strengthening its position in the Arctic. Danish Foreign Minister Rasmussen noted that his country has "been stepping up," allocating nearly $15 billion in recent years toward defense capabilities in the High North. This includes purchasing 16 additional F-35 fighter jets. Copenhagen has also pledged to increase spending on healthcare and infrastructure within Greenland.

"We didn't manage to change the American position," Rasmussen said. "It's clear that the president has this wish of conquering over Greenland."

He concluded with a firm message: "We made it very, very clear that this is not in the interest of the kingdom."

Silver prices tumbled as investors cashed in on an explosive rally, with the metal falling as much as 7.3% on January 15. The drop came after the United States signaled it would hold off on imposing broad import tariffs on critical minerals.

The correction follows a remarkable run-up that saw silver hit an all-time high of US$93.7515 after surging more than 20% over the previous four trading sessions. As silver retreated, gold prices also declined.

US Policy Shift Eases Supply Squeeze Fears

A key factor behind the sell-off was President Donald Trump's decision to pursue bilateral agreements for mineral supplies rather than immediate, widespread levies. While price floors were mentioned as a possibility, the move away from tariffs alleviated market anxiety.

Fears of potential tariffs had previously led to the stockpiling of supplies, including silver, in U.S. warehouses. This contributed to a global short squeeze in 2025 and continued to support prices into 2026. Traders were closely monitoring a U.S. Commerce Department investigation into whether mineral imports posed a threat to national security.

Daniel Ghali, a senior commodity strategist at TD Securities, noted that the decision "suggests the administration will take a more surgical approach." He added that this "significantly alleviates the fear of a broad-based approach that could have inadvertently impacted the underlying bars that underscore benchmark metals prices."

What Fueled Silver's Explosive Rally?

Silver's recent pullback comes after an incredible performance in 2025, when it jumped almost 150%. The metal's gains outpaced those of gold as some investors sought a more affordable alternative.

The rally was supported by several key factors:

• Industrial Demand: Silver is a crucial component in industrial applications, particularly for solar panels.

• Investment Rotation: Investors moved into silver after gold became too expensive.

• Speculative Buying: A recent speculative frenzy in China added significant upward momentum.

Christopher Wong, a strategist at OCBC Bank, stated that the medium-term outlook for silver "remains firmly constructive, underpinned by supply shortfalls, industrial consumption and spillover demand from gold." However, he warned that "the velocity of the recent moves warrants some near-term caution."

Broader Market Forces and Geopolitical Risk

Both gold and silver benefited from a wider rush into commodities that also propelled tin and copper to record highs. The Trump administration's renewed criticism of the Federal Reserve has bolstered prices and revived the "sell America" trade.

Haven demand has also been fueled by several geopolitical factors, including the U.S. capture of Venezuela's leader, repeated threats to take Greenland, and the ongoing precarious situation in Iran.

Ole Hansen, head of commodity strategy at Saxo Bank, cautioned that market dynamics are complex. "Much of what traders see on the screen reflects forced flows, margin dynamics, option hedging and short covering rather than genuine supply-demand price discovery," he said in a social media post. "In this environment, technical levels lose reliability, stops are easily triggered, and even correct macro views struggle to survive short-term noise."

Market Snapshot and Outlook

By 1 p.m. in Singapore, silver had fallen 6% to US$87.7795 an ounce. Gold declined 0.7% to US$4,591.51, while both platinum and palladium dropped by more than 2%.

According to the latest Markets Pulse survey, gold's rally may have legs beyond January. However, while silver and copper have reached similar milestones, there are signs that investment flows into these metals are wavering as traders reassess the durability of supply constraints.

New bank loans in China climbed more than expected in December, signaling that government stimulus measures may be starting to revive a credit appetite that has been weakened by a property market crisis and soft domestic demand.

Chinese banks extended 910 billion yuan ($130.54 billion) in new loans during the month, a sharp increase from 390 billion yuan in November, according to data from the People's Bank of China (PBOC). This figure surpassed the 800 billion yuan median forecast from a Reuters poll of 19 analysts, though it remained below the 990 billion yuan recorded in December 2024.

Full-Year Lending Hits Four-Year Low

Despite the year-end rebound, the data for the entire year painted a weaker picture. New yuan loans for all of 2025 totaled 16.27 trillion yuan, the lowest annual figure since 2018 and a notable drop from the 18.09 trillion yuan issued in 2024.

This weakness in borrowing highlights the ongoing economic challenges facing policymakers. While China reported a record trade surplus of nearly $1.2 trillion in 2025, authorities have struggled to spark household consumption and counteract a persistent slump in the property sector.

Corporate Borrowing Up as Household Loans Contract

A deeper look into the December figures reveals a clear divergence between corporate and household credit demand.

• Corporate Loans: Grew by 1.07 trillion yuan.

• Household Loans: Shrank by 91.6 billion yuan, following a 206.3 billion yuan contraction in November.

The continued decline in household borrowing, which includes mortgages, underscores the lack of confidence in the housing market. Meanwhile, the growth in corporate lending suggests that policy support, such as the 500-billion-yuan financial tool introduced in September to fund major projects, may be gaining traction.

PBOC Eases Policy as Key Indicators Stabilize

In response to economic headwinds, Beijing has committed to stabilizing the housing market and boosting domestic demand through investments in national projects and a consumer trade-in scheme.

Reinforcing these efforts, the PBOC announced on Thursday it would lower the interest rate on some of its structural monetary policy tools by 25 basis points, effective January 19, to further stimulate the economy.

Broader monetary and credit indicators from the central bank showed a mixed but stable picture in December:

• Outstanding Yuan Loans: Grew 6.4% year-over-year, matching November's pace and slightly ahead of the 6.3% forecast.

• Broad M2 Money Supply: Grew 8.5% year-over-year, accelerating from 8% in November and beating the 8% forecast.

• M1 Money Supply: Growth slowed to 3.8% from 4.9% in the prior month.

• Total Social Financing (TSF): Outstanding TSF, a broad measure of credit and liquidity, grew 8.3% from a year earlier, down from 8.5% in November.

Hopes for an imminent Federal Reserve rate cut are fading as new economic data reveals that inflation is not cooling as quickly as policymakers would like. The latest figures on wholesale and consumer prices will be a critical input for the Fed's economic projections through 2026 and will heavily influence its interest rate decisions this year.

Recent reports suggest that the path back to the Fed's 2% inflation target remains challenging, making a pivot to easier monetary policy less likely in the near term.

Inflation's Stubborn Grip on the Economy

A delayed report from the Labor Department showed that wholesale prices rose by 3% in November, accelerating from a 2.8% increase in October. A surge in energy costs was a primary driver of this increase.

Even after excluding volatile components like food, energy, and trade services, the core measure of wholesale prices climbed 3.5% for the year ending in November. This figure matches the high set in March, indicating persistent underlying price pressures. According to Stephen Brown, an economist at Capital Economics, the impact of tariffs on these numbers appears minimal for now.

This trend was echoed in consumer price data for December. The core Consumer Price Index (CPI), which strips out food and energy, registered at 2.6%. While slightly below the 2.7% forecast by experts, this rate has held steady since September and remains well above the Federal Reserve's official 2% goal.

Based on these figures, Brown projects that the Personal Consumption Expenditures (PCE) index—the Fed’s preferred inflation gauge—could rise to 3%. The PCE index had been stable at approximately 2.8% for the previous three months.

Corporate America Feels the Squeeze

According to the Federal Reserve's "Beige Book," a collection of economic anecdotes from across the country, tariffs were a significant concern for businesses in early January. Many companies that initially absorbed these extra costs are now beginning to pass them on to customers to protect their profit margins.

However, some sectors, such as restaurants and retail, have shown less willingness to raise prices. The general expectation among businesses is that prices will remain elevated as they navigate these increased expenses.

Despite these price pressures, the broader economy has demonstrated resilience. Eight of the twelve Federal Reserve districts reported minor economic improvement, a step up from the preceding four months when most regions saw little to no growth.

A Split Emerges Among Fed Officials

The latest economic data has sparked a range of interpretations among Federal Reserve leaders regarding the future path of monetary policy.

The Optimistic Case for Gradual Easing

Anna Paulson, president of the Philadelphia Fed, expressed cautious optimism. She argued that price increases stemming from tariffs are mostly confined to goods, not services, and are unlikely to fuel long-term inflation. Paulson projects that goods inflation will return to the 2% target by the end of 2026, with the most significant impact felt in the first half of this year.

"I am feeling cautiously optimistic," Paulson noted, suggesting that even if the full-year inflation figure seems high, the short-term trend could hit the 2% mark by December. If inflation continues to moderate and the labor market remains stable, she anticipates "modest" rate reductions later this year.

The Aggressive Push for Lower Rates

In contrast, Fed Governor Stephen Miran is advocating for more significant rate cuts. He predicts that declining prices in services and housing will offset the rise in goods prices. Miran has penciled in 150 basis points of rate cuts for 2026, a stark contrast to the single 25-basis-point cut anticipated by most of his colleagues.

Miran's argument centers on the belief that the "neutral rate"—the interest rate level that neither stimulates nor restricts the economy—has fallen. He attributes this shift to lower population growth from changing immigration patterns, which he believes will eventually cool inflation. He also acknowledged it remains an "open question" what is driving goods prices higher if not tariffs, suggesting lingering pandemic effects or tech export restrictions as possibilities.

The Cautious Stance on the Final Mile

Neel Kashkari, president of the Minneapolis Fed, remains more uncertain. While he agrees that inflation is on a downward trajectory, he is unsure whether it will settle at 2.5% or remain higher by the end of the year.

Kashkari highlighted a growing divide in the economy: high-income families are faring well, but lower-income Americans are struggling with the high cost of living, not a lack of employment. He cautioned that cutting interest rates prematurely to support the job market could backfire, worsening inflation for the very families it aims to help.

"Overall, the economy seems quite resilient," Kashkari said. He pointed to strong consumer spending and new investments in artificial intelligence as key growth drivers. The economy's failure to slow more significantly despite high interest rates has led him to question whether current monetary policy is as "tight" as it appears.

What to Expect from the Fed's Next Meeting

Following a series of three rate cuts last autumn, the Federal Reserve is now widely expected to hold its benchmark interest rate steady in the 3.5% to 3.75% range at its upcoming meeting later this month.