UK Manufacturing Shrinks As Exports Dry Up Amid Tariffs Shock

Economic

Forex

Summary:

UK factories were hit by the biggest plunge in overseas orders in five years as a global trade war outbreak sapped demand from the US, Europe and China, according to a closely watched survey.

S&P Global’s purchasing managers’ index showed the manufacturing sector remaining deep in contractionary territory despite a slight improvement to a reading of 45.4 in April, above the flash estimate of 44 and up from 44.9 in March.

The survey revealed the pressure mounting on factories from Donald Trump’s sweeping tariffs, a stagnant domestic backdrop and higher employment costs following a hike in payroll taxes. Business optimism tumbled to the lowest in almost 2 ½ years, jobs were cut at the second-sharpest pace since the pandemic and cost pressures jumped.

“Surveyed manufacturers noted that US tariff announcements were having a noticeable impact on global markets as trading partners adapt to increased trade volatility,” said Rob Dobson, director at S&P Global Market Intelligence. “Manufacturers are also seeing an increasingly harsh cost environment.”

Economists expect the US tariffs to be disinflationary for the UK by dampening global demand and redirecting trade, as exporters that previously sold in the US, particularly in China, seek alternative markets at a discount. However, the PMI survey suggested that the tariffs may be contributing to price pressures in the manufacturing sector.

High energy prices, increased staff costs and supply-chain uncertainty caused by the tariffs were blamed for the sharpest jump in purchase prices since December 2022. Factories raised their own prices at the steepest pace in over two years.

Bank of England rate-setters have been wary of predicting that tariffs will push down inflation, partly because it could cause supply chain disruptions if US importers rush to find substitutes for goods from countries facing the highest tariffs. Firms could also stockpile goods in case a higher tariff is introduced in future.

Source: Bloomberg Europe

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Economic

Historical Growth Sets the Foundation

Vietnam’s economic expansion has been remarkably steady since the Đổi Mới reforms. In 1986, its GDP stood at just $43 billion. By 2008, this figure had grown nearly threefold to $125 billion. The pace accelerated significantly thereafter: in just 15 years, Vietnam scaled from a $100 billion economy to $408 billion by 2022 and $433.7 billion in 2023.

In 2024, Vietnam's nominal GDP reached $476.3 billion, making it the fourth-largest economy in Southeast Asia—ahead of the Philippines ($462 billion) and Malaysia ($422 billion)—and the 34th largest globally.

Forecast Trajectory Through 2030: Steady Climb but Not Exponential

According to the International Monetary Fund (IMF), Vietnam’s GDP is expected to hit $491 billion in 2025. Despite moving into fifth place regionally behind Indonesia, Singapore, Thailand, and the Philippines, Vietnam remains on an upward path. By 2029, the IMF projects GDP at $627 billion, overtaking Thailand ($616 billion) and moving up to 32nd place globally. That rank is expected to hold in 2030 when Vietnam's GDP reaches $666.5 billion.

Meanwhile, the UK-based Centre for Economics and Business Research (CEBR) is more bullish. It forecasts Vietnam will reach $676 billion in 2029—surpassing Thailand, Singapore ($656 billion), and Malaysia ($594 billion)—and ascend to 33rd globally.

Targeting the $1 Trillion Milestone: When and How?

The CEBR anticipates that by 2039, Vietnam’s GDP could hit $1.41 trillion. This would mark a near-tripling of the country’s current economic size in just 15 years. If realized, Vietnam would rank as the world’s 25th largest economy—leapfrogging ASEAN peers such as Thailand ($1.059 trillion), Malaysia ($1.055 trillion), and Singapore ($982 billion).

This would represent a compound annual growth rate (CAGR) of approximately 5.2% from 2024 to 2039. Such a pace, while demanding, is consistent with Vietnam’s performance over the past two decades, suggesting the target is plausible if growth drivers remain intact.

Structural Dynamics Behind Growth

The climb to $1 trillion will not simply be a function of momentum but will require deepening industrial capacity, upgrading infrastructure, and attracting sustained foreign direct investment (FDI). Furthermore, Vietnam’s growing integration into global supply chains—especially in electronics, textiles, and manufacturing—is likely to play a central role. Demographics also remain favorable, with a young workforce and increasing urbanization.

Yet risks persist. Global macroeconomic instability, trade tensions, and internal structural bottlenecks (e.g., logistics constraints, slow judicial reform, low labor productivity) could slow progress. Vietnam’s ability to continue reforming, particularly in public governance and innovation, will determine whether it hits the $1 trillion mark by the late 2030s or later.

Comparative Perspective: Outpacing ASEAN Peers

By 2039, Vietnam is expected to surpass major ASEAN economies in nominal GDP. CEBR data suggests Vietnam will top Singapore by $428 billion, Malaysia by $355 billion, and Thailand by $351 billion. This shift will have both symbolic and strategic significance. It will reflect a realignment of economic power within Southeast Asia, with Vietnam becoming a key player not only in regional affairs but also in global trade and investment discussions.

Vietnam’s journey from a $43 billion economy in 1986 to a projected $1.41 trillion by 2039 illustrates one of Asia’s most resilient growth stories. While not guaranteed, surpassing the $1 trillion threshold within the next 15 years appears achievable—provided the country maintains reform momentum, navigates global uncertainties wisely, and harnesses its comparative advantages in manufacturing and demographics.

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Patricia Franklin

Economic

What to Know:

● Trump seeks patience from Wall Street as US economy weakens.

● Tariff policies affect inflation and interest rates.

● Federal Reserve monitors inflation expectations amid uncertainty.

Trump Requests Patience from Wall Street Amid Economic Concerns

Trump has requested Wall Street leaders for patience amidst a weakening U.S. economy, influenced by his tariff policies, seeking time to stabilize financial markets.

This request sends signals of uncertainty in the economy, with potential impacts on interest rates and market stability. Federal Reserve officials closely watch inflation expectations.

Trump's Tariff Policy Dominates Economic Concerns

Donald Trump is reportedly seeking more time from Wall Street leaders amid growing economic concerns. His tariff policies, particularly on non-USMCA goods, have sparked debate over financial implications and market stability.

Trump reiterated his tariff stance, asking for patience among financial leaders. Federal Reserve officials have noted the temporary inflationary impact of these tariffs, highlighting complexities in economic forecasting.

Neel Kashkari, President, Minneapolis Federal Reserve, “Trump’s tariff policies may make rate cuts less likely in the current year.”

Varied Industry Reactions to Economic Uncertainty

Industry reactions vary, with some expressing concerns about prolonged economic uncertainty. The tariffs have contributed to fluctuating market conditions and increased scrutiny of trade policies.

Financial and political landscapes face potential shifts as Trump's economic policies unfold. Federal Reserve's cautious approach reflects the broader implications for interest rates and strategic economic adjustments.

Tariffs: Historical Patterns and Economic Predictions

Comparing to previous tariff implementations, economists see parallels in economic responses and market volatility. Historical trends suggest potential for temporary inflation shifts and strategic tariff adaptations.

Experts suggest outcomes may hinge on policy adjustments and global trade dynamics. Continued analysis will require monitoring of economic indicators and strategic responses from key financial institutions.

Source: bitcoininfonews

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Economic

Strong Semiconductor Demand Drives April Export Surprise

South Korea’s April export data offered a rare upside surprise amid ongoing global trade tensions, with outbound shipments rising 3.7% year-on-year to $58.21 billion. This marked the strongest growth in four months and sharply outpaced the Reuters consensus forecast of a 2.0% contraction. The surge was primarily fueled by a 17.2% increase in semiconductor exports, underpinned by rising memory prices and renewed global demand for high-performance chips. This reflects a direct relationship between global tech demand and South Korea’s export resilience—where improved conditions in the semiconductor market significantly support national trade performance.

While the semiconductor sector was a clear bright spot, other industries painted a more mixed picture. Wireless communication device exports jumped 26.5%, but this was offset by declines in computers (-15.3%) and display panels (-7.6%). In the automotive sector, overall car exports fell 3.8% due to U.S. tariffs imposed in early April, though auto parts managed a 3.5% increase, suggesting some supply chain adjustments or resilience in component demand. Steel and biopharmaceutical products also showed notable gains, rising 5.4% and 21.8% respectively, adding to the diversity of South Korea’s trade recovery in the face of tariff disruptions.

Tariff Pause Offers Temporary Relief but No Certainty

President Donald Trump’s 25% tariffs on auto and steel imports have clearly impacted South Korean exports, particularly to the U.S., where shipments declined by 6.8%. In contrast, exports to China rose 3.9%, and those to the European Union surged by 18.4% to a record $6.7 billion. These directional changes hint at a partial reallocation of trade flows, where exporters pivot away from constrained markets and toward more accessible regions. However, the currently paused 10–25% reciprocal tariffs on South Korea are scheduled to resume in July, unless ongoing trade talks produce a bilateral resolution. This looming risk casts doubt over the sustainability of April’s strong performance.

Economists remain cautious despite the upbeat April data. Park Sang-hyun of iM Securities warned that early shipping—where firms front-load exports to beat tariff deadlines—could have inflated the numbers. ING economist Kang Min Joo echoed this concern, suggesting that second-quarter exports may still contract even as high-end chip demand provides partial support. Thus, while April’s figures are directionally positive, they may not reflect a durable trend, especially given the volatile policy environment and ongoing U.S.-China friction.

Trade Surplus Narrows Marginally as Imports Dip

South Korea recorded a trade surplus of $4.88 billion in April, slightly below the $4.92 billion seen in March. Imports fell 2.7% to $53.32 billion, reversing a 2.3% increase the previous month. This reduction could be interpreted either as a sign of weakening domestic demand or as firms completing their pre-tariff inventory builds. The moderate surplus reinforces the country’s continued export reliance, with the balance vulnerable to future shifts in global demand or protectionist measures.

Temporary Resilience Amid Structural Risk

South Korea’s April trade performance underscores the complexity of its export-dependent economy in an era of tariff uncertainty. Strong chip sales and diversified sector gains have allowed the country to outperform expectations, but these gains are potentially fragile. The upcoming expiration of the U.S. tariff pause in July remains a critical pressure point. While trade talks continue, the long-term trajectory of South Korea’s exports will depend on sustained semiconductor demand, effective policy negotiation, and the global economy’s ability to absorb new protectionist shocks.

Source: Reuters

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Forex

Dollar Recovery Gains Momentum Despite Weak Data

On Thursday, the U.S. dollar regained some footing despite recent disappointing economic figures, as investor sentiment pivoted toward optimism over a potential easing in global trade tensions. President Donald Trump's recent suspension of some tariffs and signals of possible trade deals with major economies, including China, India, and Japan, provided a window of relief for the dollar, which had suffered its worst monthly decline in two and a half years through April. This improvement in trade sentiment appears to have helped offset the drag from first-quarter GDP contraction, which was largely driven by an unprecedented surge in imports.

In contrast, the Japanese yen declined by around 0.5% to 143.73 per dollar following the Bank of Japan’s policy decision. While the central bank's unanimous vote to hold interest rates was expected, the market was more sensitive to the BOJ’s downward revisions to its economic and inflation forecasts. The projected real GDP growth for fiscal year 2025–2026 was cut to 0.5% from 1.1%, reinforcing the perception that further monetary tightening is unlikely in the near term. This shift prompted investors to pull back from the yen, aligning with broader expectations of an extended pause in Japan’s normalization efforts.

Currency Movements Reflect Diverging Central Bank Trajectories

The divergence in central bank policy outlooks helped shape movements across major currency pairs. The euro fell to a two-week low of $1.13, and the British pound also dipped to $1.3294, both down approximately 0.2% against the dollar. These adjustments suggest that, despite domestic headwinds, the U.S. currency may benefit in the short term from improving trade headlines and relative policy stability. In contrast, Japan’s cautious stance and economic downgrades weighed directly on its currency.

Markets are now bracing for the release of U.S. employment data, with April nonfarm payrolls expected to show a hiring slowdown to 130,000 jobs. Alongside jobless claims and the ISM manufacturing survey, these data points will offer further clarity on the extent of economic resilience following a quarter marked by trade-induced volatility. If labor market data shows signs of softening, the narrative around recession risk could intensify, complicating monetary policy decisions for the Federal Reserve.

Commodity Currencies Hold Steady

Meanwhile, the Australian and New Zealand dollars remained relatively stable. The Aussie hovered around $0.6405, buoyed slightly by an inflation report that came in marginally above expectations, which tempered dovish bets on future rate cuts. The New Zealand dollar maintained its position near $0.5940, trading in the upper range of its recent channel. Both currencies showed resilience, supported by domestic data and a less direct exposure to U.S.-China tariff dynamics compared to export-heavy economies like Japan.

The interplay between global trade developments, central bank policies, and economic data continues to produce divergent currency trends. The dollar’s recent recovery reflects a cautious optimism that tariff-related disruptions may ease, while the yen’s decline underscores the challenges facing Japan’s economy and monetary strategy. With April’s jobs report set to arrive shortly, investor focus is narrowing on the labor market as a key indicator of underlying U.S. economic strength. In the absence of consistent signals, the foreign exchange market remains reactive, moving in tandem with political developments and shifting central bank tones.

Source: Reuters

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Economic

Strategic Adjustment to Competitive Tariff Landscape

Facing the risk of steep trade penalties under U.S. President Donald Trump’s escalating tariff regime, Thailand has signaled its intent to recalibrate its trade strategy. Finance Minister Pichai Chunhavajira announced on Thursday that Thailand will pursue tariff levels that match those of its major trading rivals. This adjustment, if achieved, is expected to soften the blow of impending U.S. measures and preserve Thailand’s export competitiveness.

Minister Pichai acknowledged that Thailand’s economy may experience temporary "air pockets"—a term suggesting sporadic turbulence rather than long-term instability—as the tariff situation unfolds. However, he argued that if Thailand succeeds in matching its tariff exposure with regional peers, the relative disadvantage would be neutralized. This implies a comparative response strategy, where the objective is not to eliminate tariffs entirely, but to ensure they do not singularly disadvantage Thai exporters.

Implications of the 36% Tariff Threat

Thailand, among the Southeast Asian economies most exposed to U.S. tariff hikes, currently faces the prospect of a 36% levy if no compromise is reached by July. The magnitude of this figure—higher than the global average—threatens core Thai export sectors including electronics, automotive parts, and agricultural products. Minister Pichai's remarks indicate that negotiations are ongoing and that Thailand is leveraging the current U.S. moratorium on tariff enforcement as a window to secure better terms.

The timing and framing of Thailand’s response highlight the causative relationship between uneven tariff policies and economic vulnerabilities. Unlike a mere correlation, where two events occur together, Thailand's push for tariff realignment is a direct reaction to policy asymmetry. If the country were to retain a higher effective tariff burden than its competitors, the resulting shift in trade flows could severely affect market share, production planning, and investor confidence.

Confidence in Negotiation Leverage

Minister Pichai expressed optimism about the outcome of ongoing talks, suggesting that Thailand’s proposal is positioned to yield favorable terms. This confidence stems from Thailand’s role as a regional trade hub and its participation in multiple multilateral trade agreements, which may provide leverage during negotiations. By framing tariff parity as a defensive rather than expansionist measure, Thailand may appeal to broader principles of fair trade rather than provoke retaliatory scrutiny.

With the U.S. moratorium set to expire in July, the next two months will be pivotal for Thailand's trade and economic outlook. The finance minister’s strategy centers on reducing competitive disadvantages rather than seeking exemptions, which could resonate more effectively with American negotiators focused on global tariff consistency. If Thailand succeeds, it may avoid significant trade disruptions and preserve investor confidence through calibrated economic diplomacy.

Source: Reuters

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Economic

Economic Contraction and Unclear Growth Path

The release of the first-quarter U.S. GDP report has brought more confusion than clarity. While a 0.3% annualized contraction marked the first economic decline since 2022, economists and investors have struggled to interpret whether this represents a genuine downturn or a temporary distortion linked to tariff-induced trade behavior. The contraction was largely driven by a historic 41.3% surge in imports, as businesses rushed to get ahead of higher input costs from newly imposed tariffs. This led to a record trade gap that subtracted 4.83 percentage points from GDP—a technical impact rather than a signal of weakened domestic demand.

Despite the overall GDP decline, consumer spending—the largest component of the U.S. economy—grew at 1.8%, offering some reassurance. Economists like Larry Werther of Daiwa Capital Markets America took this as evidence that underlying domestic activity remains intact. However, the strength in consumption contrasts with the headline contraction, creating a mixed picture that complicates forecasting and policymaking. The relationship between tariffs and economic behavior appears to be both immediate and reactive: businesses respond swiftly to policy uncertainty, thereby distorting normal economic indicators.

Market Volatility and Investor Frustration

Markets initially reacted negatively to the GDP figures, with stock futures falling and bond yields shifting. However, equities recovered by the end of the session, indicating that investors may be more sensitive to expectations than to the data itself. The S&P 500 ended the day slightly higher but remained nearly 10% below its February high. Bond markets showed a flattening curve: two-year yields dropped on Fed cut speculation, while long-term yields rose, reflecting inflation concerns and diminished confidence in long-term growth stabilization. The conflicting yield movements signal that investors are hedging multiple scenarios rather than betting on a clear macroeconomic direction.

The key challenge lies in how tariffs have disrupted typical economic patterns. The import surge, while boosting short-term inventory levels, is unlikely to be sustained, and its reversal could temporarily boost GDP figures in upcoming quarters. However, the unpredictability of trade policy under President Trump's administration has introduced substantial volatility into data readings. According to Peter Andersen of Andersen Capital Management, the ongoing uncertainty surrounding tariff negotiations has made traditional modeling unreliable, affecting both macroeconomic forecasting and asset allocation strategies.

Recession Risks Rise, but Remain Conditional

While a recession is not yet the base-case scenario for most economists, the probability has grown materially. Factors such as consumer resilience and labor market strength are acting as buffers, but any deterioration—especially in employment—could shift expectations rapidly. As noted by Carson Group's Sonu Varghese, consumption remains the economy’s stabilizing force. Should the labor market weaken, the downside risks could accelerate significantly, shifting sentiment from cautious optimism to defensive positioning.

Investor sentiment currently reflects a barbell strategy, with simultaneous investment in defensive stocks and high-growth names. This bifurcated approach suggests that markets are preparing for both stagflation and recovery, depending on how inflation, employment, and trade dynamics evolve. According to Nationwide’s Mark Hackett, the bar for good news is low—meaning even mildly positive surprises could trigger sharp market rebounds.

Looking Ahead: All Eyes on Labor Data

The next critical data point will be the U.S. employment report, due Friday. Given the current instability in trade and inflation expectations, labor market performance will be scrutinized for signs of stress or resilience. A weakening in job creation or wage growth could tip sentiment more definitively toward a downturn scenario. Conversely, solid labor figures may provide the clarity currently absent from the GDP data.

In summary, the current economic environment is clouded by policy-driven distortions that make traditional indicators difficult to interpret. The GDP contraction is real, but its underlying causes reflect short-term reactions to external shocks rather than structural weakness—at least for now. Investors, economists, and policymakers alike are bracing for the next round of data, knowing that clarity remains elusive in a tariff-disrupted economy.