Weakening Japanese Economy Adds To Upward Pressure On USDJPY

Stocks

Forex

Summary:

The USDJPY pair is undergoing a correction amid weak Japanese data and moderately positive US statistics, with the rate currently at 156.72.

USDJPY forecast: key trading points

· Japan's economy contracted more sharply in Q3 than preliminary estimates indicated

· The Reuters Tankan index for manufacturers declined to +10 in December 2025

· Concerns about fiscal policy and slowing growth worsened business sentiment in Japan

· USDJPY forecast for 10 December 2025: 157.80

Fundamental analysis

The USDJPY rate is declining after three consecutive days of growth. The Japanese yen is once again under pressure because revised data showed a deeper contraction in the Japanese economy in Q3 than originally expected. The Reuters Tankan index for Japanese manufacturers fell to +10 in December 2025 from November's nearly four-year high of +17, as concerns over fiscal policy and slowing growth weighed on business sentiment.

Markets are forming expectations of a possible BoJ rate hike next week and are closely watching Governor Ueda's comments after the meeting, as they will define the policy trajectory for 2026.

Meanwhile, the US Bureau of Labor Statistics reported with a delay that job openings in the US increased by 12 thousand to 7.670 million in October 2025, up from 7.658 million in September.

USDJPY technical analysis

The USDJPY rate is correcting after rebounding from the 156.90 resistance level. Despite the decline, buyers are keeping the price above the EMA-65, indicating persistent upward pressure.

The USDJPY forecast for today suggests the bearish correction may end, followed by continued growth towards 157.80. The Stochastic Oscillator further supports the bullish scenario: its signal lines have reached oversold territory and turned upwards.

A consolidation above 156.90 will confirm full-fledged bullish momentum and indicate that the price is exiting the corrective channel.

Weakening Japanese Economy Adds To Upward Pressure On USDJPY_1

Summary

The weakening of the Japanese economy, coupled with supportive US data, creates conditions for sustained bullish momentum. The USDJPY technical analysis confirms the potential for renewed growth towards 157.80 if the price breaks above 156.90.

EURUSD 2026-2027 forecast: key market trends and future predictions

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Gold (XAUUSD) forecast 2026 and beyond: expert insights, price predictions, and analysis

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Source: RoboForex

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Danske Bank

Forex

Political

Economic

Central Bank

Everybody knows the Federal Reserve (Fed) will announce a 25bp rate cut today. I know it, you know it, he/she/it knows it, my five-year-old knows it, my cat, your dog, the birds in the sky. Everyone knows the Fed is lowering rates later today. Market pricing is giving it roughly an 88% probability — too high for the Fed to walk back in the absence of an emergency.

What we don't know is what Fed members are planning for next year. How many cuts they anticipate, and whether their projections will convince markets to react accordingly.

For the doves, the case for rate cuts is clear: the US labour market has softened, partly due to a combination of aggressive anti-immigration policies, tariff uncertainty and fears around AI-related job displacement. Tariff-led price pressures, meanwhile, still haven't shown up materially since tariffs were announced in April. Add to that the political noise — with Donald Trump pressuring the Fed to cut rates, at times with aggressive public remarks — and poor Jerome Powell is hearing things he probably never expected to hear in his lifetime.

For the most extreme doves, the Fed has "plenty of room" to cut. Kevin Hassett — one of Trump's favourite candidates to lead the Fed next year — said yesterday that the rise of AI gives the Fed an opportunity to run easier policy because lower rates could lift both aggregate supply and demand. Higher supply, he argues, could help contain inflation.

Others think it may be wiser to pause for thought. AI-driven productivity gains are real. But looming inflation risks from tariffs still require a careful playbook — particularly if AI-driven disinflation doesn't materialise fast enough to neutralize potential tariff-led inflation.

So, it's complicated. All eyes will be on the Fed's dot plot. Any hawkish tilt or reluctance to signal further cuts could trigger another repricing and weigh on sentiment.

The good news: investors aren't walking into this meeting blindly. Money markets have already trimmed their expectations from 2–4 cuts next year to just two, reducing the risk of a sharp reaction to a "hawkish cut."

And judging by yields, the message from investors is clear: they're not buying the dovish narrative. Instead, investors worry that lower yields could revive inflation and ultimately prevent the Fed from cutting more — or even force a hike. The proof: the US 10-year yield has climbed since the Fed began cutting in September.

This disconnect between Fed policy and market yields suggests lower policy rates are not fully transmitting. No matter what Fed officials think, markets remain worried about inflation. They won't absorb lower policy rates until they see evidence of inflation falling. That dynamic could prevent the S&P 500 from pushing higher into year-end.

Meanwhile, global winds are turning hawkish, as well. The Reserve Bank of Australia (RBA) said this week it debated an "extended pause or a hike," and markets now price a rate increase by June — a stark reversal from expectations of a cut just a month ago. The Australian 10-year yield has jumped from ~4.10% in late October to above 4.80%.

The Bank of Canada (BoC) is expected to hold today, but markets are almost fully pricing a hike by late 2026, on the back of strong Canadian labour data. Canadian 10-year yields have risen from around 3% to near 3.50%.

The European Central Bank (ECB) isn't expected to cut next year, and Isabel Schnabel said this week she's comfortable with market pricing that the ECB's next move could be a hike. The European 10-year yield is now around 2.85%, up from ~2.50% in October.

The Reserve Bank of New Zealand (RBNZ) watchers have also shifted from expecting a September cut to expecting a hike. The 10-year yield has spiked from ~4% to above 4.6%.

And the Bank of Japan (BoJ) is widely expected to hike next week. The Japanese 10-year is flirting with 2%, raising the risk of Japanese pension funds and insurers — major US Treasury holders — repatriating capital back home, and pull the rug from under the feet of US treasuries.

Consequently, even though equity investors still debate whether the tech sector is in bubble territory, global bond investors have little doubt about two things: DM debt is unsustainably high, and central bank expectations are shifting hawkish. The latter pushes the yields higher.

And if yields continue pushing higher, valuations will come under pressure — especially for highly leveraged companies.

So, today's reaction to the Fed will likely set the tone for the remainder of the year: will Santa bring gifts, or stay snowed out? Answer in a few hours.

Source: Danske Bank

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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SAXO

Commodity

Stocks

Forex

Market drivers and catalysts

· Equities: Equities traded mixed, with flat U.S. and softer Europe and Asia as investors wait for the Fed and key China data

· Volatility: VIX mid-teens, short-term vols jump into Fed, SPX 0DTE implies ±0.6%

· Digital Assets: Options heavy put demand in IBIT/MSTR/miners, ETHA balanced and structured

· Fixed Income: US Treasury yields at high end of recent range ahead of FOMC

· Currencies: FX volatility extremely muted ahead of FOMC, JPY weak

· Commodities: Silver trades above USD 60 as industrial demand fuels supply concerns

· Macro events: Bank of Canada Rate Decision, FOMC rate decision

Macro headlines

· SpaceX, the Elon Musk-led company, is said to be moving ahead with plans for an IPO in mid-to-late 2026 that would value the company at USD 1.5 trillion and raise more than USD 30 billion, making it the largest IPO ever.

· France's National Assembly approved next year's social security bill by 247–234, boosting the odds of a year‑end budget and easing calls for Prime Minister Sebastien Lecornu to resign, with Lecornu saying the vote shows compromise is possible even as the main budget will be tougher and the government's stance unchanged.

· US job openings rose to a five‑month high of 7.67 million in October while layoffs climbed to 1.85 million, the highest since early 2023, and hiring fell by 218,000, with Stephen Stanley saying the labour market is slowing but not as sharply as some alternative indicators suggest.

· Ahead of today's widely expected hawkish rate cut from the FOMC, bond traders are betting on a shallower path of Federal Reserve interest-rate cuts in the year ahead, with just two 25 bps cuts expected during the first half. The change is part of a global move to wager that major central banks will slow or halt their monetary easing.

Equities

· USA: U.S. equities ended mixed, with the S&P 500 flat, the Nasdaq slightly higher and the Dow down 0.4% as traders weighed fresh labour data ahead of the Federal Reserve decision. Job openings rose to about 7.67 million in October, keeping the Fed's data-dependent stance in focus while markets price a 25 basis point cut this week, and JPMorgan fell 4.7% after guiding 2026 expenses to roughly 105 billion, dragging peers. Nvidia eased 0.3% on talk China may curb H200 chip purchases despite U.S. export clearance with a surcharge, while Home Depot slipped 1.3% and Paramount, Netflix and Warner Bros Discovery moved on the evolving Hollywood deal saga, with investors now watching the Fed's guidance on the 2026 rate path.

· Europe: European equities edged lower, with the Euro Stoxx 50 down 0.1% and the Stoxx 600 near flat as investors stayed cautious ahead of Wednesday's Federal Reserve decision, where a 25 bp cut is widely expected but the 2026 policy path remains unclear. EssilorLuxottica dropped 5.6% after Warby Parker unveiled glasses with built-in artificial intelligence (AI) features in partnership with Google, while Thyssenkrupp slid around 6.5% on guidance that pointed to a possible 800-million-euro loss in 2026. By contrast, defence stocks rallied after reports that German lawmakers will sign off on 29 procurement deals totalling about 52 billion euros next week, lifting Hensoldt, Rheinmetall, Leonardo, BAE Systems and Thales as markets focus on European rearmament and budget debates.

· Asia: Asian trading was weaker, with Hong Kong's Hang Seng index down 1.3% to around 25,434, a two-week low as losses spread across sectors ahead of the Federal Reserve decision and key Chinese inflation data. Talk of a "hawkish cut" and uncertainty around U.S. policy in 2026 kept investors cautious, while mainland shares eased before November consumer price index (CPI) and producer price index (PPI) releases even as the Politburo pledged stronger 2026 support through proactive fiscal and loose monetary policy. Tech and consumer names led declines, with Pop Mart off 5.4%, SMIC down 4.2% and Xiaomi, Meituan and China Resources Land losing about 3–4%, and the focus now shifts to how Beijing's support plans feed through to earnings and sentiment.

Volatility

· Equity volatility is edging higher into tonight's Fed decision, but we are still in a mid-teens regime rather than full risk-off. VIX closed near 16.9 (+1.6%), with short-dated gauges like VIX1D jumping more sharply as traders pay up for very local protection. SPX finished around 6,840, down just 0.1%, yet 0DTE options price an intraday move of about ±43 points (≈0.6%), while FOMC-day straddles imply almost ±1% after the announcement, the largest expected Fed move since March.

· Skew remains contained and VVIX is below 100, so demand is focused on near-the-money hedges rather than crash protection, with some strategists even advocating selling rich FOMC straddles given how small recent realized moves have been.

Digital Assets

· Crypto markets are firm but not euphoric as traders also key in on the Fed. Bitcoin trades around 92–93k after bouncing from November's sharp drawdown, with price action choppy but range-bound ahead of the "hawkish cut" many expect. Ether holds just above 3,300 and continues to slightly outperform, while majors like Solana, XRP and the miner complex (MSTR, MARA, RIOT, CLSK, CIFR) trade higher, helped by the prospect of easier policy and improving risk sentiment.

· Options flow in crypto remains put-heavy, with sizeable long-dated protection in IBIT and MSTR as investors hedge equity-style proxies and miners, whereas ETHA shows a more balanced mix of calls and puts, pointing to structured upside rather than outright downside bets.

Fixed Income

· US treasury yields trade near the highs of the recent range since September ahead of the FOMC meeting Wednesday, with the benchmark 2-year treasury yield near 3.61%, while the 10-year benchmark yield closed about a basis point higher near 4.19% on Tuesday before pulling back slightly overnight.

· Japanese government bonds traded quietly and within recent ranges, save for at the front end of the yield curve, where the 2-year JGB benchmark yield poked to a marginal new high for the cycle above 1.08% before easing to within Tuesday's trading range below 1.075%.

· The German 10-year Bund yield rose to marginal new highs since March yesterday, nearly touching 2.88%, before easing back to 2.85% into the close.

Commodities

· Silver surged to a fresh record above USD 60, supported by rate-cut expectations and after The Silver Institute said demand is set to expand across key technology sectors such as solar (PV), EVs and related infrastructure, as well as data centres and AI. The gold-silver ratio has slipped to a four-year low around 68.5, marginally below its 25-year average, underscoring silver's strong relative performance.

· Gold trades calmly around USD 4,200 ahead of today's widely expected US rate cut. An uptrend from the October correction low offers support at USD 4,118 while resistance remains firm around USD 4,250.

· Crude trades near recent lows amid ongoing concerns about global oversupply in the coming months. In its latest monthly update, the EIA said US production hit a record this year before slowing in 2026. Meanwhile, the API reported a 4.8 million barrel draw in crude stockpiles, partly offset by a sharp build in gasoline inventories. Brent remains stuck in a narrow four-dollar range, with downside attention focused on support around USD 62.

· The BCOM Grains Index fell to a six-week low following the December WASDE report. Wheat came under pressure after the USDA raised world ending stocks for the 2025–26 season by slightly more than expected, while soybeans remain weighed down by the lack of Chinese buying. Corn, by contrast, edged higher on stronger export demand expectations.

Currencies

· The dollar traded quietly ahead of today's FOMC meeting, with the expectation that the Fed is likely delivering the last cut until after a new Fed Chair takes over next May, but with significant delays in US data meaning that odds might shift in coming weeks. EURUSD edged below the 1.1650, while USDJPY rose, mostly as a function of JPY weakness.

· The Australian dollar remains firm after the recent hawkish RBA meeting and on rising Australian bond yields. AUDUSD, trading near 0.6650, is eyeing the huge overhead resistance level, the top of the range for 2025 at 0.6707, while AUDJPY rose above 104.00 for the first time since July of 2024.

Source: SAXO

Risk Warnings and Disclaimers

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Gerik

Economic

Mounting Pressure from Currency Depreciation

The Bank of Korea (BOK) has taken a more vocal stance on the rapid depreciation of the Korean won, with board member Kim Jong-hwa stating that authorities must consider intervention to mitigate its economic consequences. Speaking at a press conference on Wednesday, Kim underscored that the weakening currency is not only an abstract market trend but a concrete threat to South Korea’s macroeconomic stability, warning of higher inflation and eroding household purchasing power.

The won has fallen roughly 5% against the US dollar in the current quarter, approaching a 16-year low. This decline has been attributed to a combination of persistent capital outflows, investor appetite for foreign equities, and the yawning interest rate gap between South Korea and the United States.

Rate Gap and Policy Inertia Highlight Structural Risk

The BOK has kept its base rate steady in recent policy meetings, leaving the benchmark at 3.5%, while the US Federal Reserve’s current policy rate sits around 5.5%. The two-percentage-point differential is the widest since 1999 and remains a primary driver of capital outflows from South Korea. With the Fed’s December meeting expected to deliver only moderate rate cuts if any the divergence may persist into early 2026.

This widening interest rate gap directly affects currency markets. Foreign investors have fewer incentives to hold won-denominated assets when dollar yields remain higher, contributing to sustained weakness in the Korean won. The implications are multifaceted: higher import costs, inflationary spillovers, and growing stress for small and medium-sized exporters lacking effective currency hedging strategies.

Call for Coordinated FX Measures

Although Kim did not outline specific intervention tactics, his remarks suggest growing internal pressure on the BOK and other state institutions to act jointly. The recent creation of a four-party consultative group comprising the BOK, the finance ministry, the welfare ministry, and the National Pension Service (NPS) represents a structural shift toward proactive coordination on exchange rate stability.

One immediate tool under consideration is the issuance of dollar-denominated bonds by the NPS to raise foreign currency liquidity. This could relieve pressure on the local currency without tapping into foreign exchange reserves. Such an action, while not a direct FX market intervention, would serve as a supply-side measure to address the dollar shortage and support the won.

Risks of Inaction: Inflation and Business Strain

Kim warned that if authorities fail to respond, the economic burden will fall disproportionately on SMEs and import-reliant industries. Many exporters lack sufficient currency hedging mechanisms, and domestic manufacturers importing intermediate goods face margin compression if unable to pass on costs. Additionally, retail consumers are already confronting rising prices in energy, food, and imported goods, compounding pressure on real incomes.

The relationship here is causative: a weakening currency raises the domestic price of imported goods, directly contributing to inflation. If inflation accelerates while household incomes stagnate, the resulting decline in purchasing power could dampen consumption and suppress growth, reversing South Korea’s fragile post-pandemic recovery.

Kim’s comments mark a shift in tone from the Bank of Korea, suggesting that passive tolerance of currency weakness is no longer tenable. As South Korea confronts inflation risks, trade competitiveness concerns, and a historically wide rate differential with the US, coordinated measures ranging from bond issuance to possible FX market intervention are likely to emerge. For now, markets will closely watch the BOK’s next moves, as well as the Fed’s policy direction, which remains a central variable in shaping South Korea’s monetary and currency strategy moving into 2026.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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FXOpen

Forex

Commodity

The AUD and CAD are trading in corrective mode, reflecting market caution ahead of today's Federal Reserve and Bank of Canada meetings. Investors are locking in some profits after a volatile start to the week and prefer to wait for updated guidance from policymakers on the future path of monetary policy.

Over the coming trading sessions, focus will be on decisions from the Bank of Canada and the Fed, as well as the accompanying statements and press conferences. Central banks are setting the tone for the day, meaning reactions in AUD/USD and USD/CAD could be sizeable and highly volatile in the hours ahead.

USD/CAD

Late last week, USD/CAD fell sharply, breaking through key support levels at 1.3890–1.3930. However, a rebound from the psychological 1.3800 level led to consolidation within the 1.3800–1.3860 range. Technical analysis points to the potential for a corrective move back towards the previously broken support, as a "piercing pattern" has formed on the daily chart.

A sustained move above 1.3860 could signal a recovery towards 1.3890–1.3930. If negative news for the US dollar emerges, a renewed test of 1.3800 is possible, followed by a decline towards 1.3730.

Key events that may influence USD/CAD in the near term:

· today at 17:45 (GMT+3): Bank of Canada interest rate decision;

· today at 18:15 (GMT+3): Bank of Canada press conference;

· today at 18:30 (GMT+3): US crude oil inventories.

AUD/USD

For about a week, AUD/USD has been trading within a relatively narrow range of 0.6600–0.6650. The outcome of the RBA meeting supported the Australian dollar, but the pair has yet to break above the upper boundary of this range and extend its uptrend.

A move above 0.6650 would confirm buyer control and open the way towards 0.6690–0.6710, while a downside break would increase bearish pressure with targets near 0.6550.

Key events that may influence AUD/USD in the near term:

· today at 22:00 (GMT+3): US Federal Reserve interest rate decision;

· today at 22:30 (GMT+3): Federal Open Market Committee press conference;

· tomorrow at 03:30 (GMT+3): Australia full-time employment change.

Source: FXOpen

Risk Warnings and Disclaimers

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IC Markets

Forex

Stocks

Commodity

US Stocks Drift Ahead of Fed Rate Decision – Dow Dips 0.4%

US stock markets eased back on Tuesday as traders moved to the sidelines ahead of today's all-important Federal Reserve interest rate decision. The Dow fell 0.38% to close at 47,560, the S&P 500 dipped 0.09% to 6,840, while the Nasdaq managed a modest 0.13% rise, finishing at 23,576. A stronger-than-expected set of US employment numbers pushed Treasury yields higher across the curve, with the 2-year yield climbing 4 basis points to 3.615% and the 10-year rising 2.4 basis points to 4.188%.

The firmer yield environment helped lift the dollar; the DXY gained 0.14% on the day to settle at 99.23. In commodities, oil markets remained under pressure as renewed optimism over potential progress in Ukraine peace discussions—following meetings between Kyiv and its allies in London—saw Brent crude slip 0.70% to $62.05, while WTI dropped 0.95% to $58.32 a barrel. Gold, meanwhile, pushed back into recent ranges, rising 0.43% to $4,208.21 an ounce as traders sought a safer footing ahead of a packed macro calendar.

Fed Day at Last

Today's Federal Reserve update has probably been the most highly anticipated central bank meeting of the year, with the volatility in rate moves expectations exceeding all others in the preceding 11 months. With less than a day to go, market expectation sits just under 90% that we will see a further 25-basis-point cut later today. That is up from 70% a month ago, but more crucially up from near 30% around six weeks ago.

Most market participants are expecting to see a relatively "cautious cut" today, with a split in the committee well documented. So, a swing either side—i.e., a dovish cut or a hawkish cut—should see some big moves across all financial products. Stock markets have been trading optimistically over the last couple of weeks, indicating that they anticipate more stimulus into 2026, while the bond market has been more cautious. Either way, the possibility of strong corrections is high, and it should be a very lively market into the end of the trading day.

Huge Day Ahead for Investors

Today looks to be shaping up as one of the biggest days of the month for global markets. The Asian session sees the release of key Chinese data with CPI (exp +0.7% m/m) and PPI (exp +2.0% y/y), which should see some good moves in local markets, while the London session has a scheduled update from ECB President Christine Lagarde. However, the New York session looks set to be extremely lively.

The Federal Reserve's rate call towards the end of the day is without doubt the headline event, where a 25-basis-point rate cut is well priced in; Chairman Jerome Powell's press conference shortly after is likely to drive volatility even further. Earlier in the Northern Hemisphere session, the Bank of Canada will deliver its own interest rate decision, with the market firmly expecting them to hold rates at 2.25%. As with the Fed, traders are expecting forward guidance from the statement and subsequent press conference to add further volatility to local markets. US Crude Oil Inventory data is also due out in the session; however, expect the major central bank updates to dominate.

Source: IC Markets

Risk Warnings and Disclaimers

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Gerik

Economic

Strategic Shift Gains Urgency Amid Rising Trade Risks

European companies are accelerating efforts to diversify their supply chains away from China, moving beyond pandemic-era introspection into concrete operational changes. Jens Eskelund, President of the European Union Chamber of Commerce in China, emphasized this transition in a press briefing ahead of the chamber’s latest report on supply chain vulnerabilities. He noted that “dependencies are being discussed in much more detail,” reflecting deeper awareness of how critical and embedded Chinese production has become to global industries, including in basic goods like toothpaste.

The context for this shift is markedly different from the pandemic. Previously, the primary concern was logistical whether a supply chain could physically deliver products amid lockdowns. Now, the focus has broadened to include political risk, such as how vulnerable businesses are to trade restrictions, export controls, or shifting geopolitical alignments.

Record Trade Surplus and Global Backlash

Ironically, China’s global trade dominance continues to grow even as concerns mount. Official data shows China’s trade surplus reached a record $1 trillion through November 2025, underscoring strong global demand despite persistent US tariffs. China’s share of global container traffic also climbed to 37% in the first three quarters of 2025, up from 36% in 2024 and significantly higher than pre-pandemic levels of 31.7% in 2019.

This rise has been attributed not only to China’s cost advantages such as a weaker yuan and industrial overcapacity but also to lingering dependencies across global supply networks. However, this growing dominance is triggering pushback. The EU Chamber highlighted that China faced a record 198 World Trade Organization trade investigations last year, over half initiated by developing nations, indicating that the backlash is no longer limited to the West.

Export Controls Expose Fragility of Overdependence

Tensions between China and the US have escalated throughout 2025, particularly over trade policy and tariffs. In response, Beijing imposed several rounds of export controls, especially targeting rare earth elements and other strategic materials. These moves have reinforced awareness of the risks associated with depending on a single supplier country, particularly one with increasingly assertive policy tools.

A survey conducted by the EU Chamber in November revealed that around one-third of member firms were now exploring supply options outside China or investing in capacity abroad. This represents a substantial increase from the Chamber’s earlier 2025 survey, where only 10% were focused on supply chain relocation. These latest findings indicate a growing trend of operational diversification and forward planning.

Friendshoring Over Reshoring: A Geographic Recalibration

While political discourse in Europe and the US often centers around “reshoring” as a response to China risk, the actual movement of supply chains reflects a different trend. Cameron Johnson of Tidalwave Solutions observed that “nobody is reshoring it’s all friendshoring.” Companies are primarily redirecting supply networks to politically aligned and lower-cost regions such as Mexico and Southeast Asia, rather than returning manufacturing to Europe or North America.

What makes this shift particularly complex is that Chinese companies are adapting alongside foreign firms. Many are proactively establishing or partnering with factories in these same alternate markets, enabling them to retain influence over production chains even as final assembly leaves China. This illustrates that diversification away from Chinese territory does not necessarily mean a full decoupling from Chinese entities.

Localization and Policy Compliance Still Anchor Some Activity in China

Despite diversification trends, many companies are simultaneously deepening their footprint within China. Around 25% of EU firms surveyed earlier this year said they were expanding their China operations primarily to meet Beijing’s localization requirements. These policies, which incentivize domestic sourcing and production, force foreign businesses to localize in order to maintain market access, even as they hedge globally.

This dual strategy onshoring within China while expanding elsewhere highlights the complexity of supply chain restructuring. Eskelund emphasized that some Chinese companies, especially in the automotive sector, are now more globally adaptive than their own government. This agility allows them to stay competitive across multiple markets, regardless of trade friction.

The European business community is entering a new phase in its relationship with Chinese supply chains. While the rhetoric of diversification has been present since the pandemic, 2025 has seen a measurable turn toward action, spurred by escalating geopolitical risks, export controls, and calls for resilience. Though reshoring remains rare, the pivot toward friendshoring is real and unfolding at scale. The coming year may determine whether these shifts represent a structural rebalancing or merely a tactical adjustment to temporary pressures. Either way, Europe’s dependence on China is being reevaluated in boardrooms with greater urgency than ever before.