13.10.25 - China back in focus
China returned to the spotlight. This morning, the latest trade data came in well above expectations. ccording to China’s customs authority, exports rose 8.3% year-on-year (est. 6.0%), up from 4.4% the previous month, while imports increased 7.4% YoY (est. 1.5%), accelerating from 1.3% in August.
The strong data, however, was definitely overshadowed by renewed trade tensions late last week. After China announced new limits on rare-earth exports on Thursday, US President Donald Trump responded on Friday evening with plans to impose an additional 100% tariff on all Chinese imports, effective November 1, on top of existing duties.
Over the weekend, Trump shifted tone once again. In a Sunday post on Truth Social, he wrote:
“Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment... The U.S.A. wants to help China, not hurt it!!!”
He added that the November 1 deadline was “an eternity,” though he could advance it if China “takes further actions.”
Markets: after Friday’s sharp sell-off, markets stabilized over the weekend and rebounded on Monday.
China markets opened lower - Futures rebound during US trading hours
Gold with new all-time high, over USD 4’100/oz
Bond yields moving sideways after Fridays drop to 4.03% on the US 10-year
US dollar tend sideways with increased intraday swings
Volatility index (VIX) started to ease after the spike on Friday
My View: I already highlighted the TACO trade with the announcement of the the news, “Trump Always Chickens Out.” The cycles are now well known: Each cycle follows the same pattern: bold tariff threats, a wave of market panic, and then a quick rhetorical reversal.
Markets may overreact in the short term in either ways. The question will be whether this marks the start of a new tariff cycle or just another negotiation tactic.
Either way, volatility is back, and investors should prepare rather than ignore it.
Last week’s moves also served as a reminder of how a sharp and lasting sell-off could unfold if sentiment were to truly turn.
Become a member to access more valuable market updates like this
