As geopolitical and economic powers around the world continue to deal with overlapping challenges, recent news reports are pointing to deeply concerning trends for China and Britain alike. China’s trade data for June is expected soon, while the country faces a notable decline in industrial production and manufacturing. At the same time, the UK economy contracted for the second month in a row, throwing its future path towards growth into doubt. With US tariffs increasing and currency values going haywire with the strong dollar, this is a huge concern to our industry. These modifications have produced a climate of unstable and risky markets.
China’s industrial production fell by 1.0% in May, a sharp contrast to the previous month’s decline of 0.6%. Our hardest hit sector remains the manufacturing sector, down 1.0%. That’s a pretty awful outcome relative to the 0.7% contraction we experienced in April. Analysts predicted that the next trade figures, for June, would give clearer signs about the economic picture. They highlight the fact that China’s exports have begun to rebound.
2023 has proved to be another tough year so far, with China’s exports down a weighted average of 4.2%. Across the Pacific, signs of change are beginning to appear. Exports, in fact, rose to 6% on average in 2024. Through May of 2025, they have continued that momentum with a year-over-year increase through the first five months of 2025 averaging 5.6 percent. Those numbers don’t quite show just how difficult this month has been. There’s a big opportunity for healing just ahead.
Alongside China’s economic woes, the UK has faced its share of misfortunes. To make matters worse, the economy unexpectedly contracted by 0.3% in May, for negative growth in two months in a row. This continued downturn has harrowed economists. It should point to a new kind of economic recovery that most people have been hoping for after past recoveries.
The UK’s trade deficit narrowed to about GBP5.7 billion. This is an increase on the previously revised down figure of GBP6.5 billion in April. This development may offer some hope. Analysts caution that June’s shortfall is expected to be around $33-$34 billion, roughly half of last year’s deficit for the same month. The unemployment rate is expected to increase to 7.1%. That’s a new cyclical high we haven’t yet seen since July 2021.
As these economic worries play out, global financial markets respond to situations building on several different fronts. The yield on the 10-year US Treasury is up just over three basis points to about 4.38%. This jump occurs during a time of continual debate over the US implementation of tariffs on foreign trading partners. Economic and Trade Benefits Last month, President Trump’s administration threatened to impose a universal tariff of 15% – 20%. This comes on the heels of a recently implemented 35% tariff on Canada, creating shocks that reverberate through markets worldwide.
It spilled over into the Canadian dollar, which has not been able to withstand this tumult, touching a new monthly low while falling around 0.35%. Currency fluctuations show a microcosmic view of how connected these global economies truly are. They show how American trade policies can have a huge impact on our neighbors.
On top of all these positive advances, Mexico is today scheduled to release its May industrial production numbers. This report will be closely monitored as analysts seek to gain insights into the performance of the Mexican economy amid broader regional challenges.
Surprisingly, the eurozone is showing strength. This keeps the euro above its 20-day moving average for nearly two months running. Protectionism continues to rear its ugly head, and global economic stability is fraught with unknowns. The euro’s relative strength offers some protection from the worst of market conditions.
To make things worse, the yield on Japan’s 30-year bond jumped almost 20 bps this week to a new cycle-high 3.06%. This increase reflects rising concerns over inflation and interest rates within Japan’s economy. It illustrates how global market dynamics are increasingly dictating the terms of financial strategies at home and abroad.