UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Back and forth on trade'
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Oct 20, 2025 Trade tensions are back in the spotlight, but this time markets are reacting positively to the US easing its stance towards China. Anticipation builds for upcoming trade talks, as the US typically steps back from aggression during negotiations. Interestingly, equity markets show more volatility than the real economy itself, reflecting the complex dynamics at play. Meanwhile, China's economic indicators reveal stronger production and cautious optimism about achieving growth targets, while Italy considers new taxes on wealthy foreigners, impacting public debt financing.
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Markets Overreact To Trade Noise
- Financial markets react more strongly to trade-policy swings than the real economy does.
- Policy volatility rattles equities far more than it disrupts economic fundamentals.
Trade Tensions Follow A Cycle
- The US-China trade tensions follow a recurring pattern of escalation and de-escalation.
- The norm has been the US stepping back and scheduling fresh talks, dampening long-term economic damage.
China Weathered Tariff Pressure
- China's Q3 growth slowed slightly but not as much as feared despite tariff uncertainty.
- Stockpiling and rerouting softened tariff impacts, and China likely will hit this year's growth target.