Sunday, September 21, 2025: Economic Tensions Between Europe, the U.S., and China

The global economy faces heightened tension and uncertainty due to Europe’s monetary policies and rising U.S.–China trade disputes. Recent events underscore how closely markets are linked and how political and economic decisions affect financial stability.

Trump Warns of Possible U.S. Government Shutdown Amid Stalled Talks

Former U.S. President Donald Trump warned of a potential government shutdown as negotiations between Republicans and Democrats falter.

Lagarde Highlights Europe’s Inflation and Monetary Policy

European Central Bank (ECB) President Christine Lagarde emphasized that the ECB has achieved its inflation target but cautioned that uncertainty still clouds the economic outlook despite a new trade agreement with the United States.

In an interview with Denmark’s DR TV aired Saturday, Lagarde said:
“Interest rates should align with the inflation target—and that’s exactly what we are doing. We have now reached the goal.”

She added that the recent EU–U.S. tariff agreement improved economic predictability, though clarity remains lower than before former President Trump imposed his trade tariffs.
Lagarde noted that overall uncertainty has fallen by nearly half—a significant improvement—but risks remain.

The ECB kept borrowing costs unchanged for the second consecutive meeting after eight straight quarter-point cuts over the past year. After a temporary dip next year, policymakers expect inflation to stay near the 2% target, with gradual economic momentum returning in the coming quarters.
Most officials see no need for further easing unless the economy faces a major shock, though some stress that additional action should remain an option if necessary.

China Reduces Rare-Earth Magnet Exports to the U.S. Despite Overall Growth

China’s exports of rare-earth magnets to the United States fell in August even as total shipments recovered, reflecting continuing trade friction with Washington.

According to customs data released Saturday, U.S.-bound shipments dropped 5% from the previous month to about 590 tons. At the same time, China’s overall exports of these products climbed to roughly 6,146 tons, the highest level since January.

The decline comes amid renewed tension following a Friday phone call between President Trump and Chinese President Xi Jinping to discuss the trade dispute.

Rare-earth magnets are critical for advanced industries such as electric vehicles, wind turbines, and military equipment. Beijing previously used them as leverage against Washington, while Trump recently hinted at possible aircraft parts countermeasures.

China controls about 90% of global magnet production, significantly influencing a market vital to multiple sectors. This dominance has accelerated U.S. and international efforts to develop local supply chains and reduce dependence on China.

In this context, U.S. company MP Materials, the nation’s only rare-earth mining firm, plans to begin commercial magnet production by year-end to bolster U.S. independence in this strategic field.

These developments underscore the global economy’s challenges—from inflation pressures and monetary policy decisions to supply-chain struggles—highlighting that international cooperation and conflict de-escalation remain key to maintaining balance and sustainable growth.

 

Australia’s labor market weakens, China’s exports jump, and the U.S. Fed prepares layoffs.
Australian employment dropped by 5.4K in August, while unemployment stayed at 4.2%.
China’s rare earth exports reached their highest level since 2012.
As Chair Jerome Powell signals two more rate cuts this year, the U.S. Federal Reserve plans to cut 10% of its workforce.

Full Report

In August, global markets saw notable economic developments, including mixed data from Australia, a surge in China’s rare earth exports, and U.S. plans for job cuts.

Australian Labor Market

Data from the Australian Bureau of Statistics on Thursday showed the economy lost around 5.4K jobs in August—its sharpest decline in five months—versus expectations of a 21.2K gain. Unemployment held steady at 4.2%, matching forecasts. Employment change is a key indicator of economic activity and consumer spending; typically, higher employment supports the Australian dollar, while weak data pressures it. August’s mixed results left the impact neutral.

China’s Rare Earth Exports

According to official customs data compiled by Bloomberg, China’s rare earth exports hit at least a 13-year high at 7,338 tons in August. The shipments include high-performance magnets used in tech, consumer goods, and fighter jets. This surge comes amid ongoing trade tensions between Washington and Beijing, even after recent steps toward a trade truce.

U.S. Federal Reserve

Federal Reserve Chair Jerome Powell announced plans to cut roughly 10% of the Fed’s workforce, reducing staffing to the lowest level in over a decade. Following a 25 basis-point rate cut, Powell signaled that two additional cuts are likely to support economic growth and ease borrowing costs this year.

These developments highlight divergent global economic trends: Australia faces job market pressures, China enjoys strong export momentum, and the U.S. Fed adopts cost-cutting measures while maintaining accommodative monetary policy.

 

 

 

On Wednesday, the U.S. Federal Reserve announced a 25 basis-point cut to the federal funds rate, bringing the target range down to 4.0%–4.5%, aligning with market expectations but revealing internal divisions within the committee.

Decision Details

The Fed pointed to slower economic growth in the first half of the year, modest job gains, and a slight uptick in unemployment, while noting inflation remains somewhat elevated.
The committee reaffirmed its commitment to maximum employment and a long-term inflation target of 2%, acknowledging continued economic uncertainty.
The Fed also confirmed it will continue reducing holdings of government bonds and mortgage-backed securities as part of its quantitative tightening policy.

 

Committee Split

A strong majority, including Chair Jerome Powell, supported the rate cut, while member Steven Miran voted for a larger 0.50% cut, highlighting differing views on risk.

Updated Economic Projections (September 2025)

• GDP Growth: Expected at 1.6% for 2025, rising to 1.9% by 2027.
• Unemployment: Forecast to remain at 4.5% in 2025, easing to 4.3% by 2027.
• Headline Inflation: This year, projected to decline from 3.0% to the Fed’s 2.0% long-term target.
• Core Inflation: Estimated at 3.1% in 2025, falling to 2.0% by 2028.
• Interest Rates: Expected to drop to 3.6% in 2025 and 3.0% over the longer term, slightly below prior forecasts.

 

Market Implications

 

 A rate cut and a brighter economic outlook offer short-term support to markets. However, the committee’s internal split and persistent inflation pressures suggest that the path toward easier monetary policy will be gradual and challenging.

 

 

Investors are focused today on the U.S. Federal Reserve meeting, which is described as the most important event of the year for global markets. While global stocks remain calm and currencies and bonds trade in narrow ranges, anticipation builds ahead of the announcement that may set the course of monetary policy for the coming months.

 

Market Calm and Anticipation

 

U.S. equities showed little change, with global markets moving only slightly across most asset classes. Major U.S. indices hovered near record highs, while European stocks edged up 0.1% to recoup some earlier losses. The MSCI Asia Index held at an all-time high.
The U.S. dollar stayed near its lowest level since 2022, reflecting traders’ bets on a more accommodative Fed stance.

 

Potential Split Inside the Fed

 

Markets broadly expect a 0.25% rate cut, but the real debate centers on the statement’s tone and Fed Chair Jerome Powell’s press conference.
Recent history suggests possible divisions among committee members, amplified by the addition of Steven Miran—appointed by President Donald Trump—who may heighten internal disagreements.

Economic Data Pressures

• Inflation: Rose to 2.9% in August from 2.7% in July, indicating growing price pressures.
• Labor Market: The economy added only 22,000 jobs in August, versus expectations of 73,000, and unemployment climbed to 4.3%.
• Consumer Spending: Increased 0.3% for the second month, showing household resilience.

These factors put the Fed in a tough spot: inflation remains above target, yet a weakening labor market strengthens the case for easing.

 

Market Expectations

 

Futures markets price a 96.1% chance of a 25-basis-point cut, with just 3.9% expecting a larger 50-basis-point move.

 

Gold Shines

Gold has emerged as a key beneficiary, recently topping $3,700 per ounce before a slight pullback, boosted by a weaker dollar and mounting bets on monetary easing. Lower rates enhance gold’s appeal as a non-yielding asset compared to bonds or deposits.

 

Powell’s Crucial Speech

 

Observers expect Jerome Powell to adopt a dovish tone, highlighting labor market risks and signaling readiness for further cuts if necessary. Any less-accommodative hint, however, could trigger significant volatility across stocks, bonds, and currencies.

As the world awaits Powell’s remarks and the clues they provide about future policy, today’s Fed decision is a critical test of balancing the fight against inflation with supporting a slowing job market. Even a subtle shift in the statement’s tone could spark new waves of market turbulence, making this meeting a defining moment for global markets in 2025.

 

 

The global economic arena is witnessing overlapping developments: stable Eurozone inflation figures, Steven Miran’s appointment to the U.S. Federal Reserve, and Christine Lagarde’s warnings of a comeback of financial risks in new shapes. These simultaneous events highlight the challenges monetary policymakers face amid market pressures and changes in the global economic system.

 

Eurozone Inflation Holds at 2% for Third Month.

Final data from Eurostat on Wednesday confirmed that the Eurozone inflation rate remained steady at 2% in August for the third consecutive month, matching the European Central Bank’s target and slightly below the preliminary estimate of 2.1%.
Core inflation, excluding food and energy prices, remained 2.3%, unchanged from earlier estimates.
The lowest inflation rates were recorded in Cyprus (0.0%), France (0.8%), and Italy (1.6%), while the highest were in Estonia (6.2%) and Croatia (4.6%).
The report noted that the services sector contributed the most to the annual inflation reading, adding 1.44 percentage points.

 

Trump Appoints Steven Miran to the Federal Reserve

U.S. President Donald Trump signed the decision to appoint Steven Miran as a new member of the Federal Reserve Board of Governors, stressing the importance of maintaining the central bank’s independence from political pressure.
The announcement came ahead of the Federal Open Market Committee meetings that will set the path for interest rates in the coming period.
Trump stated that choosing Miran—currently Chairman of the Council of Economic Advisers—reflects the administration’s commitment to supporting independent and balanced monetary policy.
With the presidential signature, Miran will officially participate in the Fed’s closely watched meetings for the first time.
His entry comes at a sensitive time as investors await the committee’s decision on interest rates amid slowing global economic growth.
Expectations are split between a 25-basis-point cut or a larger 50-basis-point move, increasing the weight of his vote.

Miran’s stance on monetary policy remains unclear as he has not publicly expressed his views on potential rate cuts.
Analysts believe his vote could be pivotal in balancing White House calls for more accommodative policy against more cautious Fed members.

 

Lagarde: Financial Risks Haven’t Disappeared—They’re Returning in New Forms

European Central Bank President Christine Lagarde opened the 10th Annual Research Conference in Frankfurt on Wednesday, held in partnership with Stanford University’s Hoover Institution, emphasizing that financial risks persist but are re-emerging in new guises.
Lagarde explained that the global financial system has undergone significant transformations since World War II and that technological advances have resurfaced traditional risks in modern forms.
She referenced Carmen Reinhart and Kenneth Rogoff’s book This Time Is Different, which chronicles eight centuries of financial crises.
Lagarde highlighted that one of the most significant changes in the past 20 years is the rapid growth of non-bank financial institutions, whose assets in the Eurozone now equal about 400% of GDP, compared with only 140% in 1999, making them responsible for more than 60% of the financial sector’s size.
Meanwhile, the banking sector faces rising challenges from technological innovation, fintech companies, and stablecoins, accelerating the spread of risk.
She cited the March 2023 collapse of three U.S. banks as an example of how social media significantly accelerated financial panic.
Lagarde stressed that regulatory goals are not to stifle innovation but to manage the risks it brings, noting that the European Union is implementing an ambitious plan to enhance regulatory frameworks and strengthen the financial system.
She concluded by underscoring that financial stability requires constant vigilance and that scientific research remains an essential tool for identifying risks and supporting policymakers, especially as traditional challenges reappear in modern forms.

While Eurozone inflation remains at the central bank’s target and investors await the Fed’s next move with a new influential member, Lagarde’s warnings are a clear reminder that financial risks have not disappeared—they have merely reshaped themselves in unconventional ways. The coming phase will require vigilance and a careful balance between supporting stability and encouraging innovation.

 

Japanese Indices Set New Records Backed by Technology Stocks

Japanese equities extended their rally on Tuesday, hitting record highs thanks to robust performance in the technology sector, following the “Respect for the Aged Day” holiday.

• The Nikkei 225 rose 0.3% to close at 44,902 points, surpassing the 45,000 mark for the first time in history.
• The broader TOPIX gained 0.25% to 3,168 points, reaching an all-time high.
• The yield on Japan’s 10-year government bonds held steady in the bond market at 1.605%.
• The U.S. dollar fell 0.35% against the yen to ¥146.87 in currency trading.
• Semiconductor shares surged, with Sumco up 9%, Disco up 8.25%, and Resonac Holdings up 5.3%.

Attention now turns to the Bank of Japan’s policy meeting this Friday, where rates are expected to remain unchanged, following upcoming decisions from both the Bank of England and the U.S. Federal Reserve

U.S. Senate Confirms Stephen Miran to the Federal Reserve Amid Sharp Division

 

The U.S. Senate narrowly confirmed Stephen Miran as a member of the Federal Reserve Board of Governors on a 48–47 vote.

• Miran will join the Federal Open Market Committee meeting on September 16–17, filling the vacancy that Adriana Kugler resigned last month.
• This is the first time since 1935 that an official has moved directly from the executive branch to the Fed’s board.
• Observers view the move as part of President Donald Trump’s efforts to increase influence within the central bank during a pivotal inflation and interest-rate policy period.
• Though Miran’s term is expected to last only until January, his presence offers Trump added leverage in shaping monetary policy.

Google will invest £5 billion in the U.K. in energy and AI projects.

Google, a subsidiary of Alphabet, announced a major £5 billion ($6.8 billion) investment in the United Kingdom, coinciding with President Trump’s anticipated visit, which is expected to feature new economic agreements.

• Google signed an agreement with Shell to manage a portfolio of carbon-free energy projects in the U.K., including storing surplus clean energy and feeding it back into the national grid.
• The company will also open a new data center in Waltham Cross as part of a two-year plan to support research, development, and engineering projects in artificial intelligence.
• These investments are projected to create around 8,250 jobs annually , strengthening the U.K.’s position as a strategic hub for AI and advanced technology research

Summary

Japan’s stock indices continue to reach historic highs driven by technology stocks, Google commits to massive U.K. energy and AI investments, and the U.S. Senate’s confirmation of Stephen Miran adds political momentum for the Trump administration amid rapidly changing global economic conditions.

The global economic arena is witnessing a state of anticipation amid expectations of a new move by the U.S. Federal Reserve to cut interest rates under pressure from President Donald Trump, while data from China reveals the slowest industrial growth in 11 months amid mounting internal and external challenges.

Trump Expects Major Rate Cut Despite Market Bets on Modest Move

U.S. President Donald Trump said he expects the Federal Reserve to deliver a “significant” interest rate cut at its meeting this week, even though markets are pricing in a reduction of only 25 basis points.

Speaking to reporters on Sunday after returning to Washington, Trump said, “I think this is the perfect time for a big rate cut,” according to Bloomberg.

The Fed is scheduled to begin its meeting on Tuesday and conclude on Wednesday, when it may announce the first rate reduction in nine months, amid Trump’s continued pressure since returning to the White House.

Recent economic data have reinforced expectations for an easing move, pointing to a cooling labor market while inflation remains above the 2% target.

China Records Slowest Industrial Output Growth in 11 Months

Data released Monday morning by China’s National Bureau of Statistics showed that industrial production growth slowed in August to its weakest level in nearly a year, missing market expectations.

Key Economic Indicators:

• Industrial production rose 5.2% year-on-year in August, below forecasts of 5.7% and down from July’s 5.7%.
• Retail sales increased 3.4% year-on-year, compared to 3.7% in July and expectations of 3.8%.
• The unemployment rate climbed to 5.3% in August, exceeding July’s 5.2% and forecasts for no change.

These figures highlight persistent pressure on the world’s second-largest economy as domestic and external demand weaken, adding to the challenges facing policymakers in Beijing.

As investors await the Fed’s decision, markets continue to closely watch Chinese economic indicators. The overall picture points to ongoing strain on the world’s two largest economies, which could weigh on the global economic balance.

 

New Round of U.S.–China Talks in Madrid Amid Trade and TikTok Disputes

Madrid hosted the start of a new round of negotiations between the United States and China on Sunday. The talks are aimed at containing escalating trade tensions and deciding the fate of TikTok in the American market.

The six-hour discussions at the Santa Cruz Palace, home to Spain’s Foreign Ministry, brought together U.S. Treasury Secretary Scott Besent and Trade Representative Jameson Greer with Chinese Vice Premier He Lifeng and chief trade negotiator Li Zhenggang.
After the first session, Besent offered only a brief comment: “Talks will continue tomorrow morning.”

Background: Tariffs and a Prolonged Standoff

This is the fourth meeting between the two delegations in four months across various European cities, following sessions in Geneva, London, and Stockholm. It comes as President Donald Trump’s U.S. tariffs remain in place.

Key Issues on the Table:

• Trump extended tariffs on Chinese imports up to 55% until November 10, despite a temporary truce in Stockholm in July.
• A significant point of contention is TikTok’s future. Washington’s deadline for ByteDance, the app’s parent company, to end U.S. operations expires September 17. However, sources suggest the White House may grant yet another extension—the fourth since Trump returned to office.

Trade experts doubt a breakthrough but see the formal inclusion of TikTok on the agenda as giving the U.S. administration political cover for any further extension.

The talks also covered energy issues. Washington is pressing Beijing to tighten controls on illicit shipments to Russia and urging G7 allies to impose tariffs on countries importing Russian oil, especially China and India.
The United States has already levied an additional 25% tariff on certain Indian goods, while Chinese imports remain outside these sanctions.

Sessions are set to resume Monday morning between 8:00 and 10:00 local time, followed by a joint press conference later in the evening to present the outcome of the second round.

Political and economic circles are watching closely for any progress, however modest, as the fate of TikTok and Russian oil remains a focal point of contention.

Daily News Report – September 14, 2025

Today, the world witnesses a series of striking political and economic developments, marked by key financial decisions, significant diplomatic statements, and major technology agreements—underscoring the challenges and transformations confronting leading nations.

Fitch Downgrades France’s Credit Rating to A+ Amid Political Turmoil and Fiscal Deficit

On Friday, Fitch Ratings cut France’s sovereign rating from AA- to A+ with a stable outlook, citing ongoing political crises and a lack of clarity over public finances as obstacles to reducing the fiscal deficit.

The agency noted that the government’s defeat in a no-confidence vote highlights growing political fragmentation, reducing the authorities’ ability to implement broad austerity measures. Fitch added that current forecasts make it unlikely France will lower its deficit below 3% of GDP by 2029, the goal set by the previous government.

Chinese Foreign Minister: “China Does Not Engage in Wars and Has No Plans To”

On Saturday, Chinese Foreign Minister Wang Yi stated that China neither participates in wars nor intends to do so in the future. His comments indirectly addressed U.S. calls for allies to impose tariffs on Russian oil imports, including those destined for China.

The United States has sought to persuade buyers of Russian crude to halt purchases as part of efforts to end the war in Ukraine. Washington has already imposed tariffs on India for importing Russian oil but has refrained from similar measures against China, which it regards as a key strategic partner to Moscow.

In a statement issued by the Chinese Foreign Ministry after a joint press conference with his Slovenian counterpart in Ljubljana, Wang stressed that wars do not resolve crises and economic sanctions only make them more complex.

UK and U.S. Poised for New Tech Agreement Ahead of Trump Visit

The United Kingdom is preparing to sign a major technology agreement with the United States during President Donald Trump’s upcoming official visit, amid expectations of massive investments in advanced technology.

According to the British government, the agreement—set to be finalized next week—will strongly boost businesses and consumers on both sides of the Atlantic, though full details have not yet been disclosed.

UK Technology Secretary Liz Kendall, who took office in early September, said that cutting-edge technologies such as artificial intelligence and quantum computing will profoundly impact people’s lives, from developing new disease treatments to improving public services.

Trump is scheduled to arrive in Britain on Tuesday for a three-day state visit, accompanied by top U.S. executives, including Jensen Huang (CEO of Nvidia) and Sam Altman (CEO of OpenAI). Sources report that Huang and Altman plan to announce multi-billion-dollar investments in UK data-center infrastructure, while U.S. cloud-computing firm CoreWeave, which entered the UK market earlier this year via an IPO, is preparing to reveal a new investment.

These fast-moving developments highlight the scale of today’s global economic and political challenges—from debt crises and internal divisions to geopolitical tensions and massive technology investments—illustrating a global landscape filled with risks and opportunities.