End of the ‘Phoney Trade War’ Period
After months of relative calm during the Northern summer, businesses worldwide are reportedly preparing for increased economic uncertainty and financial market volatility as trade tensions reemerge. According to Reuters analysis, the recent period may have represented a “phoney trade war” similar to the eight-month period of minimal military activity after World War Two began in 1939.
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The report states that most U.S. tariffs only began taking full effect from August, with government data yet to capture the complete impact. The recent government shutdown further complicated the situation by delaying economic releases, creating what analysts suggest could be a perfect storm of data hitting markets simultaneously when government operations resume.
Renewed Trade Tensions and Executive Authority
Market uncertainty is reportedly compounded by President Donald Trump’s use of executive orders, which provides flexibility to adjust tariffs in response to various economic, political, or social developments. Sources indicate this authority was demonstrated recently when the administration revived threats of 100% tariffs on Chinese goods, creating tension ahead of a November 1 deadline.
The China–United States trade war developments suggest that assumptions about the trade shock being fully absorbed may be premature. Global monitoring bodies reportedly fear the real impact of sweeping tariffs will only become apparent next year, despite the International Monetary Fund’s assessment that the world economy avoided the worst-case scenario outlined earlier this year.
Economic Forecasts and Business Sentiment
The World Trade Organization has significantly reduced its forecast for global goods trade growth next year, cutting expectations from 1.8% in August to just 0.5% currently. WTO Director-General Ngozi Okonjo-Iweala stated that the outlook for next year appears “bleaker,” with some of this year’s surprising resilience attributed to import front-loading ahead of expected tariff impacts.
For American small businesses, anxieties that seemed to ease over summer have reportedly returned. The National Federation of Independent Business monthly survey showed sentiment declining in September for the first time in three months, with the Uncertainty Index jumping seven points to 100—the fourth-highest reading in over 51 years. The percentage of business owners expecting improved conditions over the next six months plunged 11 points to 23%.
Market Volatility and Key Events
Financial market volatility is reportedly increasing as investors navigate conflicting influences from the trade war and AI investment boom. The VIX “fear index” of S&P 500 implied volatility has risen to its highest intraday levels since May after spending five months below historical averages. Treasury volatility is also increasing, with regulators and global watchdogs warning about potential major corrections.
Analysts suggest the remainder of October contains several pivotal events that could significantly impact markets. The delayed September inflation report is scheduled for release on October 24, regardless of whether the government has reopened. This could be followed by the publication of all postponed data reports if Washington resumes operations.
Converging Market Forces
These developments reportedly converge just before the Federal Reserve meeting on October 29, which coincides with third-quarter updates from major tech companies including Microsoft, Meta, Alphabet, and Amazon. Apple follows with its report the next day. Unless tensions ease, the November 1 China tariff deadline then looms that weekend.
According to the analysis, current GDP growth and stock market performance are being supported by substantial investment flowing into artificial intelligence and AI infrastructure, potentially masking underlying economic challenges. This dynamic between parallel economic realities is reportedly reintroducing considerable volatility into financial markets as investors attempt to balance trade war impacts against technological investment opportunities.
With tariff uncertainties returning and market volatility increasing, businesses and investors are reportedly preparing for a potentially turbulent period ahead as the temporary calm in trade tensions appears to be ending.
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