On September 19, 2025, the world’s attention turned to a highly anticipated phone call between U.S. President Donald Trump and China’s President Xi Jinping. The stakes were high: at the top of their agenda was a trade agreement that could keep the popular video app TikTok operating in the United States, while also easing the persistent trade tensions between the world’s two largest economies. According to Yahoo Finance, U.S. officials expected the call to set the stage for an in-person summit between the two leaders later in November—a sign that both sides were eager, or at least willing, to find common ground after months of uncertainty.
This diplomatic overture did not come out of the blue. The global economy, after all, has been navigating a period of heightened policy shocks and political uncertainty, largely stemming from the Trump administration’s aggressive trade maneuvers. Yet, as The Economic Times reported, the world’s economies have shown a surprising degree of resilience. Early in Trump’s term, dire predictions of a global recession and plummeting markets abounded. Headlines even warned of a collapse in global trade so severe that some joked Christmas itself might be canceled. But fast-forward to this fall, and the reality looks quite different.
“The global economy continues to exhibit considerable resilience amid heightened policy and political uncertainty,” BNP Paribas economists noted recently, crediting supportive financial conditions, robust household and corporate balance sheets, the promise of an AI-driven productivity boost, and lower energy prices for the unexpected stability. Perhaps most crucially, the feared trade war—one that could have crippled global shipping and sent tariffs spiraling ever upward—never truly materialized. Instead, sketchy but functional trade deals with exporting nations in Europe and Asia have kept commerce flowing, albeit under more modest tariffs that are being shared across exporters, importers, and consumers alike.
Still, the landscape remains anything but settled. China, for instance, recently dropped a months-long antitrust probe into Google amid ongoing discussions about the TikTok deal, even as it increased pressure on domestic purchases of Nvidia chips. As one source told the Financial Times, “Drop one case but seize the other. China is trying to narrow its retaliatory targets to make them more potent.” The message is clear: while Beijing is willing to make some concessions, it’s also playing hardball where it counts.
Meanwhile, the Trump administration has not shied away from flexing its own economic muscle. Reciprocal tariffs ranging from 10% to 50% are set to take effect in November, with President Trump invoking the 1977 International Emergency Economic Powers Act (IEEPA) as justification. The legal fate of these tariffs now rests with the U.S. Supreme Court, which has scheduled oral arguments for early November, aiming for a swift resolution. An appeals court has allowed the tariffs to remain in place during the proceedings, keeping businesses and investors on edge.
Despite these headwinds, there have been some bright spots. During Trump’s recent visit to the UK, British pharmaceutical giant GSK announced a $30 billion investment in U.S. research and development—the largest such commitment by a foreign drugmaker in recent memory. According to Bloomberg, this move comes as Trump threatens to impose import tariffs on the industry and pushes for more domestic manufacturing. Yet, not all negotiations have yielded progress; the UK has shelved talks with the U.S. on removing British steel tariffs, meaning current duties remain in place for now.
Back in Washington, Treasury Secretary Scott Bessent struck a cautiously optimistic tone, telling reporters he was confident that a trade deal with China was near. With reciprocal tariffs looming, Bessent said he expected further talks before the measures take effect in November—a sentiment echoed by market watchers who see ongoing diplomacy as the best hope for avoiding a full-blown economic standoff.
Central banks, for their part, have responded with a blend of caution and pragmatism. The U.S. Federal Reserve, for example, cut its benchmark rate by 25 basis points during the week of September 15-19, a move designed to support growth amid the uncertainty. Fed Chair Jerome Powell downplayed the market impact of Trump’s efforts to remove Fed officials, telling a post-meeting press conference, “I don’t see market participants... factoring (that) in right now in terms of setting interest rates (on Treasury bonds and other market-based securities).” The yield on the U.S. 10-year Treasury note has actually fallen from about 4.6% when Trump took office to around 4.1% today—a sign that, for now, global investors have not lost faith in the U.S., the Fed’s independence, or the long-term path of inflation.
Across the Atlantic, the European Central Bank raised its 2025 GDP growth forecast to 1.2% from 0.9% last year, citing what ECB President Christine Lagarde called “resilience in domestic demand.” Italy, long seen as a fiscal trouble spot, is now tidying up its public finances to the point that ratings agency Fitch may grant it a boost. Spain’s economy is also humming along, with the Bank of Spain lifting its 2025 growth forecast to 2.6% thanks to robust tourism and domestic demand. Germany, Europe’s largest economy, is on the verge of a major transformation: large-scale public spending on infrastructure and defense, coupled with tax cuts, is expected to push GDP growth into the 1.5-2.0% range for 2026 and 2027. “The German fiscal plan is going to be a huge, huge support for the economy from 2026,” said Edmond de Rothschild Asset Management’s Caroline Gauthier.
Elsewhere, Japan’s manufacturer sentiment is at its highest in more than three years, according to the Reuters Tankan survey. Emerging markets like Brazil, Mexico, and India are holding up as well, buoyed by U.S. dollar weakness and proactive domestic policies. India, for example, is banking on tax cuts to spur domestic demand and offset the impact of U.S. tariffs.
But not everyone is convinced the current calm will last. Bank of Japan Deputy Governor Ryozo Himino warned this month that “the most plausible explanation for this is that tariff effects are taking time to surface,” adding that the U.S. administration “may roll out policies we have yet to foresee.” Investors, too, are wary. Oliver Blackbourn of Janus Henderson Investors cautioned, “U.S. labour market weakness should have everyone on a hair trigger for recession.” Alan Siow, a portfolio manager at Ninety One, echoed the sentiment, noting that the adjustment to new trade realities could be a “long, long tail” process, with market highs potentially masking underlying vulnerabilities.
As the world waits for the outcome of Trump and Xi’s negotiations—and the Supreme Court’s verdict on tariffs—the uneasy calm persists. For now, the global economy is holding up, but policymakers and investors alike know that the next spark could change everything in a heartbeat.