Economy
Trade war bigger challenge for EM central banks than COVID-19: IMF
The trade war fed by U.S. President Donald Trump presents an even tougher challenge for emerging market policymakers than the COVID-19 crisis five years ago, a top official at the International Monetary Fund (IMF) has warned.
The shock from the trade war brings “differential effects” for central banks in emerging markets, in contrast with the COVID-19 pandemic, when they could quickly ease monetary policy, the IMF’s Gita Gopinath said, according to an interview published on Thursday.
In an interview with the Financial Times (FT) newspaper, the fund’s first deputy managing director said the unpredictable impact of tariffs on developing economies and global markets would make the task of their central bankers harder.
“This time the challenge is going to be greater for them, compared to the pandemic,” she said.
Federal Reserve (Fed) policymakers have been signalling they are not ready to lower interest rates until they are sure tariffs will not further stoke inflation. Some estimates predict the inflation in the U.S. could go up in the short term due to the impact of Trump’s tariffs, which are expected to make goods, from shoes to phones, more expensive for ordinary Americans.
Elsewhere, the Bank of England (BoE) and the European Central Bank (ECB) have pivoted to easing monetary policy as inflation slowed down from the peaks observed in 2022 and due to widely stagnating or low growth.
However, in emerging markets, which are also facing higher U.S. trade barriers, the situation looks “more like a demand shock,” said Gopinath, which means slower inflation and growth.
The situation contrasts with the onset of the pandemic, when most central banks around the world slashed interest rates.
“When we have this kind of a divergence, you could end up with tightening global financial conditions, and emerging markets are particularly sensitive to such changes in global markets,” Gopinath told the FT.
Emerging market currencies and stocks have largely rebounded in the two months since Trump announced his sweeping “reciprocal” tariffs, as investors bet that central banks will be largely free to stimulate their economies despite the risk that higher rates in developed countries will draw capital away.
However, a report from the Organisation for Economic Co-operation and Development (OECD) warned that “the risk of disruptive capital flows has risen in emerging market economies.”
Still, Gopinath noted that “emerging market central banks have built up credibility over time, and several have moved to inflation-targeting frameworks,” which she said was very positive.
She added: “Global factors are still bigger drivers for them compared to advanced economies, and so when we’re entering this environment where we are seeing major shifts in global economic policy, along with the uncertainty, this will present a challenge to them.”
Advanced Micro Devices (AMD) briefly climbed past $1 trillion in market capitalization for the first time on Monday, marking a milestone for the chipmaker, which joined a small group of competitors with a similar valuation as investors bet on its expanding role in artificial intelligence computing.
The company’s shares were last up 9% at $610, after surging to an all-time high of $613.92, creating a valuation of just over $1 trillion.
The milestone caps a stellar rally for the Santa Clara, California-based AMD, regarded as the closest rival to AI bellwether Nvidia for graphics processing units (GPUs).
It becomes the fourth U.S. chipmaker to top a $1 trillion valuation, after Nvidia, Broadcom and Micron. Nvidia crossed the mark in 2023 and is now the world’s most valuable company, worth more than $5 trillion.
AMD has accelerated its AI product launches and moved beyond selling individual chips to offering complete systems that combine processors, networking gear and related hardware, helping it compete with Nvidia’s products.
The company is also benefiting from rising demand for central processing units used alongside graphics processors in servers handling inference. That has helped AMD take market share from Intel.
Early last month, AMD forecast quarterly revenue above Wall Street estimates, which fell short of lofty investor expectations, sending its stock down over 7% on the day. Since then, it has leaped over 26%.
Most chip stocks surged on Monday, with Intel jumping around 11%, Qualcomm rising 4.1% and the broader chips index gaining 2.6% to a one-month high.
Türkiye has extended the liquidation period of scores of investment funds at the center of a liquidity crunch that prompted authorities to intervene, while detaining more people and freezing assets linked to executives.
Authorities stepped in last week to shore up market stability after some investment funds defaulted on redemption requests, triggering a sharp selloff in Türkiye’s benchmark stock index. The measures helped the index recover some of its losses.
As part of the intervention, the Capital Markets Board (SPK) mandated Ziraat Bank and Işbank to oversee the liquidation of 131 investment funds managed by seven portfolio management companies, including Tera Pörtfoy, Pusula Pörtfoy and Hedef Pörtfoy, on the TEFAS electronic fund trading platform.
Late Sunday, the SPK said it was extending the liquidation period given to the banks to six months from three months, “considering the portfolio structures of the funds subject to liquidation and market developments.” It did not elaborate. The assets under management of liquidated funds have been said to exceed TL 890 billion ($18.3 billion).
An investigation into suspected share price manipulation has led to the detention of top executives from several firms and drawn scrutiny to concentrated bets in thinly traded stocks.
Treasury and Finance Minister Mehmet Şimşek said Friday the liquidation would not put pressure on Borsa Istanbul Stock Exchange because regulatory changes should prevent any contagion risk. He said authorities would continue to monitor the market closely.
On Saturday, the Justice Ministry said that Pusula Holding Chair Serdar Turhan, Tera Yatırım Holding Chair Emre Tezmen and three fund administrators had been detained as part of the investigation. It said four other suspects had already been arrested and all other suspects identified by the Capital Markets Board had been barred from leaving the country and had their assets frozen.
On Sunday, the ministry said it had identified a transfer of $15 million from Turhan’s account to an account in Switzerland, and another transfer of $25 million from an account belonging to Muhammed Yarız, another executive at Pusula Pörtfoy Yönetim, which is linked with Pusula Holding.
The ministry added that Nihat Kırmızı, the chairman of the Doğa Sigorta firm, was also detained as part of the probe.
15 detained over Katılımevim shares
On Monday, Justice Minister Akin Gürlek said authorities detained 15 people in a probe into transactions involving shares of Katılımevim, a listed Turkish savings financing company that was founded by Pusula Holding’s Turhan, while freezing assets linked to executives at several investment firms.
Prosecutors launched legal proceedings against 25 suspects in the Katılımevim investigation, Gürlek said in a statement. Ten suspects remained at large.
The SPK last week filed criminal complaints against 38 people over alleged manipulation of shares in Katılımevim and two other listed companies, and imposed two-year trading bans on them.
Authorities froze financial and asset transactions involving executives and officials linked to Pusula Finans Holding, Pusula Yatırım Menkul Değerler, Tera Yatırım Menkul Değerler, Tera Portföy Yönetimi, Hedef Holding, Hedef Portföy Yönetimi, Bulls Yatırım Menkul Değerler, Bulls Portföy Yönetimi and Ufuk Yatırım Yönetim ve Gayrimenkul, Gürlek said Monday.
The government has instructed banks, notaries, land registry authorities and financial crimes watchdog MASAK to prevent assets under investigation from being transferred or reduced, Gürlek said.
Authorities also ordered strict monitoring of transactions by board members, authorized signatories, their spouses and close relatives that could reduce their assets, requiring such transactions to be cleared by prosecutors.
The investigation was continuing, Gürlek said.
Tera says working to repay investors
Tera Pörtfoy said Sunday it had repaid some investors and was working to repay others, but that restrictions imposed by authorities were delaying the process.
“Redemption requests submitted during the period when inflows into our funds were being converted into investments surged within a short timeframe, evolving into a collective outflow demand totaling approximately 300 billion Turkish Lira” ($6.15 billion), Tera Pörtfoy said in a statement.
“It should be appreciated that meeting a demand of this magnitude within such a short period would not be easy for any financial institution,” it said, adding that investors had been paid between September 16 and 18 but that further repayments were not possible “due to transaction restrictions and blocks.”
It also said the firm was ready to cooperate with authorities to conclude the process as quickly as possible.
Alphabet’s Google search engine has been slapped with a 403 million euros ($463 million) fine by the European Union after an inquiry into its processing of location data, a watchdog acting on behalf of the bloc said Monday.
Ireland’s Data Protection Commission (DCP) found that Google infringed European Union privacy rules known as the General Data Protection Regulation (GDPR) through three of its specific features – “Web & App Activity,” “Location History” and “Location Accuracy” – from 2018 to 2020.
“As a result of Google’s failures, individuals could have been unaware that their location was being used to, for example, influence them with ads or to infer their interests, and could lose control over their personal data,” DPC Deputy Commissioner Graham Doyle said in a statement.
“The retention of users’ location data for longer than necessary aggravated this loss of control.”
It was the fourth-largest fine of the more than 4 billion euros in total levied by the DPC since it became the lead EU regulator for most big U.S. tech firms under the strict 2018 GDPR due to the location of companies’ EU operations in Ireland.
Google was also ordered by the DPC to bring its processing into compliance within six months.
In response, the company said the “case centers around historical policies that have since been updated.”
“From 2019 onward, we’ve significantly evolved our practices and launched robust tools that make managing location data simple,” it added in a statement.
The DPC opened the inquiry in 2020 following complaints from several European consumer rights organizations, including the pan-European consumers’ organisation BEUC, regarding Google’s processing of location data.
The infringements included the lawfulness and fairness of Google’s processing of location data in “Web & App Activity,” an account setting that processes information related to users’ activity on Google services, and “Location History,” which keeps track of users’ location through mobile devices.
Google is subject to three other ongoing statutory inquiries, all of which are at an advanced stage, the DPC added.
A fourth-quarter jet fuel deficit looms for Europe, despite its efforts to secure supplies from faraway countries like South Korea, which is preparing to send its highest volume to Europe in four years this September, according to expert analysis and shipping figures.
The continent has been importing more jet fuel from nations including Nigeria, the United States and Canada since the outbreak of the Iran war over half a year ago, which hit Middle East supplies and cut off around half of Europe’s jet imports.
Europe remains highly exposed to the risk of further supply disruption as Middle Eastern tensions rise.
Consultancy Energy Aspects forecasts that Europe will see a fourth-quarter jet fuel deficit of 510,000 barrels per day, against surpluses of 18,000 bpd in the United States and 419,000 bpd in Asia-Pacific. The third-quarter trend is largely the same.
South Korea in September has become the latest large source of jet fuel shipments to Europe, according to flows data. European imports of the fuel from the Asian nation so far in September stand at 129,000 barrels per day, according to commodities intelligence firm Kpler, the highest since October 2022. LSEG data shows similar volumes.
With the continent expected to remain short of jet fuel, Europe’s imports are set to continue, said James Noel-Beswick, head of commodities at market intelligence firm Sparta Commodities.
Jet fuel is one of the so-called middle distillates, which include diesel and gas oil. European diesel hit a record high this week, firmer than Asia’s diesel markets.
The widening spread between the Asian and European benchmarks is making it more profitable to export barrels into Europe, Noel-Beswick added.
Europe’s jet fuel stocks drop
Imports from South Korea also coincide with low inventories, with stocks held independently in the Amsterdam-Rotterdam-Antwerp (ARA) oil refining and storage hub hitting their lowest in seven years in the week to Sept. 10.
Asia is a swing supplier of jet fuel to Europe and traders typically turn there when they judge the arbitrage – the relative prices between the two regions – profitable. Average monthly exports last year were 1.5 million barrels, Kpler data showed.
South Korea’s jet fuel output for July hit a seven-year high of almost 13.89 million barrels, while exports reached a 3-1/2-year high, government data showed.
An increase in refinery crude processing rates has contributed to this rise in output, and traders expect crude runs for August to be firmer than July. Provisional government data showed July refining runs at 2.7 million barrels per day, up by 16% from June.
Flights in and out of Scotland, Northern Ireland and the north of England were disrupted Monday due to an air traffic control failure, the latest embarrassment to afflict the U.K. national air traffic controller.
Although NATS, formerly known as National Air Traffic Services, said the issue at its Prestwick center in Scotland has been fixed, the repercussions would likely continue through the day at the very least, with flights canceled or delayed.
“We are working with airports and airlines to safely lift air traffic regulations as quickly as we can to minimize any further disruption,” it said in a statement. “We apologize for the disruption.”
NATS said airports south of Manchester, including those in and out of London, are “broadly unaffected.”
Manchester, Belfast International, Edinburgh and George Best Belfast City airports have seen the most disruption, according to aviation analytics company Cirium.
NATS said the disruption is unconnected with the software glitch that led to the cancellation of over 2,000 flights in and out of the United Kingdom two weeks ago. The chaos prompted mounting calls for its chief executive Martin Rolfe to stand down.
In a report on the outage published Friday, NATS said a software defect in the National Airspace System, which allocates codes so air traffic controllers can identify flights on radar, was behind the decision to ax the flights.
A previous outage in August 2023 cost airlines 100 million pounds ($134 million) and caused travel chaos.
Airlines and airports were aghast at the latest problem to afflict air traffic control over the U.K.
Ryanair, Europe’s biggest airline, said 25,000 of its passengers were facing delays as a result of Monday’s issue and repeated its calls for Rolfe to resign.
“Martin Rolfe has presided over repeated system failures, repeated passenger disruption and repeated failures to deliver an effective back-up system,” its chief operations officer Neal McMahon said. “Enough is enough. Martin Rolfe should resign today.”
Rival airline easyJet had to cancel some flights, saying the latest disruption “once again calls into question the resilience of NATS’ systems and demonstrates the need for firm actions to prevent these repeated failures.”
And British Airways said it is “disappointing” that some customers may experience disruption after “yet another technical fault” involving NATS.
The U.K. government owns 49% of NATS, making it the largest shareholder and giving it a veto over key decisions. Airlines, airports, investors and employees own the remaining shares in the public-private partnership.
“I know this will be deeply frustrating for passengers after the previous issue,” Transport Secretary Heidi Alexander said.
A lot has changed in the four months since the leaders of the two global superpowers last met: Xi Jinping has overseen a surge in China’s trade, while Donald Trump has struggled with falling approval ratings at home.
That shift in fortunes has tempered expectations for their summit in Washington this week, analysts say, with Xi in no rush to make concessions and Trump constrained by a costly war with Iran that has hurt both his popularity and Americans’ wallets.
While thorny issues like Taiwan may surface, the main focus of the Sept. 24 meeting is whether the leaders will signal an extension to a trade truce struck last year that averted a major shock to the global economy.
“Xi is not really looking for anything tangible. He wants to extend the gentleman’s agreement with Trump so that China has time to fortify itself,” said Jon Czin, a foreign policy expert at the Brookings Institution who formerly served as China director at the U.S. National Security Council.
‘Living in Xi’s world’
White House officials have sought to downplay the potential for major breakthroughs.
U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng helmed preparatory talks in New York Sunday aimed at teeing up some potential agreements on AI guardrails and trade in non-sensitive products.
That is a far cry from Trump’s vow when he returned to office in 2025 to use tariffs to address a trade imbalance with China that was “killing” the United States.
But since agreeing the truce with Xi in October of that year, his attention has been divided among myriad other foreign policy battles, from the wars in Iran and Ukraine to disputes with Europe over free speech.
China has faced its own challenges, such as slowing domestic demand and a protracted property crisis, but the export juggernaut that Trump sought to tame has kept roaring in what economists are increasingly referring to as China Shock 2.0.
China has found new markets and boxed out competition from other industrialized countries. It is exporting more of its goods to the rest of the world, with a $1.2 trillion global trade surplus last year, particularly as its low-priced electric vehicles undercut the auto sectors in Germany, Japan and South Korea.
Its surplus is on pace to top $1 trillion for a second straight year.
While U.S. efforts to curb the cheap parcels that online retailers such as Shein and Temu rely on have worked, more than half of the roughly 6,500 product categories China sold to the U.S. so far this year have grown compared to 2025.
A delegation of Chinese business leaders, potentially including some firms facing U.S. regulatory scrutiny as they seek greater market access, is set to accompany Xi to Washington.
The Trump administration “thought they could use massive unilateral pressure to force China to make concessions, and that did not occur,” said Scott Kennedy, an expert on the U.S.-China economic relationship at Washington-based think tank CSIS.
“Now this is Xi Jinping’s world, and we’re all living in it.”
Taiwan and trade wins
If Xi is in the driver’s seat as analysts suggest, that will further unnerve U.S. allies in Asia who expect the Chinese leader to push Trump to soften Washington’s support for Taiwan.
Xi repeatedly asked him about Taiwan when they met in Beijing in May, including about arms sales and Washington’s resolve to defend the island, Trump told reporters.
The U.S. president described a pending $14 billion arms package for Taiwan as a “negotiating chip” with Beijing.
Some officials in Taipei and Tokyo worry he may be tempted to cash in that chip for political wins ahead of November’s midterm elections, which could prove challenging for his Republican Party.
That could include Chinese purchases of Boeing jets or farm goods, or commitments to curb the flow of fentanyl precursor chemicals that have fueled the U.S. opioid crisis.
“China-U.S. ties have become more transactional,” said Wu Xinbo, a professor at Shanghai’s Fudan University who advises China’s Foreign Ministry.
While Washington may want to prioritize trade talks, for Beijing, the U.S. approach to Taiwan could be key, he said.
“If you accommodate our concern on the Taiwan issue, then we would be willing to accommodate your concerns on other issues, be it law enforcement or on purchases of U.S. agricultural products,” Wu said.
Putting pressure on Iran
Washington also sees Xi as uniquely able to exert pressure on Iran to bring an end to the war that has dragged Trump’s approval rating to the lowest of his political career.
However, Xi has shown little inclination to do so. Beijing is reportedly selling billions of dollars’ worth of goods to Iran through a sanctions-evasion scheme. China’s Foreign Ministry says it is not aware of such a scheme.
U.S. threats last month of secondary sanctions on countries doing business with Iran – which Bessent called an “Economic D-Day” – appear not to have yet been wielded against Tehran’s largest trading partner.
That is more evidence, analysts say, that Trump is eager to keep relations with Xi steady as he focuses his energies elsewhere – an arrangement that also suits the Chinese leader.
“Both Xi and Trump feel it’s quite helpful to have stability in the relationship so that they can focus on more pressing things,” said Ruby Osman, senior geopolitical researcher at the Tony Blair Institute for Global Change.
“For Trump, that is Iran. For Xi, that is building out China’s domestic resilience for whatever comes after Trump.”
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