Trade war, price swings, and more face big economies 

From the risk of higher trade tariffs under US President-elect Donald Trump’s administration to monetary authorities stemming economic uncertainties, some of the world’s big economies may be in for a rollercoaster ride in 2025.

Here are what lies ahead for China, Japan and the Eurozone:

China trade tensions

The outlook for the world’s second-largest economy remains weak on sluggish domestic demand. Tariffs on most Chinese imports may significantly curb consumption, trade, and investment.

Benign inflation is also expected to persist into 2025. The People’s Bank of China’s (PBOC) recent rate cuts did not boost consumption to market players’ expectations.

Thus, China may bolster its economic stimulus by further reducing borrowing costs and speeding up property support measures. Analysts see the PBOC cutting policy rates by 40-60 basis points (bps) next year.

The yuan could face further depreciation following Trump’s nomination of China hawks to his second-term Cabinet. This could intensify if plans to raise tariffs on Chinese imports to as much as 60% pan out.

Japan growth and rates

Robust wage growth gives Japan’s domestic demand a positive outlook, but growth is uneven due to weak private investment and exports. The nation’s economy may also be impacted by US tariffs, as Japan is a key supplier of semiconductors to China.

The anticipated demand-driven inflation boosts the case for rate hikes by the Bank of Japan. And markets are pricing in at least 40bps rate hike in 2025.

Still, the yen may continue to fluctuate given its sensitivity to political and economic developments. Any potential upside could be moderated by government intervention and growing expectations of BOJ rate hikes.

Eurozone’s fragile economy

The outlook for the economic bloc is weak. It also faces risk from potential broad-based US tariffs.

Inflation in the Eurozone is expected to slow in 2025, but upside risk lingers if the economic bloc retaliates against Trump’s universal tariffs and stokes costs of imported goods.

The European Central Bank is expected to cut rates – from 3% currently to a terminal level of 2.25% in 2025 – to support the economy.

A trade war risks the euro falling to parity with the US dollar. The bloc’s currency could have additional room to decline further once Trump unveils final economic plans.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.) 

ANNA DOMINIQUE CUDIA, MBA, CSS, is the Head of Markets Research at Metrobank’s Trust Banking Group, spearheading the generation and presentation of financial markets insights to clients. She used to be with Metrobank’s Investor Relations, where she brought in international awards and took part in various multi-billion peso and dollar capital raising activities. She holds a Master of Business Administration (Finance) degree, with distinction, from the University of London, and industry certifications in finance. She is a naturally curious person and likes to travel here and abroad.   

SOPHIA THERESE “PIA” BONIFACIO is a Markets Research Analyst at Metrobank’s Trust Banking Group, covering local and offshore macroeconomic research. She obtained her Bachelor’s degree in Economics with a Specialization in Financial Economics, cum laude, from the Ateneo de Manila University and is a Certified UITF Sales Person (CUSP). Pia enjoys long road trips and is a self-proclaimed milk tea connoisseur.