Q3 Market update provided by Quilter Cheviot - 13th October 2025

China–US trade tensions: what’s just happened and what it means for markets

China’s move

On Thursday last week China announced new restrictions on the export of rare-earth minerals. These materials are essential for making products like smartphones, electric vehicles, semiconductors and military equipment. China dominates global processing of these minerals, and the new rules mean that foreign companies must now get special approval from Beijing to export products containing even small amounts of Chinese-sourced rare earths.

President Trump’s response

In reaction, Donald Trump announced on Friday just before 3pm UK time:

• A 100% additional tariff on Chinese goods, starting 1 November.

• New export controls on critical US software products.

• A threat to cancel a planned summit with President Xi later this month – although Trump later suggested he might still attend.

Trump said the tariffs are intended to counter China’s attempt to use its control of rare earths as leverage. He also hinted that the measures could be reversed if China backs down before the deadline.

Impact on stock markets

• US stock markets fell sharply (down approximately 3%) on Friday following Trump’s announcement.

• Technology stocks were hit hardest as many rely on rare-earth materials from China.

• Investors are now concerned about a renewed trade war which could disrupt supply chains and slow global growth.

What’s next?

There is still a window for negotiation and over the weekend Trump downplayed concerns about China, saying the US wants to help, not hurt it. Some commentators have noted that Trump is unlikely to escalate foreign policy tensions before resolving the current US government shutdown.

China’s export controls begin on 1 December, while Trump’s tariffs start on 1 November. This gap could allow both sides to de-escalate before the measures take effect. In the meantime, this fresh US/China dispute could push global stock markets lower in the near term with higher levels of daily volatility. We saw this happen when Donald Trump first announced significant tariffs on American trading partners in his Rose Garden speech on 2nd April. We will continue to monitor market developments closely and, if needed, adjust your portfolio to ensure it remains appropriately positioned in response to changing conditions.

Q3 2025 ‘at a glance’ summary

The third quarter of 2025 was generally positive for investors, with most asset classes performing well.

1. Global investment climate

• Tensions around international trade eased slightly – helping boost investor confidence.

• In the US, job market data showed signs of weakness. This led the US central bank (the Federal Reserve) to begin lowering interest rates again with a 0.25% base rate cut in September – a move aimed at supporting the economy.

2. Stock markets

• Technology companies had a strong quarter, thanks to better-than-expected profits. This renewed interest in “growth” stocks.

• Growth vs. Value:

• Growth stocks are shares in companies expected to grow earnings quickly – often in sectors like technology.

• Value stocks are shares in companies that appear undervalued compared to their fundamentals – often in sectors like finance or energy.

• Over the quarter, growth stocks performed better than value stocks globally.

• Emerging markets as a group did better, in sterling terms, than developed markets.

3. Bond markets / interest rates

• Bonds had a mixed quarter. While riskier assets like stocks did well, government bonds faced challenges.

• In France, political uncertainty made investors nervous. In the UK and US, concerns grew about how governments are managing their finances.  In the US, there were also worries about whether the central bank (Federal Reserve) can act independently of political pressure.

• These concerns caused long-term interest rates (yields) on government bonds to rise, especially in France and the UK but also in Germany – a sign that investors expect more volatility or inflation in the future.  However, expectations that the US will cut interest rates further over the next year helped balance things out with a small decline in the US 30-year Treasury yield in Q3.

• In Europe, the central bank (ECB) seems to have finished lowering rates for now. In the UK, futures markets are not pricing in any more Bank of England base rate cuts in 2025.

4. Currency and commodity markets

• The US dollar had a quiet quarter after a calamitous first half of the year. It strengthened in July due to worries about conflict in the Middle East – but those concerns eased in August, and the dollar gave back those gains.

• That said, the pound weakened by 2.1% against the US dollar in Q3, moving from $1.37 to $1.34.  Against the Euro we saw sterling fall 1.7% from €1.16 to a touch above €1.14.  A weaker pound is (counterintuitively) generally positive for our clients as most underlying exposure is outside of the UK domestic market for globally invested portfolios.

• Gold and silver prices rose very sharply in the third quarter.

• The price of gold increased by 16.8% over the quarter. Over the 9-month period to 30th September gold was up 47.0%. All in dollar terms.

• A key driver of this recent surge has been retail investors buying gold through ETCs (Exchange-Traded Commodities – investment products that track the price of assets like gold and can be bought and sold like shares). This marks a shift from earlier in the year, when central banks were the main buyers – a more stable and long-term source of demand.

• Silver rose even more dramatically – up 29.2% in Q3 and +61.4% over the 9 months to end-September, in dollar terms. Like gold, silver has attracted strong interest from individual investors.

• While rising gold and silver prices may seem positive, the fact that retail investors are now driving this phenomenon is a potential concern. Retail sentiment – how confident or enthusiastic individual investors feel – can change quickly, especially if prices fall or headlines shift. In contrast, central bank buying tends to be more strategic and long-term – making it a more reliable support for prices.

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