Global Markets in May 2025: Navigating Trade Tensions and Economic Shifts

Trade Policy Developments

On May 27, 2025, the International MonetaryFund (IMF) raised the UK's 2025 GDP growth forecast from 1.1% to 1.2%, citingrobust first-quarter performance and a recovering economy. However, the IMF noted downside risks including global trade tensions and weak productivity. It praised UK trade deals with the EU, India, and the US and recommended refinements to fiscal rules to prevent emergency spending cuts. The Guardian

Stock markets rallied as US President Donald Trump delayed imposing 50% tariffs on EU imports until July 9, easing trade warfears. The FTSE 100 reached a two-month high, and Germany’s DAX hit a recordpeak. The Guardian+1MarketWatch+1

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Sectoral Highlights

Manufacturing in China: China's "Made in China 2025" policy, launched a decade ago to establish China as a global manufacturing superpower, has significantly modernized Chinese manufacturing, often surpassing foreign competitors inautomation and production capacity. Reports affirm that the policy's key goals were largely met, mainly through industrial policy, subsidies, and strategic market access restrictions. However, the policy also attracted international criticism for being mercantilist and sparking trade tensions, especially withthe U.S. and EU. Financial Times

Automotive Industry in India: India’s automotive market remains robust and attractive to both global and domestic car manufacturers, despite lagging in electric vehicle (EV) adoption due to insufficient infrastructure. The country's strong car sales are driven by favorable demographics, including a rising working-age population andincreasing income levels. The Economic Times

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Market Performance

Global stock markets experienced volatilityin May 2025. On May 2, markets rallied strongly as investors responded positively to signals from the U.S. Federal Reserve indicating a likely pause in interest rate hikes. Optimism about economic growth in major economies also helped lift investor sentiment. Info Finance

However, following Memorial Day 2025, stocks rebounded modestly, recovering from recent trade-related declines. Despite astrong earnings season and positive market sentiment, analysts caution that thefull economic effects of ongoing tariffs, particularly those stemming from U.S.-China tensions, have yet to materialize. Barron's

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Conclusion

May 2025 has been a month of contrasts in globalmarkets, with positive economic indicators tempered by ongoing trade tensions and sector-specific challenges. Investors are advised to stay informed and consider these dynamics when making investment decisions.