06:18 AM EDT, 10/20/2025 (MT Newswires) -- A market focus at the start of this week is renewed trade tensions between China and the United States which have increased downside risks to the near-term outlook for global trade and growth, said MUFG.

Last week U.S. President Donald Trump threatened to impose 100% tariffs on imports from China from Nov. 1, marking a new phase of escalating trade tensions between China and the U.S., wrote the bank in a note to clients. However, market participants remain cautiously optimistic that much higher tariffs are unlikely to remain in place for long and may not even be implemented at all helping to dampen the negative market reaction.

Investor optimism has been encouraged by comments from President Trump over the weekend, stated MUFG. Trump told Fox News on Sunday that the 100% tariff was "not sustainable" though it "could stand". Adding that the U.S. will "be fine" with China.

According to media reports, U.S. Treasury Secretary Scott Bessent virtually met with Vice Premier He Lifeng on Friday and had a constructive exchange of views ahead of this week's latest round of U.S.-China trade talks taking place in Malaysia.

The release overnight Sunday of the latest economic activity data from China provided confirmation that growth slowed in Q3 after proving more resilient than expected during H1 of this year, added the bank. The annual rate of gross domestic product growth slowed to 4.8% in Q3 down from 5.2% in Q2.

The National Bureau of Statistics noted though that the first three quarters have laid a "solid foundation" for achieving the government's full-year growth target of around 5%. However, weakness evident in domestic demand, both consumption and investment, remains a concern. Bloomberg has calculated that fixed-asset investment has contracted for four consecutive months to September, and has fallen by an annual rate of 0.5% in the first three quarters of this year.

Retail sales growth slowed further as well to an annual rate of 3.0% in September down from 3.4% in August.

However, it was partially offset by an unexpected pick-up in industrial production which rose to an annual rate of 6.5% in September up from 5.2% in August.

It comes at a time when China's top leaders are meeting in Beijing at the so-called fourth plenum to put together development plans for the next five years, added MUFG.

In the currency market, USD/CNY continues to trade between 7.1000 and 7.1500 although China's central bank (PBoC) has been setting the daily fix below 7.1000 over the past week, according to MUFG.