(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Mike Dolan

LONDON, Oct 15 (Reuters) - After a period of relative

calm through the Northern summer, businesses are bracing for a

nervier winter, a return of trade and economic uncertainty, and

higher financial market volatility to boot.

In some respects, the last few months may have been a bit of

a phoney trade war - not unlike the eight-month 'Phoney War'

after the start of World War Two in 1939 when no major military

activity actually took place.

As most U.S. tariffs only really hit in earnest from August,

government data has yet to pick up any lasting impact and the

shutdown dropped a veil on all new releases two weeks ago.

Not only does that inject considerable fog into the piece, it

also raises the jarring prospect of numerous economic releases

hitting markets all in one go - whenever government is allowed

back to work. Everyone from the Federal Reserve Chair down to

Wall Street economists is still unsure about just how the

biggest U.S. tariff rises in a century will pan out.

What's more, U.S. President Donald Trump's use of executive

orders allows him the ability to shift tariffs at will to wring

concessions from overseas countries on any economic, political

or social development he feels strongly about. The dramatic

resumption of 100% China tariff threats late last week speaks a

lot to that - teeing up a tense two weeks to a new November 1

deadline.

In other words, the idea that the trade shock has happened

and is now bedding down as a given may be wide of the mark.

Indeed, global bodies monitoring the process fear the real

hit from the tariff sweep will only show up next year.

Even though the International Monetary Fund this week said the

world economy likely dodged the worst case scenario outlined in

the spring, the World Trade Organization has slashed its

forecast for world goods trade growth next year to just 0.5%

from a prior estimate of 1.8% in August.

"The outlook for next year is bleaker," Director-General

Ngozi Okonjo-Iweala said last week, adding some of the surprise

resilience this year was largely down to furious front-loading

of imports to beat the crunch and the real hit may now simply

have shifted to fall squarely on 2026.

UNCERTAINTY REDUX

For U.S. small businesses, anxieties that seemed to dissipate

over the summer are back on the rise. The National Federation of

Independent Business monthly survey showed sentiment falling in

September for the first time in three months and the poll's

"Uncertainty Index" jumped seven points to 100 - the

fourth-highest reading in over 51 years.

The share of business owners expecting better conditions

over the next six months plunged 11 points to 23%, with prices

rising and orders waning.

A point highlighted by the NFIB itself is overall GDP growth

and broad stock indexes are being flattered by the torrent of

investment flowing into artificial intelligence and AI

infrastructure - overshadowing what's really going on Main

Street.

The push and pull of those parallel universes are starting to

re-inject considerable volatility back into financial markets

too - as investors trying to juggle the differing influences of

a trade war and an AI investment boom, not to mention the messy

implications for monetary policy, the threat of worker shortages

from immigration curbs and a blackout on government statistics.

The remainder of October is now littered with pretty pivotal

events. October 24 sees the release of the delayed September

inflation report - whether government has reopened or not - and

there's a chance of delayed publication of all the postponed

data reports if indeed Washington gets back to work again.

And that could all hit just before the Fed meeting on October 29

- which just happens to be the same day as Microsoft, Meta,

Alphabet and Amazon all report third-quarter updates. Apple

follows the day after.

Unless it's defused in the interim, the November 1 China tariff

cliff-edge then looms that weekend.

Spurred back into life after five months below historical

averages, the VIX "fear index" of S&P 500 implied volatility is

back on the rise and nudged its highest intraday levels since

May this week. Treasury volatility is back on the rise too.

With bubble trouble part of daily market parlance again, a

resurgence of volatility may well cut across trending markets.

And regulators and global watchdogs are once again warning of

the risk of a major correction.

If the phoney trade war is now over, it may be time to don

hard hats.

The opinions expressed here are those of the author, a

columnist for Reuters

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