Key Takeaways
- China's economic momentum was already slowing before the latest escalation of the trade war, with industrial output and retail sales hitting multi-year lows, prompting Beijing to blame the U.S. for the flare-up and raising global recession risks.
- Japanese electronic parts makers are actively restructuring their production and supply chains, shifting away from China and increasing investments in domestic and Southeast Asian facilities to mitigate risks from intensifying US-China tensions and tariffs.
- U.S. House Speaker Mike Johnson (R-LA) and Representative Marjorie Taylor Greene (R-GA) are at odds over the Republican party's healthcare strategy, particularly regarding expiring Affordable Care Act (ACA) subsidies, with Greene warning of significant premium hikes for Americans.
The global economic and political landscape is currently marked by escalating trade conflicts, strategic supply chain realignments, and internal political discord. China's economy is experiencing a significant slowdown, exacerbated by new U.S. tariffs, while Japan is proactively adjusting its manufacturing footprint to navigate geopolitical headwinds. Simultaneously, a notable rift has emerged within the U.S. Republican party concerning future healthcare policy.
China's Economic Headwinds Amidst Escalating Trade War
China's economic momentum was already decelerating before the latest round of tariff increases, a situation Beijing squarely attributes to the United States. Industrial production in China saw its slowest growth since November, and retail sales recorded their weakest pace this year in July 2025. Furthermore, industrial profits declined by 1.8% in the first half of 2025 and 4.3% in June, with exports to the U.S. plummeting by 33% in August 2025. China's quarterly growth rate has slipped to 6.2%, marking its slowest expansion in nearly three decades.
The trade war intensified with former President Donald Trump's threat of a 100% tariff on imported semiconductors and chips, following an earlier effective increase to 145% on Chinese imports in April 2025. China swiftly retaliated by raising its tariffs on U.S. imports to 125%, with its finance ministry labeling Trump's actions as "completely unilateral bullying and coercion". This tit-for-tat escalation has significantly heightened global recession risks, leading to a fall in global stocks, a slide in the dollar, and a sell-off in U.S. government bonds, while gold surged to a record high as investors sought safe haven assets.
Japanese Manufacturers Rejig Production to Mitigate US-China Tensions
In response to the ongoing US-China trade war and other global shocks, Japanese electronic parts makers are strategically reconfiguring their production and supply chains. The US-China economic confrontation, which began in 2018, has increasingly compelled Japanese firms to choose between the two major markets. U.S. tariffs on Chinese exports have also impacted products manufactured in China by Japanese companies, diminishing China's appeal as an export hub for the U.S. market.
Notable companies are already taking action. Daikin Industries ((/stock/6367)) plans to manufacture air conditioners without Chinese-made parts as early as March 2024, sourcing components from Japan and Southeast Asia. This move was partly driven by supply disruptions caused by China's zero-COVID policy. Similarly, Panasonic ((/stock/6752)) is working to eliminate Chinese components from its U.S.-made batteries to mitigate tariff risks. The Japanese government is actively supporting this shift, encouraging the relocation of production bases from China to ASEAN nations and Japan through subsidies, including a substantial 4 trillion yen (approximately US$25.4 billion) to bolster the semiconductor industry. Furthermore, Japan has aligned with the U.S. and the Netherlands in restricting exports of advanced chipmaking equipment to China, impacting key players like Tokyo Electron Ltd. ((/stock/8035)), Nikon Corp. ((/stock/7731)), and Screen Holdings Co. ((/stock/7735)) to curb China's technological ambitions.
US Political Landscape: Healthcare Divides Emerge
Domestically, a significant political disagreement has surfaced between House Speaker Mike Johnson and Representative Marjorie Taylor Greene concerning the Republican party's approach to healthcare. The dispute centers on the impending expiration of Affordable Care Act (ACA) subsidies, which Greene argues Republicans lack a plan to address. She has voiced strong concerns that American families could face substantial increases, with premiums potentially doubling in 2026, and monthly costs ranging from $1,500 to $2,000.
Speaker Johnson has pushed back against Greene's criticisms, asserting that she does not serve on relevant committees and is "probably not read in on some of that". He maintained that discussions on healthcare policy were scheduled for October but emphasized that such deliberations require the government to be fully operational. This internal party friction has escalated during a government shutdown, with Greene also advocating for the Senate to use the "nuclear option" to end the impasse.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.