Achilles Heel.

The Autumn of the Ayatollah.

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1. In its trade standoff with Washington, Beijing thinks it has found America’s Achilles’ heel: President Trump’s fixation on the stock market. China’s leader, Xi Jinping, is betting that the U.S. economy can’t absorb a prolonged trade conflict with the world’s second-largest economy, according to people close to Beijing’s decision-making. China is holding a firm line because of its conviction, the people said, that an escalating trade war will tank markets, as it did in April after Trump announced his so-called Liberation Day tariffs, prompting Beijing to hit back. China expects that the prospect of another market meltdown ultimately will force Trump to negotiate at an expected summit with Xi late this month, the people said. (Source: wsj.com)

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2. Deflationary pressures persisted in China, with both consumer and producer prices falling in September, supporting the case for more policy measures as a prolonged property market slump and trade tensions weigh on confidence. While China’s export growth rebounded in September, renewed trade measures and threats from Beijing and Washington have rekindled concerns about jobs and further deflation. Policymakers have so far refrained from launching major stimulus, wary of creating a stock market bubble which could end in a repeat of the 2015 crash. Producer prices (PPI) in September fell 2.3% from a year earlier, narrowing from a 2.9% fall in August, National Bureau of Statistics (NBS) data showed on Wednesday. The decline was the smallest in seven months, helped by government efforts to curb price competition. (Source: reuters.com)

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3. Americans are set to pay more than half of President Donald Trump’s tariff costs as companies raise prices, according to economists of Goldman Sachs Group Inc. US consumers will likely shoulder 55% of tariff costs by the end of the year, with American companies taking on 22%, the Goldman analysts wrote in an Oct. 12 research note to clients. Foreign exporters would absorb 18% of tariff costs by cutting prices for goods, while 5% would be evaded, they wrote. For now “US businesses are likely bearing a larger share of the costs” as it takes time to raise prices, economists Elsie Peng and David Mericle wrote in the note. “If recently implemented and future tariffs have the same eventual impact on prices as the tariffs implemented earlier this year, then US consumers would eventually absorb 55% of tariff costs.” (Source: bloomberg.com)

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4. Oil prices have fallen to a five-month low after a report from the International Energy Agency estimated a recent “large surplus” of crude supply. Brent crude dropped as much as 3 per cent to $61.50 a barrel, its lowest since early May, on Tuesday. The price eased in early Wednesday trading in Asia to $62.26. The decline came after the agency said preliminary data indicated a “massive” build-up in oil shipments in September following a surge in exports by key producers, suggesting that output is now more than consumers need. The overhang will average 3.2mn barrels a day (b/d) from this month through to June 2026, according to IEA estimates. It had previously estimated a surplus of 2mn b/d to last well into next year. (Sources: ft.com, iea.org)

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5. Karim Sadjadpour:

For the first time in nearly four decades, Iran is on the cusp of a change of leadership—and maybe even of regime. As Supreme Leader Ayatollah Ali Khamenei’s reign nears its end, a 12-day war in June laid bare the fragility of the system he built. The war exposed the enormous gulf between Tehran’s ideological bluster and the limited capabilities of a regime that has lost much of its regional power, no longer controls its skies, and exercises diminished control over its streets. In the autumn of the ayatollah, the central question is whether the theocratic regime he has been ruling since 1989 will endure, transform, or implode—and what kind of political order might emerge in its wake. (Sources: carnegieendowment.org, foreignaffairs.com)

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