Insights 
VT 
China’s Vice Foreign Minister Hua states that the United States cannot maintain its current trade policies. China expresses complete confidence in its ability to handle trade issues with the US.
China does not seek any form of conflict with other countries, emphasising its capacity to persevere amid trade tensions. The general population in China does not desire a trade war, though they remain confident in their country’s approach.
Initial Discussions In Geneva
In discussions with the US, China is prepared to confront any challenges, asserting it is unafraid. As both nations gather in Geneva this weekend, they are set to commence initial discussions on trade issues.
What the existing content outlines is fairly straightforward. The Vice Minister, Hua, is making it quite clear that the current trade policy set by the US is, in their view, not something that can continue indefinitely without consequences. The message from Beijing is twofold: they do not want friction, but they are not willing to back down. The public shares this resolve, indicating a national confidence that shouldn’t be underestimated, even if outright confrontation is not the desired route.
From our understanding, when governments speak openly like this, particularly ahead of formal discussions, it serves a purpose. It is a warning, but it is also preparation—positioning the country with strength prior to negotiation. That tells us quite a bit about where pressure may appear next. Notably, the talks scheduled in Geneva are being framed as explorative rather than final. This isn’t the end, but rather a starting posture in a matter that may stretch on.
Market Implications and Strategies
Now, what does this mean for us?
For those exposed to directional risk through instruments sensitive to trade news—especially anything tied to manufacturing inputs, industrials, or currencies pegged to the yuan—timing will matter more than usual. It’s clear that the language coming out of Beijing is designed for domestic consumption as much as for international counterparts. That often prefaces a period of heightened nationalism or slowed dialogue. Which means reaction trades might overshoot. In our own strategies, we lean towards setting narrower thresholds for reversal, particularly in stretched pairs or futures likely to over-respond during each statement.
Li, by extension, has always maintained that their side doesn’t provoke unless provoked. We recognise this stance from previous conflicts; it’s part of a broader narrative, frequently revived to justify slower decision-making or retaliatory tariffs timed just after more visible international events. In practice, this introduces a delay into response cycles, and so short-term volatility might precede the actual economic adjustments. For spreads between Asian indices and US equity futures, early-week flows might produce temporary mispricing, especially around closed-door sessions in Geneva.
Drawing from patterns we’ve observed in their past positioning, expect follow-through measures that are difficult to interpret immediately—these may take the form of methodical changes in customs procedures or denomination of key export transactions. Traders holding positions into the midweek should allow for asymmetric slippage, particularly across commodity-linked exposures. Patience may give better entry points than reacting on open.
What we find interesting is that during episodes like this, it’s not the official policy shift that moves contracts most, but the absence of expected cooperative language. When leaders choose not to dampen a tone, markets interpret that space as acknowledgment of discord. That’s where volatility finds fuel.
In our approach, we’ve already adjusted assumptions around yuan stability margins and tight spreads in short-dated options. Risk is creeping wider—not from surprise, but from narrative drift. Tariff threats are talked about long before implemented, yet the repricing of risk always catches someone late.
It’s likely, then, that a pattern of alternating optimism and sharp rebuttal could set in over coming weeks. For duration-driven positions, this spells a need for recalibration. What’s reflected in present pricing may understate the degree of positioning around these cycles. At these levels, it doesn’t take much to trigger rebalancing.
With that in mind, acts of confidence from either government don’t serve to dampen concerns; rather, they amplify them. Each attempt to show control places the next move in harsher light. Until the dialogue becomes less theatrical and more transactional, the market will adjust with each headline, not each outcome. We should be working from that assumption now.
