Insights 
VT 
The UK anticipates a tariffs agreement with the US on automobiles to take effect by the end of the month. This agreement would result in 10% tariffs, rather than the previously proposed 25%.
Both parties have agreed on a partial trade deal, set to be implemented before the final deadline. However, the issue of steel and aluminium tariffs remains unresolved.
President Trump Delays Tariff Increase
Currently, these tariffs are at 25%, with the possibility of being doubled. President Trump has paused this increase until 9 July.
These recent developments reflect a temporary easing of trade tensions. The reduction of prospective automotive tariffs from 25% to 10% narrows a gap, but doesn’t fully remove the constraints traders have had to factor into pricing models. While this outcome dodges the worst-case scenario, the persistence of upper-bound risk on metals suggests that uncertainty hasn’t been fully priced out.
Tariffs on steel and aluminium, holding steady at 25%, are still subject to a potential increase, which, if implemented, would sharply alter hedging costs and could trigger more aggressive positioning. Trump’s decision to delay the rise until the 9th of July doesn’t eliminate risk — it merely pushes volatility further down the calendar. What we’re seeing here is a soft signal, not a guarantee. That added time makes June a particularly sensitive window for forward contracts.
The partial trade arrangement — though still pending its final form — gives us reason to expect some stabilisation in automotive exposure. We’ve recalculated several mean reversions around key automotive component inputs, and the sharpest break in mid-May now appears overstated. Some of that retracement, though modest in scope, may be sustained as implied vol moves lower on front-month auto-linked assets. We don’t expect that softness to persist beyond announcement unless the final text includes broader coverage or a timeline extension.
Anticipated Impact on Market Adjustments
There is, however, a notable lack of coordination on industrials. With steel and aluminium not included in the deal’s initial tranches, spreads based on metal-dependent sectors are likely to remain choppy. For context, volume-weighted derivatives on flat-rolled products rose rapidly following the April warnings. We assume that institutional desks, having already priced in up to a 50% duty scenario, may begin rolling positions into Q3, particularly once the narrow buffer period ends next month.
The pause tells us that leadership on both sides is holding space for deeper negotiation, but still keeping pressure on. The postponement gives traders precise short-term dates to work with. No ambiguity here — July the 9th is now the marker everyone will build around. That’s not speculative; it’s structural. Skews across options chains are already tilting toward higher implieds on metals nearer that breakpoint.
For us, that pulls focus to term structure in mid-duration exposures tied to industrial input cost pass-through. The metals delay creates a pricing vacuum for the next few weeks. Pre-emptive movements by flow traders may create price pockets that swing outside standard bands, especially if macro indicators shift.
Also worth noting is how these layers of trade manoeuvring filter down to consumption-linked instruments. With nothing locking in metals costs just yet, we’d be cautious in assuming consistent margins downstream. That suggests greater selectivity on contracts tied to product demand.
Mitigation strategies should now weight timing more heavily. There’s circularity between waiting for the formal automotive text, preparing for the July 9th ceiling, and managing directional calls in industries still exposed. Attempts to play both sides will likely face constraints on capital usage and timeline clarity.
What’s changed here isn’t just the numbers — it’s the tempo. Data release windows, announcements, and hedging cost shifts are stacking closer together. That compresses decision space, especially for desk leads managing blended exposure across multiple commodities.
We’ve taken this delay as a tactical signal — not of resolution, but of recalibration. That means adjusting calendar spreads accordingly and anchoring around the dates that matter. No time to discount them.
