China’s commerce ministry said it is willing to work with the US and use the China–US economic and trade consultation mechanism. It said China has met the obligations required under the Phase One agreement.
The ministry said it wants the US to view the agreement’s implementation in an objective way. It also said China will protect its rights and interests, and called on the US not to shift responsibility or create problems.
Market Reaction So Far
There was no immediate market impact in offshore trading. USD/CNH was 0.16% lower, near 6.8666.
A trade war is an economic conflict driven by protectionist measures such as tariffs. These actions can trigger countermeasures, raise import costs, and increase the cost of living.
The US–China trade dispute started in early 2018 after US trade barriers were imposed over claims of unfair practices and intellectual property theft. China responded with tariffs on US goods including cars and soya beans, and a Phase One deal was signed in January 2020.
The pandemic reduced attention on the dispute, while later US policy kept tariffs in place and added further levies. The text says Trump imposed 60% tariffs on China on 20 January 2025, raising tensions and affecting supply chains and inflation.
Trading Implications And Positioning
We are seeing China’s verbal reassurances being largely ignored by the market for now. The slight strengthening in the yuan is minimal, suggesting traders are more focused on the harsh reality of the tariffs reinstated in 2025 than on diplomatic language. This creates a tense waiting game where the risk of sudden policy shifts from either side remains incredibly high.
The economic impact of the renewed trade war is already visible in recent statistics. We’ve seen U.S. Customs data from January 2026 show a 45% drop in container volume from major Chinese ports compared to the same month in 2025, just before the new tariffs took full effect. This confirms that the trade disruptions are not just a threat but are actively hitting supply chains.
This uncertainty means we should prioritize strategies that profit from price swings rather than betting on a single direction. We have watched the VIX, the market’s “fear gauge,” average above 22 for the last month, a stark contrast to the calmer levels of 2024. Buying options on major indices or currency pairs like the Australian Dollar is a logical way to position for the expected turbulence.
Looking back at the 2018-2019 period, we remember that Beijing often used its currency as a tool to absorb the costs of tariffs. Any move by the People’s Bank of China to guide the yuan weaker would be a major signal. We should therefore be closely monitoring the options market for bets on a higher USD/CNH exchange rate.
Specific sectors are becoming clear targets for bearish trades, particularly in technology. We’ve noted that the semiconductor ETF has already underperformed the broader market by over 8% since the start of the year. With Beijing now signaling retaliation against U.S. agriculture, we anticipate continued volatility in soybean and corn futures, creating opportunities for nimble traders.
