European Union officials and diplomats have indicated a potential framework trade deal between the EU and the US could be reached soon. This agreement might introduce a 15% baseline tariff on all European imports, with a possible 50% tariff on steel and aluminium imports.<\/p>\n
In response to these developments, the EUR\/USD has seen slight recovery and is trading near 1.1730. Despite this, the pair is experiencing a daily decline of approximately 0.15%.<\/p>\n
Tariffs are customs duties on imported goods, intended to protect local markets by making foreign products more expensive. They differ from taxes, which are collected at purchase and paid by consumers or businesses, while tariffs are paid at entry points by importers.<\/p>\n
Former US President Donald Trump plans to use tariffs to protect the American economy. In 2024, the top exporters to the US were Mexico, China, and Canada, with Mexico leading at $466.6 billion. Trump aims to target these countries for tariff imposition and hopes to use the generated revenue to reduce personal income taxes.<\/p>\n
We believe the potential for a new trade framework with the European Union introduces significant uncertainty that will increase market volatility. This is particularly true for currency and commodity markets, which are highly sensitive to trade policy shifts. Therefore, derivative traders should consider strategies that profit from these expected price swings, such as buying options.<\/p>\n
Given the prospect of a 15% baseline tariff, we anticipate sustained downward pressure on the EUR\/USD pair. The Euro has already shown weakness, trading near 1.07 in June 2024, and new tariffs would likely exacerbate this trend. We suggest acquiring put options on the Euro to hedge against, or speculate on, a decline toward key support levels seen in late 2022.<\/p>\n
The mention of a 50% tariff on steel and aluminum requires a targeted response in the industrial sector. The last time significant steel tariffs were imposed in 2018, U.S. steel prices jumped over 40% while shares of European producers like Thyssenkrupp and ArcelorMittal faced pressure. We are looking at call options on U.S. steel companies and put options on their European competitors to position for a similar outcome.<\/p>\n
The former president’s broader protectionist stance, targeting top exporters like Mexico and China, indicates this is not an isolated event but a potential global theme. This could trigger wider risk-off sentiment, impacting equity indexes far beyond the directly affected sectors. To hedge against this systemic risk, we are monitoring call options on volatility indexes like the VIX, which has been trading at relatively low levels below 15, presenting a cost-effective portfolio shield.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EU-US trade deal nears; tariffs on imports loom. EUR\/USD reacts, recovering slightly amid trade tensions.<\/p>\n","protected":false},"author":62,"featured_media":17027,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-27355","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/27355","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=27355"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/27355\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17027"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=27355"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=27355"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=27355"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}