US trade representatives Greer and Bessent recently met with Chinese officials. Discussions included details on a potential pause in tariffs on Chinese goods, with a 90-day extension being one option for consideration by Trump. <\/p>\n
Further discussions did not result in changes to export controls. If Trump decides not to extend the pause, tariffs could revert to April 2 levels or another level of his choosing. The U.S. expressed concerns over China’s purchase of 90% of Iranian oil, though topics such as TikTok and a surplus in Chinese manufacturing were not addressed.<\/p>\n
Stock markets showed a decline; the Dow Industrial Average fell by 0.42%, the S&P by 0.21%, and the NASDAQ by 0.26%. In the U.S. Treasury market, yields neared their lows, with the 2-year at 3.887% (down by 3.3 basis points), the 5-year at 3.920% (down by 6.2 basis points), the 10-year at 4.344% (down by 7.6 basis points), and the 30-year at 4.881% (down by 8.3 basis points). <\/p>\n
The decision on tariff pauses lies with Trump, which will influence whether tariffs remain on hold or revert to previous levels. A future meeting with China is likely in 90 days.<\/p>\n
Based on these latest comments, we see a fog of uncertainty hanging over the market. With the August 12 tariff deadline approaching, the lack of a clear agreement from the talks creates significant risk. The final decision rests with the President, leaving traders on edge for the coming weeks.<\/p>\n
This kind of uncertainty is exactly what drives volatility, which is where derivative traders should focus. We are watching the CBOE Volatility Index (VIX), which has been hovering near a relatively calm 15. This suggests the market may not be fully pricing in the risk of tariffs returning next month.<\/p>\n
Therefore, we believe it is prudent to consider buying protection over the next two weeks. Purchasing put options on major indices like the S&P 500 (SPX) or the Nasdaq 100 (NDX) can act as insurance. These positions would profit if the market sells off on negative tariff news after the deadline.<\/p>\n
The fundamental disagreements mentioned, like the manufacturing surplus, remain a major headwind. Recent data from the U.S. Census Bureau shows the trade deficit in goods with China was over $72 billion in the first quarter of 2025. This ongoing imbalance reinforces the administration’s tough stance.<\/p>\n
We only need to look back to the 2018\u20132019 period to see how this can play out. During that trade war, the S&P 500 saw several sharp corrections of over 10%, with volatility spiking above 30. A similar “boomerang” of tariffs could easily trigger a repeat performance.<\/p>\n
With treasury yields falling, the bond market is already signaling a flight to safety. This move strengthens the case for defensive positioning in equities. The drop in yields shows that big money is preparing for a potential economic slowdown if trade tensions escalate.<\/p>\n
This situation also has clear implications for the currency markets. A risk-off move would likely boost the US dollar as a safe haven. We would expect to see weakness in currencies tied to global trade and China, such as the Australian dollar (AUD).<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" US\u2013China talks explore tariff pause; markets dip, Treasury yields fall; Trump to decide on extension.<\/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-27588","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t